Bespoke’s Morning Lineup – 8/8/24 – Follow the Odds
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.
“If you have someone equal in ability to me I will beat him every time because I will try harder.” – Pete Rose
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Along with NVIDIA (NVDA), Super Micro Computer (SMCI) has been one of the poster-childs of the AI Boom. As shown below, though, the bloom appears to be off the rose. Earlier this year, SMCI shot up to $1,200/share, but since then it has now fallen 60%. Shares are currently trading around $480 in the pre-market this morning.
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The Closer – Reversal, Consumer Credit, Terrible 10y – 8/7/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a look at the intraday reversal (page 1) followed by a checkup on investor sentiment (page 2). We then take a look into the latest consumer credit figures (pages 3 and 4). We then turn over to the latest petroleum stockpile data (page 5) and close out with a recap of the horrendous 10-year note auction (page 6).
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Chart of the Day – Nasdaq Corrections
Bespoke’s Morning Lineup — 8/7/24
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.
“I’m tired of hearing about money, money, money, money, money. I just want to play the game, drink Pepsi, wear Reebok.” – Shaquille O’Neal, who signed with the Orlando Magic on this day in 1992 after being selected first in that year’s NBA Draft
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Below is an updated look at our 50-DMA spread chart for the S&P that’s featured in our Morning Lineup each day. As shown, yesterday’s bounce barely moved the index higher within its trading range, so we’re still quite oversold here with plenty of upside room to run.
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Chart of the Day – Historic Tumble in Global Equities
Bespoke’s Morning Lineup – 8/6/24 – Calming Down
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.
“Fear is the most contagious disease you can imagine. It makes the virus look like a piker.” – Warren Buffett
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After falling 12% on Monday, Japan’s Nikkei bounced back 10% on Tuesday, and US equity futures are currently set to open higher by about 0.75% as of 8 AM ET. As shown below, the carnage from the past few weeks has now left the S&P 500 in extreme oversold territory (>2 standard deviations below its 50-DMA). These are areas where you typically start to see some upside mean reversion, although it’s certainly not a guarantee.
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Defense Outperforms
Losses are accelerating as the S&P 500 (SPY) has, as of this writing, fallen 8% since the July 16th high. That move has occurred on a rotation out of former market leaders like the mega caps as markets contend with a number of factors ranging from recession fears to rising geopolitical tensions abroad. While breadth has been rough in that time, it hasn’t been a total wash with roughly a third of the index having risen since July 16th. On a sector level, the groups with the largest share of stocks rising since 7/16 come from defensive sectors like Utilities (83.9%), Consumer Staples (63%), Real Estate (61%), and Health Care (57%).
What is impressive is that in looking only at the S&P 500’s 20 best performing stocks since the 7/16 high, the two sectors with the largest representation are Health Care and Industrials. However, looking more closely, a number of those Industrial stocks are also in the Aerospace & Defense industry with stocks like Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX (RTX) all posting double digit gains.
As a result, the S&P 500 Aerospace and Defense Industry index has risen 1.4% since the July 16th high compared to the high single-digit percentage decline in the broader market. Looking at the 14-trading day performance spread of the industry and the broader market, that 9.5 percentage point difference is a 99th percentile reading dating back to 1990. While not every spike in this spread is due to geopolitical tensions (for example in the spring of 2020 it surged as equities recovered from the Covid Crash), this spread has tended to rise sharply around tense periods for geopolitics. This current spike surpasses that from when Hamas attacked Israel on October 7th and is now the most elevated reading since November 2022 (North Korea missile launches and Russia/Ukraine war was underway) and when Russia invaded Ukraine in early 2022 before that. Prior to 2020, the only other time defense stocks outperformed the S&P 500 by such a wide margin was in the late 19990s and early 2000s. More specifically, the current reading would be the highest since February 2002 in the early days of the War on Terror when these companies began to receive large contracts from the US government.
While the industry as a whole has outperformed the S&P 500 by a decent margin, under the hood it actually hasn’t seen the best breadth. Of the dozen stocks belonging to the industry, just four defense names are higher since 7/16, and each one has earnings to thank. As shown in the charts below, those four stocks all rose sharply in late July in the wake of their latest earnings reports. Impressively, the reaction to earnings for Northrop Grumman (NOC) and RTX (RTX) were both the best on record for their respective earnings histories based on data from our Earnings Explorer tool. Howmet Aerospace’s (HWM) gain after reporting the most recent quarter also ranks highly as their third best reaction on record, however, it has not been immune from selling over the past few sessions meaning that gap has since nearly been filled. Lockheed Martin’s (LMT) saw its sixth best reaction to date. In other words, while some are arguing that the defense group is up due to geopolitics, it has really been a few strong reactions to Q2 earnings reports.
Chart of the Day: Gauging the Sell-Off
Bespoke’s Morning Lineup — 8/5/24 — The Best Laid Plans…
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 best laid plans of mice and men often go awry” – Robert Burns
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The Fed decided to hold rates steady once again last week while indicating that it was highly likely to cut rates at its next meeting in September. Since that decision, markets have decided that the Fed got too cute. As shown below, with risk assets plummeting around the world this morning, the odds of at least 50 basis points of rate cuts by the September meeting are now at 100%.
Suddenly the Fed Funds Rate all the way up at 5.25-5.50% looks wildly out of line with where the 10-year and 2-year Treasury yields are trading at around 3.75%.
Brunch Reads – 8/4/24
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.
Anne Frank’s Arrest: On August 4, 1944, Anne Frank, a Jewish girl born in Frankfurt, Germany, and her family were captured by the Gestapo, the Nazi secret police, after hiding for over two years in a secret annex in Amsterdam. Acting on a tip from an unknown informant, the Nazis raided the space where the Frank family, along with the Van Pels family and Fritz Pfeffer, had sought refuge. The arrest led to their deportation to concentration camps where they later passed away. Otto Frank, Anne’s father, was the only family member to survive the Holocaust and ended up publishing her discovered diary. Anne began writing the diary on her 13th birthday, detailing her thoughts, fears and hopes during one of history’s darkest periods. Anne wrote about everyday occurrences, her longing for freedom, and her aspirations to become a writer. When her diary was finally published, she did just that. It’s been translated into numerous languages and remains one of the most widely read accounts of the Holocaust.
The genAI boyfriend business is booming (Axios)
More women are turning to AI chatbots for connection and comfort. Allegedly, they find simulated AI empathy more reliable than humans. That idea clashes with stereotypes about AI use and suggests an alarming shift in human social behavior. AI companion apps are rapidly gaining popularity as user engagement outpaces other categories. Users can customize their chatbot experiences, and some apps, like Replika and Nomi, have garnered attention for their personalized interactions. Despite the emotional support these apps offer, the potential erosion of human relationships and privacy risks associated with the usage of sensitive data is something to consider seriously. [Link]
The antithesis of the Olympics: Using AI to write a fan letter (NPR)
A recent ad featuring Google’s AI assistant, Gemini, shows a father using AI to craft a fan letter to Olympic hurdler Sydney McLaughlin-Levrone for his daughter. The AI-generated letter ends up lifeless and uninspiring, one of the shortcomings of AI in capturing genuine human emotion and creativity. After all, is there anything better than a handwritten note from the heart? The article argues that true admiration and expression come from personal, imperfect efforts, not from relying on artificial intelligence to replace human touch and sincerity. [Link]
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