Bespoke’s Brunch Reads: 7/9/23
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.
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Markets
Wall Street Soothsayers Have Rarely Been So Bewildered About What’s Next (Yahoo)
After most Wall Street strategists got the first half of 2023 wrong, they are deeply divided about what will happen in the second half. Look on the bright side; while just about all of them got the first half wrong, at least half of them will be right about the second half. [link]
How Tom Brady’s Crypto Ambitions Collided With Reality (New York Times)
Celebrities and superstars like Tom Brady are feeling the effects of the crypto crash almost a year after the downturn. Many celebrities agreed to endorsement deals with various crypto sites and promoted the use of cryptocurrencies and crypto exchanges without conducting proper due diligence. As a result, some are finding themselves named as defendants in lawsuits alleging they misled investors about digital assets. [link]
Government
After Days of Destruction, Macron Blames a Familiar Bogeyman: Video Games (NPR)
After the death of a teenager by police during a traffic stop in June, France has seen riots damaging an estimated $1.1 billion of assets. French president Emmanuel Macron argues that social media and video games have fueled violence and vandalism in response to the death. Politicians have pointed to video games as the cause for increased violence, but studies have refuted this claim. [link]
TSA to Expand Its Facial Recognition Program to Over 400 Airports (Fast Company)
Over the next several years, over 400 airports in the United States will have a facial recognition system to identify travelers when going through security. TSA has conducted a pilot program across 25 airports testing its controversial biometrics technology and have found a 97% effectivity rate and increased efficiency for security wait times. Big Brother is watching! [link]
Commercial-Scale Wind Farm Off New Jersey Coast Approved (New York Times)
13 nautical miles off the coast of Atlantic City, New Jersey is the new home to a 98-turbine wind farm called Ocean Wind 1. This project is the 3rd commercial-scale wind farm approved under the Biden administration and is one step closer to the administration’s goal of generating 30,000 megawatts from offshore wind turbines by 2030. [link]
Intelligence
Here’s When We Hit Our Physical and Mental Peaks (WSJ)
Various researchers explored when humans reach their peaks for physical and mental tasks. For physical tasks that require speed, power, and high oxygen consumption (sprinting), humans peak in their mid-20s whereas physical tasks that are endurance or low-impact (marathons), we peak in their 40s or 50s. For most mental tasks, we peak around their 50s except for quick recall and high processing tasks, where we peak at 18 or their early 20s. [link]
ChatGPT Drops About 10% in Traffic as the Novelty Wears Off (Similarweb)
ChatGPT saw its first month of declining growth since its rise in popularity in 2022. Worldwide visitors dropped roughly 10%, unique visitors dropped 5.7%, and time spent on the website dropped 8.5%. Other AI chatbots followed this trend and saw declines in the month of June as well. [link]
What AI Can Do With a Toolbox…Getting Started With Code Interpreter (One Useful Thing)
OpenAI’s newest feature to the Chat-GPT chatbot is named Code Interpreter and gives Chat-GPT the ability to upload and download information as well as write and execute coding programs. This feature will only be available to Chat-GPT plus subscribers. Read the article to see how a user with a PhD performed advanced data analysis and made a meme using Code Interpreter. [link]
Economy
America’s Retirees Are Investing More Like 30-Year-Olds (WSJ)
After a horrible year for 60-40 portfolios, older Americans are breaking away from the conventional investment strategy, opting for dividend-paying stocks instead. Vanguard and Fidelity report significant increases in the inclusion of stocks in retirement portfolios. Stocks are preferred due to higher returns compared to bonds, which are struggling to keep up with inflation. [link]
Who’s Not Working? Behind the Full-Time Caregivers Leaving the Workforce (Minneapolis FED)
Many adults who are unemployed cite caregiving as the primary reason for a lack of employment. Most caregivers are caring for children, and most are females. Some full-time caregivers are able to work while also fulfilling their caretaking duties, but it is very difficult because young children need constant attention and care resulting in the caretaker leaving their occupation. [link]
Americans Have Quit Quitting Their Jobs (WSJ)
The job market is showing signs of cooling as Americans are staying put in their current jobs after the hiring frenzy during the COVID-19 pandemic. Employees point to increased wages, extra benefits, and uncertain economic conditions as reasons to remain at their current job. [link]
Science & Technology
Scientists See Early Universe in Slow-Motion for First Time (BBC)
Researchers in Australia examined quasars, the brightest objects in the universe, and concluded that the universe is expanding and has been since 1 billion years after the Big Bang. Their findings confirmed the expectation of Einstein’s general theory of relativity regarding the distant universe ‘running much slower than the present day.’ [link]
Sleep Deprivation May Dull Benefits of Exercise on Cognition (Neuroscience News)
University College London researchers studied the impact of inadequate sleep on cognitive abilities in adults aged 50 and above. They discovered that individuals in their 50s and 60s who slept less than 6 hours but exercised had similar cognitive declines as those who slept more than 6 hours but didn’t exercise. However, for adults over 70, lack of sleep showed no distinction between those who exercised and those who didn’t. [link]
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Have a great weekend!
