Chart of the Day: Hello July
Bespoke’s Matrix of Economic Indicators – 7/1/24
Our Matrix of Economic Indicators provides a concise summary analysis of the US economy’s momentum. We combine trends across the dozens and dozens of economic indicators in various categories like manufacturing, employment, housing, the consumer, and inflation to provide a directional overview of the economy.
To access our newest Matrix of Economic Indicators, start a two-week free trial to either Bespoke Premium or Bespoke Institutional now!
Bespoke’s Morning Lineup – 7/1/24 – Another Day, Another Week, Another Month…
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.
“Don’t give up at half time. Concentrate on winning the second half.” – Paul Bear Bryant
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s a new week, a new month, a new quarter, and a new half, but the market is picking up right where it left off last week as stocks look to kick off the new quarter on a positive note. Along with higher stock prices, treasury yields are also spiking and the 10-year yield is back above 4.4%, but these moves could change significantly with the release of the Manufacturing PMIs at 9:45 and 10: AM. Besides today’s release, the economic calendar will be jam-packed this week (even though it’s just three-and-a-half trading days) with ADP Employment (Wednesday), ISM Services (Wednesday), and Non-Farm Payrolls (Friday) among others.
Stocks finished up the first half with a gain of 15.3% on a total return basis, and the rally since this time last year has been a very respectable 24.6%. That’s nearly twice the historical average and ranks in the 75th percentile relative to all one-year periods since 1928. Over the last two years, which includes almost four months of the prior bear market, the S&P 500 has returned 22% annualized. Five and ten-year returns of 15.0% and 12.9%, respectively, also rank above the historical average, but over the last 20 years, the annualized gain of 10.3% ranks slightly below the 10.9% historical average for all 20-year periods in the S&P 500’s history. No matter how you look at the last ten years, it’s been a great time for equities, but the ten years before that weren’t so good.
That’s the good news. While stocks have performed admirably, bonds have been swirling down the toilet. Over the last year, long-term US Treasuries, as measured by the BofA 10+ Yeat US Treasury Index, have declined 5.1% on a total return basis. Annualized returns over the last two years have been even worse at a decline of 6.1%, and in the previous five years, the annualized decline has still been negative at 4%. Even over the last ten years, returns have been barely positive at just 0.7% annualized. You have to go out twenty years to get meaningfully positive returns, but even here, the gain has been somewhat muted at just 3.9%.
A great way to illustrate the weakness in bonds over the last three-plus years is the chart below. On a year/year (y/y) basis, there has only been one month in the previous forty-one where returns have been positive. Relative to history, this type of consistent weakness for such an extended period has been unprecedented. The only other period where there was any sort of consistent weakness was from October 1979 through October 1981. Back then, there were only three positive y/y readings in 25 months, but the magnitude of the y/y declines was significantly less than in the current period.
Brunch Reads – 6/30/24
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
A decade later, on November 25, 1915, Einstein presented his general theory of relativity to the Prussian Academy of Sciences, extending his special theory to include gravity as a warping of spacetime by mass and energy. This theory fundamentally changed our understanding of gravitational forces and the structure of the universe.
Sports
Want to face Gerrit Cole — between innings? Inside the controversial new tech that could change at-bats forever (ESPN)
The Los Angeles Angels used the Trajekt Arc, an advanced pitching machine, to prepare for a key moment in their May 28th game against the New York Yankees. Outfielder Willie Calhoun used the machine, which replicates pitchers, to practice against Yankees relievers he had never faced. When called to bat, Calhoun hit a leadoff single, sparking a game-winning rally. Trajekt Arc, now used by 19 MLB teams, mimics pitchers’ windups and pitches based on extensive data. Despite some controversy among pitchers over its in-game use, hitters find it a valuable tool for staying competitive against increasingly challenging pitches. [Link]
Continue reading our weekly Brunch Reads linkfest by logging in if you’re already a member or signing up for a complimentary 30-day trial to Bespoke Premium today! Cancel at any time.
