The Bespoke Report – 8/2/24 – Bad News Is Bad News
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This Week’s Can’t-Miss Analysis — 8/2/24
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.
Chair Powell and the Fed left rates unchanged on Wednesday and signaled that they’d likely be cutting rates at the September meeting. Then all hell broke loose. Since 3 PM ET when Powell had his post-FOMC press conference on Wednesday, the S&P 500 is down 3.5%, the Nasdaq 100 is down 5%, and the small-cap Russell 2,000 is down 8.3%. A series of very weak economic indicators, a failure to post strong enough beats from a few mega-caps, and more Presidential election volatility all of a sudden has investors shaking in their boots. Treasury yields have plummeted in a sign of weakening economic expectations, and Powell and the Fed don’t have another meeting until September 18th. Oh, and August and September are historically two of the worst months of the year for the market from a seasonal perspective, so there’s that to deal with as well.
It’s amazing how the market can go from thinking the Fed has everything under control to suddenly appearing way behind the curve. That’s how it always seems to work, though, doesn’t it?
As shown below, the CNN Fear & Greed index, which looks at several volatility and sentiment figures to gauge investor skittishness, has ticked into “Extreme Fear” mode. (If you’re a contrarian, you love to see it.)
As we move into August, below is a reminder of the seasonal weakness that August and September typically bring. Over the last 50 years, August and September are the only two months that have seen the Dow average declines. September is the worst month by far with an average decline of 1.28% and positive returns only 36% of the time.
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 Dog Days of Summer special below!
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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!
From August 12th-16th, we’ll be running our Stock Market Camp for students in grades 5-8!
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 already ran a one week of camp for high school students (grades 9-12) from July 22nd-26th, and our next one is for middle school students (grades 5-8) from August 12th-16th. Each weekly camp is 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.
Don’t forget to go check out our Bespoke Threads site to pick up some super-soft Bespoke merch!!!
Have a great weekend!
Treasury Rally Enters its Fourth Month
After three months in a row of gains already, long-term US Treasuries have picked up in August right where they left off in July. In just the first two trading days of August, the iShares 20+ Year Treasury ETF (TLT) has already gained close to 3% to trade at its highest level since February 1st, riding a seven-day winning streak. Despite the surge in price, TLT is only now just bumping up against a downtrend line that has been in place since its summer peak right around this time last year.
Along with the rally in price, the yield on the 10-year Treasury has plummeted for each of the last seven trading days. Going back to 1962, streaks of this length haven’t been particularly uncommon. Since 1962, there have been 44 other streaks of at least seven trading days. If the streak continues into next week, it will join more rarified territory. Of the 44 prior streaks, just 18 stretched into an eighth day, and of those, only six lasted nine days.
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Bespoke’s Morning Lineup – 8/2/24 – A Slap in the Face
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 more you sweat in peace, the less you bleed in war.” – Norman Schwarzkopf
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Welcome to August. Global stock markets have been slapped in the face by a brutal August sell-off driven by weak earnings reports, concerns over the economy, and a generally overbought technical condition. If that wasn’t bad enough, the July employment report was entirely weaker than expected. Non-farm payrolls increased by just 114K vs a 175K forecast. The Unemployment Rate came in 0.2 higher than expected (4.3% vs 4.1%). As if that wasn’t bad enough, both average hourly earnings and the average workweek were weaker than expected. After being down by 1.2% heading into the print, S&P 500 futures are now indicated to open down by over 1.5% while the Nasdaq is down 2.3%. Going the other way are treasury yields where the 10-year yield is below 3.8% and near the lowest level since last July!
As mentioned above, August has started on a poor note, and based on where futures were trading at 8 AM, the S&P 500 was on pace for a decline of 2.5% in the first two trading days of August. Since 1954, only three other years – 1998, 2002, and 2011 – have started weaker. Interestingly, though, in the late 1960s/early 1970s, there was consistent weakness to kick off the month.
In terms of how weak starts to August play out for the rest of the month, buckle up. In 1998, the S&P 500 went on to crater another 10.7% while in 2002, it surged 6.0%. Both of these moves make the 2.8% decline for the rest of August in 2011 seem sleepy.
And for the rest of the year? In 2011, that 10%+ decline fully reversed and turned into a gain of 14.7%, but in 2002 and 2011, the S&P 500 was also up but by less than 2% each time.
Bespoke Market Calendar — August 2024
Please click the image below to view our August 2024 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.
Chart of the Day – Plunging 10y Yields
Bespoke’s Morning Lineup – 8/1/24 – New 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.