The Bespoke Report – 7/7/23 – Pause
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Bespoke’s Morning Lineup – 7/7/23 – The Streak is Over
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“A state of war is not a blank check for the president when it comes to the rights of the nation’s citizens.” – Sandra Day O’Connor
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There was little conviction in equity futures heading into the June jobs report this morning. Overnight, Asian stocks were lower as they caught up to the declines from the US yesterday while European stocks attempt to bounce from yesterday’s sell-off. Industrial Production in Germany was weaker than expected falling 0.2% m/m versus expectations for no change, but commentary from ECB officials including de Guindos and Lagarde both implied that more rate hikes are in the cards.
Today’s Non-Farm Payrolls (NFP) report missed expectations by 21K while the Unemployment Rate declined to 3.6% which was right in line with expectations. Average hourly earnings and average weekly hours both came in better than expected, though. As far as revisions go, prior readings were revised lower by over 100K with May’s originally reported level of 339K revised down to 306K. Futures have seen a modest bounce while treasury yields are lower.
The streak is over! With today’s weaker-than-expected report, the record run of better-than-expected NFP reports ended at 14 and came just one month shy of tripling the prior record of five straight better-than-expected reports. It only figures that the streak ended on the same month that the ADP Private Payrolls report crushed estimates and caused just about every investor out there to price in a better-than-expected report as a sure thing. If you’re keeping track, the last three times now that ADP surpassed forecasts by 300K or more, the corresponding NFP report for the same month missed forecasts. On 6/3/21, ADP topped forecasts by 328K, and on the next day, NFP missed forecasts by 116K. On 1/5/22, ADP topped forecasts by 397K, and two days later NFP missed by 251K. Now, this week ADP tops forecasts by 372K, and NFP missed by 21K. Relying on the ADP report as an indicator for the NFP report? What is it they say about insanity and doing the same thing over and over again?
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Chart of the Day – 39, 40, 41, 42…
Bespoke’s Morning Lineup – 7/6/23 – Out Like a Bull, In Like a Bear
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“An absolutely new idea is one of the rarest things known to man.” – Thomas More
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
The first three days of Q3 have been an example of stocks not picking up right where they left off in the second quarter. while things started off quiet enough during the shortened session on Monday, yesterday’s session and this morning’s pre-market have traded heavily. This morning the tone has been especially weak as European stocks trade down over 1% on breadth that is skewed 10-1 to the downside. There hasn’t been much data to steer the market, but rising interest rates have been acting as a significant weight.
