Overwhelmingly Bullish, Even for All Time Highs
Not only has the S&P 500 returned to new highs but sentiment is also making a push higher. As shown below, the latest AAII Sentiment Survey showed more than half of respondents surveyed responded as bullish. At 51.7%, bullish sentiment is now slightly below the multi-year high from December 21st (52.9%).
While a majority of respondents are reporting as bullish, less than a quarter are bearish. This week, bearish sentiment fell to 21.8% which was a half percentage point uptick versus the previous week.
Regardless of the increase in bears, bulls netted a much larger increase resulting in the bull-bear spread to rise to 29.9. Again, that indicates the most bullish sentiment since December.
Given the S&P 500 is currently trading at record highs, we wanted to check in on how sentiment currently stacks up versus past record closes for the S&P. As shown, it looks a bit more optimistic than normal given where the market is trading as bullish sentiment has historically averaged a reading of 41% when the S&P 500 was at record highs. While the gap between the historical average and now is less dramatic, bearish sentiment likewise shows greater optimism now than in the past.
Finally, we would note that it is not only the AAII survey which is showing high levels of optimism. Factoring in other weekly sentiment surveys, the Investors Intelligence survey saw the highest number of bulls since July 2021 and the NAAIM Exposure Index showed active investment managers added long exposure to equities in the most recent week. Putting them all together into our Sentiment Composite, aggregate investor sentiment now ranks in the 98th percentile of all periods since data began in 2006 and a hair below those from last December. Before that, the only periods with similarly elevated levels of sentiment were December 2010, December 2013, early 2015, around the new year of 2018, the end of 2020, and the spring of 2021.
Chart of the Day – Credit Spreads Collapse
The Bespoke 50 Growth Stocks — 3/7/24
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. There were 17 changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. With Bespoke Premium, you’ll receive a number of daily market updates from us along with our weekly newsletter and a portion of our investor tools. With Bespoke Institutional, you’ll receive everything that’s included with Premium plus additional daily macro analysis and more stock-specific research.
To see all 50 stocks that currently make up the Bespoke 50, simply start a two-week trial to Bespoke Premium or Bespoke Institutional.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Bespoke’s Morning Lineup – 3/7/24 – Proper Context
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Observation is a dying art.” – Stanley Kubrick
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Yesterday’s bounce continued to a second morning as both S&P 500 and Nasdaq futures were in the green ahead of the just-released reports on weekly jobless claims, Q4 productivity, and Q4 unit labor costs at 8:30. Productivity numbers were revised slightly higher, Unit Labor Costs were lower than expected, and jobless claims were just slightly higher than expected.
Overnight, Asian stocks were mostly lower with Japan leading the way down as the Nikkei fell over 1% as the yen rallied on speculation that the BoJ would abandon its negative policy rate. What Asia taketh away, though, Europe has giveth, and the tone there is more positive as the STOXX 600 rallies 0.4% with Spain leading the way with a gain of 0.6%. In Germany, Factory Orders dropped 11.3%, which was nearly twice the 6% decline that was expected. The ECB just announced its latest policy decision, and as expected, they left rates on hold. You can read more about it in the full Morning Lineup report.
In discussions about inflation this week, we’ve heard multiple references to rising prices at the pump as a sign that inflation is poised to take another leg higher. Based on AAA’s tracking of the national average price of a gallon of gas, prices have taken a turn higher. In mid-January, the price was as low as $3.07 per gallon, but as of today, it’s up to just under $3.40 per gallon and at the highest level since early November.
While the rise in gas prices looks like a concern in isolation, proper context is in order. What if we told you that gas prices almost always rise in the early months of a new year? Going back to 2005, there have only been three years when prices were down on a year-to-date basis through 3/7, and the average YTD change is 8.3%. Given that history, this year’s 9.2% increase doesn’t seem so extreme or worrying.
Look at the chart below where we compare this year’s change in gas prices to a composite of the average YTD change for all years since 2005. They track each other perfectly. Gas prices have increased this year, but they nearly always do at this time of year. When prices start to decline after Memorial Day, as almost always occurs at that time of year, do you think the people crying today about higher gas prices being a canary for higher inflation will also be screaming about a ‘deflationary’ warning then? Something tells us, probably not.
For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
The Closer – JOLTS and Job Postings, Beige Book, Banks – 3/6/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a review of today’s revisions to JOLTS data (pages 1 and 2) followed by an update on the Beige Book (page 3). We then dive into job postings via Indeed.com (page 4) before finishing with a look into the latest EIA data (page 5).
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Daily Sector Snapshot — 3/6/24
B.I.G. Tips – Gold ETF (GLD) Trades to Most Overbought Level in History
Fixed Income Weekly — 3/6/24
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
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Chart of the Day – Apple (AAPL) Falls From the Tree
Semis in Uncharted Territory
The unbelievable rally in semiconductors resumed this morning as the Philadelphia Semiconductor Index (SOX) has erased all of Tuesday’s 2%+ decline and is just below its record high from Monday. As of this writing, the SOX is more than 14% above its 50-day moving average, and the closest it has been to that average since early November is 3.99%.
While the SOX has been making record highs for a number of weeks now, in just the last few days, it also reached another milestone for the first time in over two decades. The chart below shows the ratio in the price of the SOX to the S&P 500 since 1994. During the dot-com bubble, the ratio peaked at 0.9553 in March 2000 before crashing down to less than 0.22 in late 2008. In the 15+ years since that low, the ratio has been steadily digging itself out of that hole, and it finally saw the light of day last Friday, March 1st. With the SOX just recently crossing 5,000 and the S&P 500 trading at around 5,100, we’re almost to the point where the SOX could overtake the S&P 500 in terms of its price level.
While the SOX is up just under 20% on the year, the wealth hasn’t been spread evenly across its components. At the top of the list, NVIDIA (NVDA) has rallied nearly 80% while Coherent (COHR) is up over 50%. Behind those two leaders, another eight stocks in the SOX are outperforming the index so far this year. However, that means another 20 components or two-thirds of the index have underperformed the index year to date. It may be a good year for semis at the index level, but try telling that to the third of the index that’s not only trailing the gains of the index but also down for the year.