“Run faster, jump higher, reach farther, and you’ll always win!” – Jerry Garcia
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 a monster rally yesterday, futures are higher again this morning which is impressive considering that Asian markets were lower overnight, and Europe is lower this morning. A rally of over 7.5% in shares of Meta Platforms (META) in reaction to earnings is driving the positive tone, and the company’s plan to keep investing massive amounts into AI has translated to a follow-through rally in shares of Nvidia (NVDA).
Outside of equities, crude oil is trading modestly higher while treasury yields have also reversed a small amount of yesterday’s decline. A lot of these moves could change, though, as the economic calendar is packed between now and 10 AM with Non-Farm Productivity (better than expected), Unit Labor Costs (lower than expected), and jobless claims (higher than expected) all coming out at 8:30. Those reports will be followed by the S&P Manufacturing PMI at 9:45 and then ISM Manufacturing and Construction Spending at 10.
Through the end of July, the S&P 500’s total return over the last year was a gain of 22.1% which is nearly twice the historical average dating back to 1928. Not a bad 12 months! Besides the last year, equity market returns have been consistently above average for years. As shown in the chart below, the S&P 500’s annualized return over the last two years is nearly seven percentage points above the historical average while the annualized return of 15.0% over the last five years towers over the historical average of 10.5%. Stretching out over the last ten years, the gap between the current period and the historical average is not as wide, but at over 2.5 percentage points annualized, it adds up. While a 10.6% annualized return over ten years works out to a gain of 174%, a 13.2% annualized return ends up with a total return of 246%. It isn’t until you go out over the last 20 years that returns fall below average, but the spread is less than half a percentage point.
While it’s been a golden age for equity returns, bond returns have been terrible, but even here there was a little flicker of light. While the one-year performance of long-term US treasuries, as measured by the BofA/Merrill 10+ Year Treasury Index, has been well below average, it was positive which is something we haven’t been able to say much in recent months. Not only that, but monthly returns have also been positive for three straight months, and that’s the longest streak since July 2021.
Returns haven’t just been weak over the last year. Over the last two and five years, annualized returns have been negative and well over 10 percentage points below the historical average. Over the last 10 and 20 years, annualized returns are positive, but still well below the historical average.
Getting back to the fact that long-term treasuries were up in the 12 months ending 7/31, the chart below shows the rolling one-year performance dating back to 1978. July’s positive treading was only the second time in 42 months that the trailing 12-month performance was positive, and there has never been another period when trailing 12-month returns were so consistently negative.
The Triple Play Report — 7/31/24
An earnings triple play is a stock that reports earnings and manages to 1) beat analyst EPS estimates, 2) beat analyst sales estimates, and 3) raise forward guidance. You can read more about “triple plays” at Investopedia.com where they’ve given Bespoke credit for popularizing the term. We like triple plays as an indication that a company’s business is firing on all cylinders, with better-than-expected results and an improving outlook. A triple play is indicative of positive “fundamental momentum” instead of pure fundamentals, and there are always plenty of names with both high and low valuations on our quarterly list.
Bespoke’s Triple Play Report highlights companies that have recently reported earnings triple plays, and it features commentary from management on triple-play conference calls, company descriptions and analysis, and price charts. Bespoke’s Triple Play Report is available at the Bespoke Institutional level only. You can sign up for Bespoke Institutional now and receive a 14-day trial to read this week’s Triple Play Report, which features 20 new stocks. To sign up, choose either the monthly or annual checkout link below:
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Impinj (PI), a manufacturer of radio-frequency identification devices (RFID), is an example of a company that recently reported an earnings triple play. Shares of PI are up more than 75% YTD with the help of two solid earnings reactions days so far this year, including a gain of 4.4% on 7/25 in reaction to its recent triple play, the company’s third in a row.
Looking at the snapshot below from our Earnings Explorer, PI has historically had some very strong earnings days as the result of triple play reports. The average move following the highlighted triple plays below is +19.47% (median +22.82%). To put together a streak of triple plays, PI has capitalized on automation processes across various industries with its products that allow businesses to connect their products to the internet through identification, location, and authentication solutions.
Two specific cases of this trend taking shape pointed out this quarter were book tagging in Japan, but more universal and importantly was the food industry using PI’s products to tag items that would ideally reduce food waste and maximize what they are able to sell. PI hopes for pilots in this category to scale into large deployments. PI’s endpoint ICs and reader ICs are also used across retail, logistics, healthcare, and manufacturing companies. You can read more about PI and the 19 other triple plays in our newest report by starting a Bespoke Institutional trial today.
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.
Bespoke’s Matrix of Economic Indicators – 7/31/24
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!