This morning, there’s much more economic data to contend with. ADP Private Payrolls were just released and came in much higher than expected at 497K versus forecasts for a reading of 220K. Jobless claims were more mixed. Initial Claims came in slightly higher than expected at 248K versus forecasts for 245K and up from a downwardly revised reading of 236K. Continuing Claims managed to come in weaker than expected (1.72 mln vs 1.737 mln). Overall, these reports suggest that any doubts over the health of the labor market can be put to rest, at least for now. Besides these two reports, we’ll get the monthly JOLTS report at 10 AM followed by Non-Farm Payrolls tomorrow. While there’s a lot of employment-related data to contend with don’t forget about the 10 AM release of ISM Services.
With the S&P 500 rallying into bull market territory and new 52-week highs, investors have become bullish. According to the weekly survey of individual investor sentiment from AAII, bullish sentiment jumped up to 46.4% from 41.9%. While bulls are still not in the majority and haven’t been in over two years, this week’s reading was the highest level of bullish sentiment since November 2021. Looking at the chart below, sentiment and the stock market have carved out identical patterns over the last two years indicating that investors’ views of the stock market have been based on how stocks have performed in the moment.
You may think that investor sentiment has always been positively correlated to the stock market’s performance, but that hasn’t necessarily been the case. The chart below shows the rolling two-year correlation between AAII bullish sentiment and the S&P 500 since 2000. While the correlation between the two has usually been positive, the levels have varied widely. In fact, levels like the current reading of +0.50 or more have been uncommon occurring less than 12% of the time since 2000.
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The Closer – Market Cap Growth and Value, JOLTS Forecast, Durable Goods – 7/5/23
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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 dynamics between growth and value (page 1) followed by a forecast of JOLTS job openings based on the latest data from Indeed (page 2). We then turn to the latest manufacturing data (pages 3 and 4) before closing out with a rundown of the most recent positioning data (pages 5 – 7).
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Bespoke’s Consumer Pulse Report — July 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.
Factory Orders Go Negative
The last 24 hours have been rough for economic data both in the US and around the world as most indicators released have been weaker than expected. It started with weaker-than-expected PMI readings for the services sector in China but has since spread to weaker PMI readings for most major economies in the Eurozone as well. Here in the US, PMI data on the services sector will not be forthcoming until tomorrow morning, but Factory Orders released this morning were a big miss. At the headline level, orders for the month of May increased 0.3% which was a half percentage point below consensus expectations. Not only that but April’s reading was also revised down from growth of 0.4% down to 0.3%. After stripping out Transportation, Factory Orders declined 0.5% while April’s reading was revised from a decline of 0.2% down to a drop of 0.6%.
On a year/year basis, Factory Orders also dipped into negative territory for the first time since October 2020. The chart below shows the historical y/y change in Factory Orders since 1960. While readings were negative during every recession, there were plenty of other periods where they also declined on a y/y basis and the economy was nowhere near a recession. Not only that but there were also many other periods during economic expansions where Factory Orders dropped by a much larger amount on a y/y basis.
While the magnitude of the decline in Factory Orders hasn’t been extreme, what is unique about the current period is how long the rate of change in Factory Orders has been declining. The chart below shows streaks where the y/y change in Factory Orders increased (blue line) or declined (red line). With May’s report, the rate of change in Factory Orders on a year/year basis has declined for a record eight straight months, breaking the prior record of seven months that was seen during recessions in the mid-1970s, early 1980s, and during the Financial Crisis. The fact that prior streaks of similar duration all occurred during recessions isn’t exactly reassuring. What makes it less worrisome, though, is that the decline is coming after Durable Goods experienced record growth and consistency of growth coming out of the COVID crash.
There’s plenty of evidence out there to cite as reasons why the US economy is teetering on the edge of a recession or merely in a slowdown, and parts of today’s Factory Orders report could honestly be used to help justify either viewpoint.
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Chart of the Day – Returns Relative to History: Which Extreme?
Bespoke Market Calendar — July 2023
Please click the image below to view our July 2023 market calendar. This calendar includes the S&P 500’s historical average percentage change and average intraday chart pattern for each trading day during the upcoming month. It also includes market holidays and options expiration dates plus the dates of key economic indicator releases. Click here to view Bespoke’s premium membership options.
