Over the past few weeks, high growth names have turned into a pain trade with the Vanguard Growth ETF (VUG) having fallen 11% from its February 12th closing high to the intraday lows last Friday; with a small rally in the second half of Friday’s session which has continued today, the ETF is now down 7.16% since the 2/12 high.  Meanwhile, in the same time frame, the iShares Select Dividend ETF (DVY) has risen 8.13% since its February 12th close, breaking out to new all-time highs both on Friday and again today

Looking at the screen of various styles of ETFs in our Trend Analyzer, the recent moves have brought VUG deep into oversold territory as of Friday’s close. Other growth-focused ETFs are similarly oversold. Meanwhile, the strong performance of dividend stocks has resulted in DVY alongside the S&P Dividend ETF (SDY) to be extremely overbought at more than two standard deviations above their respective 50-DMAs.

In the chart below, we show the ratio of the Dividend ETF (DVY) versus the Growth ETF (VUG). Times in which the line is declining indicate outperformance of growth while an upward trending line indicates outperformance of dividend stocks.

As could be expected given the different risk premiums of the two styles of these ETFs, growth stocks have seen fairly consistent outperformance in recent years. But more recently, the opposite has been the case, and in a big way.  As shown in the second chart below, over the past month (21 trading days) the ratio of DVY to VUG has risen over 16%. In the history of the data going back to early 2004, the only period that has seen this line rise at a more rapid pace was in September 2008 when it rose by 25.46%. Looking at that instance, the outperformance of dividend stocks did not lead to any sort of a longer-term trend though. In fact, the ratio peaked only a couple of months later erasing the entirety of the move by early March 2009.  Click here to view Bespoke’s premium membership options for our best research available.

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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Mania

Leading Card Grader PSA Doubles Prices as Industry Booms by Darren Rovell (Action Network)

Two weeks after being sold for a bit less than $1bn, the leading grader of sports trading card quality, has doubled prices and raised minimum batch counts amidst an epic order backlog numbering millions of cards. [Link]

How a 10-second video clip sold for $6.6 million by Elizabeth Howcroft and Ritvik Carvalho (Reuters)

A non-fungible token purchased for $67,000 is telling for 100x that price less than six months after being sold for the first time last fall. [Link; auto-playing video]

First Trust Takes Aim At ARK; Launching Innovation ETF by David Dierking (The Street)

Following in the footsteps of ARK Invest’s extremely successful Innovation ETF (ARKK), ETF giant First Trust has filed for an ETF that takes a similar approach. [Link; auto-playing video]

Meme Stocks

Hertz, the Original Meme Stock, Is Turning Out to Be Worthless by Steven Church (Bloomberg)

The original retail-fueled short squeeze from 2020 saw Hertz declare Chapter 11; that process is now finishing up with equity owners getting nothing. [Link; soft paywall]

Bots hyped up GameStop on major social media platforms, analysis finds by Michelle Price (Business Insider/Reuters)

A Massachusetts-based cyber security company has identified a large number of social media bot accounts helped amplify the craze for GameStop (GME) stock. [Link]

Washington

The Evolution of the Oval Office Décor (American Home Shield)

Ever wonder what the President’s office looked like in the past? Décor changed little in the first half of the 20^th century, but since Truman each President has redecorated to suit their personal styles and the fashions of the time. [Link]

Divided Senate Passes Biden’s Pandemic Aid Plan by Emily Cochrane (NYT)

Despite some confusion over specific unemployment provisions that delayed passage Friday, this weekend the Democratic-controlled Senate passed a $1.9trn aid bill that will result in thousands of dollars of aide for the middle class, expanded jobless claims benefits, and is estimated to cut poverty by an astounding one-third this year. [Link; soft paywall]

Whoops

Hey Citi, your bitcoin report is embarrassingly bad by Jemima Kelly (FT)

This week an effort to discuss crypto currency with clients led to some pretty spectacular whiffs from Citi’s research group, including a remarkable mix-up over basis points versus percentage points. [Link; paywall]

The Reemergent 1977 H1N1 Strain and the Gain-of-Function Debate by Michelle Rozo and Gigi Kwik Gronvall (NIH)

During the 1970s, a virulent flu strain that wrecked havoc likely represented a failure of containment at a bio research lab. The genetics of the virus were almost identical to strains first collected decades prior. [Link]

Shifting Gears

‘I’ve Never Seen Anything Like This’: Chaos Strikes Global Shipping by Peter S. Goodman, Alexandra Stevenson, Niraj Chokshi and Michael Corkery (NYT)

Shipping can be a volatile business, but the rapid swings in demand across goods and geographies have created unprecedented chaos across transportation markets around the world. [Link; soft paywall]

How Remote Work Is Reshaping America’s Urban Geography by Richard Florida and Adam Ozimek (WSJ)

Roughly half of Americans are working remotely, and while that share will decline as vaccine rollouts make normal offices safe again, some of the shift will persist amidst a longer-term trend towards the practice of working without going in to a physical desk. [Link; paywall]

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Have a great weekend!

