The Closer – Credit Spreads, WTI Surge, Beige Book, PMIs, Housing Data – 9/6/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a look into credit spreads and the steep backwardation of crude (page 1). We follow up with a quantified look at the Beige Book (page 2), trade balance (page 3), and ISM data (page 4). We then take a look into the latest housing delinquency data from Black Knight (page 5) in addition to housing inventories from Realtor.com (pages 6 – 7). We finish with an update on the latest investor sentiment data from TD Ameritrade (page 8).
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Daily Sector Snapshot — 9/6/23
Fixed Income Weekly — 9/6/23
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.
Our Fixed Income Weekly helps investors stay on top of fixed-income markets and gain new perspectives on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes for the next two weeks!
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2% Moves Are Back
As we noted in a tweet this morning, price action of US equities has been flipped from Tuesday with large caps suffering larger losses than small caps. Looking at yesterday, the decline in the Russell 2,000 (-2.1%) dwarfed the S&P 500’s (-0.4%). For the small cap Russell 2,000, that marked the first daily move of at least 2% (positive or negative) since June 5th when the index rallied 2.4%. As shown below, that three month stretch without a daily move of 2% is far from the longest on record, but it does stand out as one of the largest in some time. Running for 61 trading days, it was the longest since the 133 day streak ending on 10/9/18.
As previously mentioned, today’s price action is a bit of the reverse of Tuesday, however, the S&P 500 is far from a 2% drop of its own. In fact, the S&P 500 has been on an even longer streak without a 2% daily move. At 136 trading days, the current streak ranks as the longest since February 2018 (310 days). As with the Russell, the current streak would have a long way to go to reach records that lasted for years like from 2003 to 2006. Regardless, the fact of the matter is that day to day volatility by this measure has been extremely muted of late.
Chart of the Day: Defensives Dumped
Bespoke’s Morning Lineup – 9/6/23 – Living at the Woodshed
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“It’s not what you look at that matters, it’s what you see.” – Henry David Thoreau
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It’s another weak morning for US equity futures as the backdrop of higher rates and oil prices weigh on sentiment. Futures are lower across the board, but not by a large amount. The key report of the day will be ISM Services at 10 AM. Plus, there are a number of conferences today, so be on the look out for individual company news throughout the day.
176 years ago today, Henry David Thoreau moved in with Ralph Waldo Emerson and his family after living in a woodshed on Walden Pond for two years. Two years in a shack is a long time, but bonds have been out behind, or maybe more accurately, in front of the woodshed for even longer. As measured by the Bank of America 10+ Year US Treasury Index, August was the 31st straight month that the year/year total return for US Treasuries was negative, easily surpassing the 15th month streak than ended in December 1980. Not only has the y/y change in long-term Treasuries been negative for more than two and a half years, but the y/y change has also lagged the y/y total return of the S&P 500 for 34 straight months.
Since 1979, there have only been two other periods where the 10-year underperformed the S&P 500 on a y/y basis for more months. The most recent ended in July 1998 at 33 months while there was a 35-month streak ending in October 1981. Given the way the numbers work out, unless treasuries stage a monster rally and/or stocks take a sharp leg lower this month, it’s almost a guarantee that the current streak will at least tie, if not exceed, the 35-month streak from 1981. In at least the last forty years, there hasn’t been a worse time to be creditor of Uncle Sam.
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Chart of the Day – Smart Money Stays on Vacation
The Closer – Dovish Fedspeak, Factory Sales, LMI, CoT – 9/5/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a look at the dovish pivot in Fed commentary and the subsequent rise in the dollar (page 1). We then pivot over to the latest factory orders data (page 2) and Logistics Managers Index (pages 3 -5). We then review the latest positioning data (pages 6 – 8).
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Daily Sector Snapshot — 9/5/23
Bespoke’s Consumer Pulse Report — September 2023
Bespoke’s Consumer Pulse Report is an analysis of a huge consumer survey that we run each month. Our goal with this survey is to track trends across the economic and financial landscape in the US. Using the results from our proprietary monthly survey, we dissect and analyze all of the data and publish the Consumer Pulse Report, which we sell access to on a subscription basis. Sign up for a 30-day free trial to our Bespoke Consumer Pulse subscription service. With a trial, you’ll get coverage of consumer electronics, social media, streaming media, retail, autos, and much more. The report also has numerous proprietary US economic data points that are extremely timely and useful for investors.
We’ve just released our most recent monthly report to Pulse subscribers, and it’s definitely worth the read if you’re curious about the health of the consumer in the current market environment. Start a 30-day free trial for a full breakdown of all of our proprietary Pulse economic indicators.