The Bespoke Report – 6/28/24 – Same As It Ever Was
To read our weekly Bespoke Report newsletter and access everything else Bespoke’s research platform has to offer, start a two-week trial to Bespoke Premium. Below we show our Asset Class Performance matrix covering major ETFs recent returns. We discuss this and much more in the full newsletter.
First Half 2024 — That’s a Wrap
If you missed Bespoke’s Paul Hickey on CNBC earlier this week, you can view it by clicking here or on the thumbnail image below.
With the first half of 2024 now behind us, below is a snapshot of asset class performance across the financial landscape using US-listed ETFs and other exchange traded products. For each ETF, we provide total returns for the first half (YTD), Q2, and June.
The S&P 500 (SPY) and Nasdaq 100 (QQQ) posted strong returns across all three time frames and enters the second half up more than 15% on the year. Large-cap growth (IVW) was up the most of any ETF in the entire matrix in the first half with a gain of 23.45%. While large-cap growth surged, large-cap value (IVE) was only up 5.6% in the first half, and small-caps (IJR, IWM) were actually flat or down. The small-cap value ETF (IJS) finished June down 4.8% YTD.
Looking at sectors, ten of eleven posted gains in the first half, with Real Estate (XLRE) the only sector ending lower. Outside of the US, things weren’t nearly as positive. Brazil (EWZ), France (EWQ), Hong Kong (EWH), and Mexico (EWW) are down year-to-date, while India (INDA) was the top performing country ETF in our matrix at +14.3%. That wasn’t enough to beat the US, though.
Commodity ETFs were somewhat scattered in Q2 and June, but aside from natural gas (UNG), the rest of the space posted double-digit gains in the first half.
Finally, while Treasury ETFs saw an upside move in June, they still ended the first half mostly in the red with the exception of super-short-term durations.
Below is a look at the 30 best performing Russell 1,000 stocks in the first half of 2024. As shown, NVIDIA (NVDA) tops the list with a 149.5% gain. Three other stocks were up more than 100% in the first half: Vistra (VST), Cava (CAVA), and AppLovin (APP). Other notables on the list of big first-half winners include Robinhood (HOOD), Spotify (SPOT), Wingstop (WING), General Electric (GE), Eli Lilly (LLY), Micron (MU), Crowdstrike (CRWD), Interactive Brokers (IBKR), Palantir (PLTR), and Dick’s Sporting Goods (DKS).
Let’s see how this list of names does for the remainder of the year…we’ll check back in at year end to see how they performed.
S&P 500 Four Under Five
The S&P 500’s strong first half, with gains exceeding 15%, has pushed its valuation even higher. The average P/E ratio based on current year expected earnings now sits at 22.7, while the median is nearly five points lower at 17.8. This gap highlights the concentration of high valuations among the largest companies in the index.
In looking through the individual stocks in the S&P 500, four stocks have a lower earnings multiple (based on estimated earnings for the current year) than the 4.9 percentage point gap between the average and median multiple of the index’s components. Below we highlight charts of each of them and show that in certain cases, cheap doesn’t necessarily mean good value.
Of the five “cheapest” stocks in the S&P 500, General Motors (GM) has been the best performer over the last year with a gain of 22.5% on a total return basis. Even after the gain, the stock trades at 4.86 times estimated earnings. For the current year, analysts expect GM to grow earnings by 24%, but in the two years after that, earnings are only expected to grow by a little more than 1% which is also the stock’s dividend yield.
Next on the list in terms of performance is Viatris (VTRS). VTRS was formed in 2020 following the merger of Mylan and Upjohn, which was a division of Pfizer (PFE). The company owns several brand-name prescriptions, generics, biosimilars, and OTC treatments. VTRS isn’t a high-growth stock (earnings are expected to decline 7% this year), but with a P/E of 3.92 and a yield of 4.49%, shareholders are more attracted to the stock because of its income characteristics. With an annual dividend payout of 48 cents and annual earnings of over $2.00 per share, as long as earnings don’t collapse, VTRS should have no problems with maintaining its payout.
