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“There are two hundred million idiots, manipulated by a million intelligent men.” – Pablo Escobar
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Last week’s Bespoke Report asked if you would remember “where you were” last Tuesday when the Russell 2000 registered the most overbought short-term overbought reading for a US index ever recorded. Over the weekend, the major news events kept coming when President Joe Biden released a statement saying he would no longer seek re-election. Will I ever forget the BBQ chicken sandwich with melted cheddar cheese that I was having for lunch when my daughter read the statement from TikTok?
As the news filtered out, President Biden’s decision was quickly compared to President Johnson’s decision in 1968 not to seek re-election. Besides the fact that they were both sitting presidents with low approval readings when they decided to drop out, the two scenarios are very different.
Johnson dropped out very early in the primary season in March 1968 as his chances for the nomination looked very uncertain if not unlikely. Biden’s decision came well after the primaries he overwhelmingly won were completed and his nomination was locked up. Additionally, whereas Johnson announced his decision to the American people in a televised address, Biden’s decision came via a statement that said he would “speak to the nation later this week in more detail about my decision.” When looking back to history for comparisons, it’s hard to find a scenario where a political party’s candidate for President who had high approval ratings within their party at one point was forced to withdraw from the election less than a month later.
Despite the major events of the weekend, the equity market seems undeterred. Futures are firmly higher heading into the new week after rocky returns last week. One factor investors need to be prepared for as we head into the end of July and early August, though, is the calendar. As shown on the Seasonality Tool of our website, while historical returns over the next week are middling relative to the rest of the year, the S&P 500’s median one-month performance from the close on 7/22 over the last ten years has been in the bottom third relative to history. The median three-month performance over the last ten years doesn’t get much worse. As shown at the bottom of the image, the S&P 500’s median three-month performance from the close on 7/22 over the last ten years has been a decline of 1.38% and ranks in just the second percentile relative to all other three-month periods during the year.
Breaking out the S&P 500’s three-month performance over the last ten years shows that while overall returns are negative, there has been a lot of dispersion. In the six years over the last ten when the S&P 500 was lower, it declined at least 1.2%. Conversely, in three of the four years when the S&P 500 was higher, it gained at least 4%. Whatever you do, buckle up.
