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“If you can’t explain it to a six-year old, you don’t understand it yourself.” – Albert Einstein
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
With some important economic data ahead (PPI, Retail Sales, and Jobless Claims), futures have been rallying this morning. Some of the positive air has been let out of the balloon, though, as the data was, for the most part, disappointing. We’ll start with the good news. Both Initial and Continuing Jobless Claims were better than expected. On the downside, Retail Sales rose less than expected across the board, and to make matters worse, January’s reading was also revised lower. PPI was also disappointing relative to expectations as the headline reading came in at double expectations (0.6% m/m vs 0.3% forecast). Core PPI was closer to expectations at 0.3% vs forecasts for an increase of 0.2%. As mentioned, even with the disappointing data, futures remain firmly in positive territory. As mentioned following the hotter-than-expected CPI earlier this week, while the inflation data was a disappointment, the commencement of rate cuts may be pushed out, but rate hikes still aren’t part of the conversation.
Yesterday was the 50th trading day of the year, and although the S&P 500 finished down for the day, there have still been 17 record closing highs so far this year. As shown in the chart below, this year’s total in the first 50 trading days of the year represents the most since 1998 when there were 20. This year is also just the fifth time since 1953 (when was the first full year of the five-trading day week in its current form) that 30% or more of a year’s first 50 trading days had record closing highs. Of the four prior years shown, the S&P 500 finished the year higher three times with the only exception being the 14.8% decline in 1987.
While 15 or more record closing highs in the first 50 trading days of a year is uncommon, for all 50-day periods it has been more common. The chart below shows the number of record closing highs over all 50 trading day periods since 1953. Looking at it this way, there have been plenty of other periods where there have been as many or much more record-closing highs over a 50-trading day span. Just as recently as September 2021, there were 25 in 50 days.
In terms of performance going forward, looking back at history, short-term market returns have tended to be below average in the week and month after similar periods where there were 15 or more record closing highs over 50 days, but six and twelve months later, average returns were pretty much the same whether there were 15 or more or less than 15.
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