The ARK Invest family of ETFs had a stellar 2020 that drew huge inflows. Across the five ETFs issued by Cathie Wood’s company, gains ranged from 105% to 178%, but 2021 has been much less friendly. The flagship ARK Innovation ETF (ARKK) is down 4.9% YTD (and getting worse), with a mixture of gains and losses across other themes. Flows haven’t yet had that kind of round trip: $20bn in 2020, with another $15bn this year (including $2bn of outflows since the peak in February). Looking at the total ARK Invest universe, we can calculate the amount of money investors have gained or lost in aggregate by subtracting flows from market cap. As shown below, back in December investors had a weighted average return of more than 60% across the five ETFs, weighted by the size of purchases. The selloff since has driven that down to just 19% through yesterday. With $15bn entering the funds this year, lots of investors are getting close to or further underwater, and declines could accelerate. So far this year, there’s only been $2bn of outflows, but the money that was quick to come in could just as quickly leave given the recent losses. This blog post is adapted from an analysis included in our nightly Closer report. Click here to start a free trial of Bespoke Institutional to get immediate access.

The drift lower in equity prices over the past couple of weeks has resulted in bullish sentiment to similarly turn lower.  The AAII’s weekly reading on bullish sentiment fell for the second week in a row this week as only 40.3% of respondents reported as optimistic.  That is the lowest level since only the first week of February as sentiment remains above the historical average of 38%.

Just over a quarter of respondents reported a pessimistic outlook this week.  That was up 1.5 percentage points from the previous week and the first increase in bearish sentiment in four weeks. Compared to the 5.6 percentage point decline in bullish sentiment (the largest since an 11.49 percentage point drop in November) the move in bearish sentiment was relatively small.  In fact, even after the increase, outside of last week, every reading so far in 2021 has been higher than the current reading.

The decline in bullish sentiment drove the bull-bear spread to fall down to 15.  That is only the lowest level since the first week of February as overall sentiment remains largely in favor of bulls, albeit less so than earlier this year.

Rather than the bearish camp, those losses to bullish sentiment went to neutral sentiment.  34.4% reported neutral sentiment this week, up 4.1 percentage points from last week.  That is the biggest one-week increase and the highest level in neutral sentiment since the week of December 24th

As for the Investors Intelligence survey of newsletter writers, the same sort of moderation in optimism was evident. 53.9% of respondents to this survey reported as bullish this week while bearish sentiment saw a 0.1 point increase to 18.6%; those respectively made for the lowest and highest readings since the first half of November. While that means sentiment still favors bulls, a higher share of respondents are anticipating a correction.  That reading rose to 27.5% this week, the highest level since the 29.1% reading for the week of September 23rd which was towards the tail end of a roughly 10% correction for the S&P 500. Click here to view Bespoke’s premium membership options for our best research available.

In addition to a higher revision of last week’s number (up 6K to 736K), initial jobless claims were higher this week moving up to 745K.  While claims didn’t improve, they did come in 5K better than expectations and they remain around some of the lowest levels since November.

Unadjusted claims were also higher rising 31.5K to 748.1K.  Again, in spite of that increase, claims are still at some of their best levels since the fall. Additionally, the current week of the year has normally experienced an uptick week over week.  Going back through the history of the data, 72% of the time the current week of the year has seen a WoW uptick in claims.

Claims from the Pandemic Unemployment Assistance (PUA) program also saw a slight uptick this week rising from 427.45K to 436.7K.  The increases in regular state claims and PUA claims means total initial claims for the most recent week rose to 1.18 million from 1.14 million the prior week.

In the past few weeks, we have noted how state-level claims have seen some interesting quirks like very high readings out of Ohio. Again this week, Ohio was the single largest contributor to the level of national regular state claims followed by California, Illinois, New York, and Texas.  Of these states, Texas also saw the largest week-over-week increase in regular state claims potentially as an after-effect of the winter storms in the region. That is after the state actually reported lower claims last week in the immediate aftermath of the storm. Although the Lone Star state saw a big increase in regular state claims, PUA claims saw a less significant uptick.  Once again, Ohio saw a much more significant uptick by this measure.

While initial claims have not seen much of an improvement, the decline keeps on coming for continuing claims.  This reading for the week of February 19th fell to a new pandemic low of 4.295 million; down 124K from the previous week.

Tacking on all other assistance programs delays the data one more week. For the week of February 12th, continuing claims across all programs were lower at 18.061 million.  That is the strongest reading since the week of January 15th when total claims had fallen to 17.873 million.  The lower reading in total claims was a result of declines across almost all programs with the biggest decline coming from Pandemic Emergency Unemployment Compensation (PEUC) claims which fell by just over 600K.  Click here to view Bespoke’s premium membership options for our best research available.