The following charts were included in our daily Closer report on 9/4/24.  You can receive our Closer in your inbox with a two-week trial to Bespoke Institutional.

July data on job openings and labor market turnover (JOLTS) showed a larger-than-expected drop in job openings, which came in 5% lower than estimated with a 3% downward revision to June data. The JOLTS data has been very consistent for some time in terms of showing a slowdown in hiring. Hires were over 4.5% of the labor force at the peak in late 2021 but have been trending lower for almost three years now; the same goes for the quits rate. Both those metrics improved this month despite weaker openings, but the weaker trend is very clear. One final note that is arguably the most concerning: while layoffs are still low, gross job terminations were 1.68mm in July. That’s not unusually high compared to pre-COVID levels, but firings may be starting to pick up. If slow hiring is now being matched by outright firings, problems could mount.

To read the rest of The Closer from 9/4 which also included our analysis on the Fed’s Beige Book, mega-cap AI mentions, and the latest job opening data from Indeed, sign up for a Bespoke Institutional trial today.

The following charts were included in our daily Closer report on 9/4/24.  You can receive our Closer in your inbox with a two-week trial to Bespoke Institutional.

Our Bespoke Beige Book Index measures the relative frequency of positive and negative terms reported in the Federal Reserve’s Beige Book.  In general, a higher relative frequency of positive terms equates to stronger GDP and vice versa (though the correlation is by no means perfect).  Below is an updated chart of our Beige Book Index following this week’s release.  In the chart, the dark blue line shows our Beige Book Index advanced six months forward, while the light blue line shows actual YoY GDP growth.  Based on our index, the current backdrop is consistent with much weaker GDP than the current ~3% pace (US GDP was up 3.1% YoY and 3.0% annualized QoQ in Q2, while the Atlanta Fed’s GDPNow tracker is sitting at 2.1% for Q3 after yesterday’s data).

This week’s Beige Book release on the qualitative economic backdrop was unimpressive to say the least.  Activity was reported as “flat or declining” in nine of twelve Federal Reserve districts with employment “steady overall” despite some reports of reduced labor utilization.  Consumer spending “ticked down in most districts” and manufacturing activity “declined in most districts.”

One more observation: the Beige Book was consistent with a bottoming of commercial real estate markets.  Below is a look at some of the commentary surrounding CRE in the latest Beige Book release:

In Boston, CRE activity was “flat” with “improvements along some dimensions.”  NY reported CRE markets “held steady” with “some decline in vacancy rates and an increase in asking rents.”  Philadelphia noted “steady construction” with a range of projects entering the pipeline.  Cleveland’s numbers were “mixed,” in Richmond “activity picked up,” and Atlanta reported that “vacancy rates rose” but “a slight uptick” in property transactions.  In Chicago’s district, vacancies “edged down,” and St. Louis noted “more properties on the market in anticipation of lower interest rates.”  Results weren’t universally positive: Minneapolis was weaker noting CRE “remained soft” while San Francisco noted CRE “weakened slightly overall.”  Still, on balance we can see a clear trend across these markets: the shock to CRE appears to have mostly played out, and while that doesn’t mean it’s all sunshine and roses, the market looks likely to firm going forward.

To read the rest of The Closer from 9/4 which also included our analysis on the JOLTS report, mega-cap AI mentions, and the latest job opening data from Indeed, sign up for a Bespoke Institutional trial today.

In today’s “$10,000 in…” post, we’re looking at the silver ETF (SLV) that began trading back in 2006.  Similar to the gold ETF (GLD), SLV allowed investors to gain exposure to silver in traditional brokerage accounts.

So how would an investor have done hypothetically putting $10,000 into the silver ETF (SLV) back in 2006 when it launched?  As shown below, that $10k would be worth a little more than $18,500 today.  You would still not even have a doubling of your money more than 18 years later.

As shown below, instead of buying SLV when it launched in 2006, had you bought the gold ETF (GLD) instead, the $10k would now be worth about $35,400.

Back in the early 2010s, SLV kept up with GLD for a bit, but it has lagged pretty badly for the last ten years.

As always, past performance is no guarantee of future results.

In yesterday’s Chart of the Day, we discussed how rotational this month’s declines have been.  Additionally, there is one other factor at play.  In the chart below, we’ve performed a decile analysis of the Russell 1,000 to see how stocks have done this month based on their dividend yields.  The stocks in the deciles to the left of the chart have the lowest or no dividend yields, while the deciles on the right have the highest dividend yields.  The bar for each decile shows the average month-to-date percentage change of the stocks in each decile.  Generally speaking, it has been the highest dividend payers that have held up the best so far this month, while the no or low-yielders have fallen the most.

Dividends don’t impact total return much over short time frames, but they make a massive difference over the long term.  There are plenty of ways to seek dividends including a number of dividend focused ETFs.  However, not all dividend ETFs are created equally.  Below we show three popular ones: the iShares Select Dividend ETF (DVY), the SPDR S&P Dividend ETF (SDY), and the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).  While they may appear similar to one another at face value, each ETF is constructed with different methodology.

For starters, DVY holdings include 100 US stocks that must have at least five years of dividend payments.  Of these three ETFs, that is the shortest dividend time requirement.  For inclusion into SDY, the methodology requires holdings to have consistently increased dividends for at least 20 years, and the NOBL ETF has the most stringent rules with a required 25 year history of raising dividend yields with many holdings having far longer histories.  As shown below, for performance over the past decade, those longer payout histories have (pun intended) paid dividends.   NOBL has posted the best total return over the past decade with a gain of 172% (10.54% annualized). That compares to a 156% return for SDY and a 145% return for DVY.  For comparison to a broader basket of stocks, that annualized return for NOBL even outpaces the broader S&P 500 Value ETF (IVE), but note that it’s still a couple of percentage points worse than the annualized total return of the S&P 500 ETF (SPY).

Like this post?  If you do, we think you’ll love our premium research.  If you’d like to receive Bespoke’s premium stock market/macro research on a daily basis, click here or on the image below to start a two-week trial today!

Alongside equities, it’s been a rough week for crude oil.  On catalysts of assumed weaker demand and supply news out of the Middle East, front month WTI futures are already down 5.56% month to date with the steepest declines occurring on Tuesday.  As shown below, crude has been falling throughout the past year and these most recent declines have brought the price of black gold to the low end of its range. Whereas last fall it was in the mid-$90 range, this week it moved into the $60 range (today prices are rebounding back above $70). The only other times in the past year that WTI was below $70 was briefly back in December. As we noted in Monday’s Closer, although front month futures are hitting the low end of the past year’s range, those prices are actually at a premium compared to out-month futures as crude markets are currently in backwardation.

Expanding the timeframe out, below we show the price of crude over the past five years.  Again, the most recent prior instance of WTI having a $60 handle was last December, and there have been a handful of other brief periods of price being as low.  Since Q2 2021 as crude prices recovered from the pandemic, the high $60 range roughly has marked a notable level of support .

That decline in crude oil has resulted in lower gas prices.  Seasonally, it is typical for prices at the pump to roll over during the summer months with declines accelerating in the fall. This year, however, prices have been falling since mid-spring.  According to AAA, the national average for a gallon of gasoline yesterday was at $3.31, which is the lowest price since late February.  That is the lowest price of gas on 9/4 since 2021 ($3.19).

Like this post?  If you do, we think you’ll love our premium research.  If you’d like to receive Bespoke’s premium stock market/macro research on a daily basis, click here or on the image below to start a two-week trial today!