While VTRS and GM have been winners, the other two ‘cheap’ stocks have only gotten cheaper over the last year. The first is United (UAL). Air travel has more than erased all of the weakness from Covid, and the TSA is expected to see record passenger volumes around this July 4th holiday. Despite the strong demand, airline stocks have generally struggled in recent months. Over the last year, UAL is down 13.85% taking its P/E down to 4.8. After tripling last year, earnings are expected to grow just 1% in 2024 but then bounce back to between 10% and 20% for each of the next two years.
Last and certainly least is Walgreens Boots Alliance (WBA) which has declined more than 55% over the last year. At the surface, the stock looks cheap trading at just 4.1 times expected earnings and yielding 8.1%. After this week’s horrific earnings report, those estimates are likely to come down sharply. The company reported weaker-than-expected earnings and lowered guidance for the full year. It added that it plans to close a ‘significant number’ of stores due to declining margins and weak profitability. In later comments, the CEO noted that up to a quarter of all stores could be affected. In response to the report, the stock crashed more than 22% on Thursday and fell every day this week. And that 8% dividend yield? While there was no mention of it on the call, WBA already cut its payout by nearly half earlier this year, and after this week’s report, another cut can’t be ruled out.
Bespoke Investment Group, LLC believes all information contained in these reports to be accurate, but we do not guarantee its accuracy. None of the information in these reports or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. This is not personalized advice. Investors should do their own research and/or work with an investment professional when making portfolio decisions. As always, past performance of any investment is not a guarantee of future results. Bespoke representatives or clients may have positions in securities discussed or mentioned in its published content.
This Week’s Can’t-Miss Analysis — 6/28/24
We publish a lot of market-related content each week, and we want to make sure you don’t miss the most important topics. Below are some charts and tables we view as “can’t miss” from the last week.
We began the week with our Chart of the Day on Monday looking at Bloomberg’s % of World Market Cap indices. As shown below, the US now makes up 48% of world stock market cap, which is a record high going back to late 2003. Ten years ago in 2014, the US made up roughly 36% of world market cap, so it has risen 12 percentage points since then. Note that while the US makes up nearly half of world stock market cap, it only makes up about 25% of global GDP.
While most countries have seen their share of world stock market cap fall as the US has risen, India is really the only major player on the world stage that has also seen its share increase consistently over time. As shown below, India has seen its share of world market cap more than double since its COVID low in early 2020.
To continue reading the rest of this week’s “Can’t-Miss” analysis, which includes another dozen or so important market-related topics, sign up for one of our two membership levels with our July 4th special below!
Bespoke Premium July 4th Special — 74 Days for $17.76, then 20% Off
Bespoke Institutional July 4th Special — 74 Days for $17.76, then 20% Off
Below is a snapshot of what’s included so that you can decide which membership option is right for you:
If you missed Bespoke’s Paul Hickey on CNBC earlier this week, you can click here or on the image below to view the segment.
Separately, please read on to learn about a new initiative launching in July that we’re very excited about!
STOCK MARKET SUMMER CAMP FOR STUDENTS
If you or any of your friends or colleagues have children, grandchildren, nieces, or nephews, please take note!
Here at Bespoke we’ve been following the stock market 24/7 for more than two decades, so based on the “10,000 hour” rule, we can confidently say that we are market “pros”.
At the same time, traditional education across grades K-12 doesn’t focus on the stock market, investing, and how it all works.
For years, we’ve thought about addressing the “stock market literacy gap” for students across the country. Now, we’ve come up with a plan!
Starting this summer, we are now offering “Stock Market Camp” for students in grades 5-8 and 9-12!
