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“Anyone with any degree of mental toughness ought to be able to exist without the things they like most for a few months at least.” – Georgia O’Keefe

Below is some introductory commentary of today’s Morning Lineup.  Start a two-week trial to Bespoke Premium to get full access.  

After yesterday’s monster rally, futures are still in a celebratory mood as futures are higher across the board.  Even bitcoin, which sat out Tuesday’s rally is trading up over 1.5%.  A slug of economic data was just released, including PPI, Retail Sales, and Empire Manufacturing.  In a nutshell, the inflation data was weaker than expected while Retail Sales and Empire Manufacturing were better than expected.  Equity futures are little changed in response to the data while treasury yields are modestly higher which is likely due to the stronger Retail Sales report.  That being said, as discussed yesterday, with the door closed on further rate hikes, good economic news is actually good market news!

Bulls went a ‘few months’ where equities did nothing but seemingly go down, and by the end of October, you couldn’t have faulted anyone for becoming frustrated with the way things were going in the market.  For those who had the toughness to stick it out, they’ve been rewarded in the last two to three weeks as the S&P 500 has rallied over 9% from its lows.

Investors in small-cap stocks have had an even tougher time of it lately, but they had their day yesterday as the Russell 2000 surged 5.44% which was 3.53 percentage points more than the S&P 500’s gain of 1.91%.  Since the Russell 2000’s inception in 1979, yesterday was only the 24th day that the index outperformed the S&P 500 by 2.5 percentage points or more in a single day, and in the chart below we have highlighted each of those days with a blue dot.

As shown, there were several of these occurrences coming out of the COVID lows as investors were flush with cash from all the stimulus sloshing around in the US economy, and before that most, but not all of the other occurrences were clustered around the period coming out of the Financial Crisis, around the peak of the dot-com boom, and after the 1987 crash.

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