Bespoke’s Stock Market Camp will run for five days from Monday-Friday with each live Zoom class lasting roughly 75 minutes. Camp will be fun, engaging, and interactive, and by the end of the week, students will have a basic understanding of how the stock market and investing works! If a live class is missed, a recording will be available.
We don’t have to tell you how valuable knowing this information at a young age can be! Instead of kids playing video games, scrolling through TikTok, or messing around on Snapchat, we think our five-day Stock Market Camp will pay major dividends down the road!
For now we are making our Stock Market Camp available to students that are referenced by Bespoke readers. We are running one week of camp for high school students (grades 9-12) from July 22nd-26th, and one week of camp for middle school students (grades 5-8) from August 12th-16th. Each weekly camp will be capped at 40 students max, so please sign up ASAP to reserve your student’s spot. You can purchase as many spots as you’d like or forward this email to colleagues and have them sign up.
SIGN UP YOUR STUDENT OR STUDENTS TODAY AS THE CAMPS ARE LIMITED TO JUST 40 ATTENDEES!
We will touch base after sign-up to gather the pertinent information. If you sign up and the student cannot attend during the dates listed above, we can either provide access to a full recording of the camp or a credit for a future camp. Refunds will be provided upon request if we are notified at least one week before the camp’s start date.
Please reach out if you have any questions about Bespoke’s Stock Market Camp. The camp is for informational and educational purposes only, and there will be no investment advice or recommendations provided. All discussions will be impersonal and historical in nature. There will be no forward-looking analysis or discussion.
Finally, if you’re not ready to sign up for a Bespoke subscription or our Stock Market Camp for a student, go check out our Bespoke Threads site to pick up some super-soft Bespoke merch!!!
Have a great weekend!
Bespoke’s Morning Lineup – 6/28/24 – The Aftermath
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.
“The end may justify the means as long as there is something that justifies the end.” – Leon Trotsky
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Was there a debate last night? Futures are modestly positive this morning despite a very weak earnings report from Nike (NKE) where the stock is down over 15% in the pre-market in what would be the worst one-day reaction to an earnings report since at least 2001. Several economic reports were just released, and the results have generally been positive. Personal Income was slightly stronger than expected, Personal Spending was slightly weaker, and PCE inflation data was right in line with estimates.
In yesterday’s Morning Lineup note we noted that “barring something completely unexpected, it’s hard to see this night being looked back at as a major milestone come November.” Last night’s debate met the bar. Politico called it the “worst performance of any general election presidential candidate in any debate in modern American history.” NBC News noted that it sent “Democrats into a panic”. A New York Times headline described it as “frightening”, “shaky”, and “halting”. CNN referred to it as ‘disastrous”. On the other side of the Atlantic, Sky News called it “excruciating” and said that some Democrats described it as a “car crash”, BBC called Biden’s performance “incoherent”, and The Economist described it as “horrific” and “casts his entire candidacy into doubt”. Keep in mind, that these aren’t publications that are typically known as leaning conservative.
The initial reaction in the betting markets was swift. As shown in the snapshot from electionbettingodds.com, while Trump’s odds of winning increased 4 percentage points to 59.7%, Biden’s chances plummeted by nearly 15 percentage points to 21.3%. Interestingly, though, on a generic party basis, Democratics odds declined by just 3.2 percentage points as the chances for a candidate other than Biden on the Democratic side grow.
While the Democratic versus Republican party matchup didn’t move nearly as much as Biden’s odds, it was a big move relative to history. As shown in the chart below, the odds of a Republican victory in November are right near the highest levels since at least 2022, and the only time the odds were higher was in late 2023.
The reason Biden’s odds had such a large decline relative to Trump’s increase comes down basically to one person- Gavin Newsom. As shown in the chart below, overnight, Newsom’s odds of being elected in November shot up to 10% for the first time, and he’s now nearly half as likely to be elected in November as Biden! Obviously, it’s still early and a lot can and will likely change between now and November. If you identify as Democrat, Republican, or unaffiliated with either party, if you watched last night’s debate, you won’t forget it.
