Outside of equities, we saw a massive move higher in Treasury yields this week and a massive drop in Treasury bond prices.  For the 20+ year Treasury ETF (TLT), this week’s 6.34% drop was its second worst week on record since it began trading back in 2002.

Below is a look at TLT’s historical weekly percentage change, and we also show how TLT has performed in the weeks and months following one-week drops of more than 5% like we saw this week.  As shown in the table, TLT has normally continued lower for a while following big down weeks.  Start a two-week free trial to one of our three membership levels to receive Bespoke’s most actionable ideas.

The past week has been a solid run for the US equity market as a whole. The S&P 500 continues to edge ever closer to prior all-time highs; opening today within half a percent of this level. As shown in the chart below, on average across all sectors, though, it is a little bit less optimistic. The average sector is still 6.5% below record highs.  Excluding energy, which is by far the furthest (in terms of price and time) from its all-time high, the average across sectors jumps up to 3.6%.  Consumer Staples and Utilities are the only sectors within 1% of their highs while the Tech sector is not far behind only 1.5% away.  Start a two-week free trial to one of Bespoke’s three membership levels to receive our most actionable research.

One way to keep track of the evolving Presidential primaries and general election news is the website electionbettingodds.com which shows what the betting market is predicting for upcoming election outcomes. In the charts below, we show the current probabilities of a primary and general election win for each of the various candidates (officially announced and otherwise) with a 1% or higher chance of winning.  Elizabeth Warren now has a commanding lead in the Democrats’ primary with a 34.9% chance of victory with Biden and Sanders in second and third.

Where things get more interesting is to figure out which candidates have the best chance of winning the general election assuming they win their primary. For example, President Trump’s odds of winning his primary are 88.1%, but his odds of winning the general election for the Presidency are priced at 43.7%.

By dividing that 43.7% by the 88.1% chance of primary victory we can get to a 49.6% general election pricing assuming the candidate wins their primary.  This conditional probability probably shouldn’t be taken too seriously, but it’s got some interesting results. Among candidates polling over 5%, Beto O’Rourke has the highest odds (80%) of a general election win if he takes the primary while other Democratic hopefuls Andrew Yang and Bernie Sanders are priced at 60%+ odds.  Biden’s general election odds are at 55% if he wins the primary, while Warren — the current front runner — is at 49.9%. Notably, although Trump is close at 49.6%, no Republican has a conditional priced probability over 50% to win the general.

All of that said, these conditional relationships can be very unstable and are complicated to arbitrage, so we probably shouldn’t place too much faith in the detail of their message, but it’s still interesting to see that markets are implicitly optimistic about the electability of a candidate like Sanders or Yang relative to more mainstream candidates like Warren, Harris, or Biden.  Start a two-week free trial to one of our three membership levels to receive Bespoke’s most actionable ideas.

In last night’s Closer, we noted the recent price action of copper.  Over the past several months, copper had been consistently moving lower in a solid downtrend, but that downtrend has been broken this week.  Finishing up about 1% in yesterday’s session, copper had its first close above resistance which would suggest a further move higher.  We’re seeing additional gains today as the commodity continues to break out.  Over the next few weeks, copper bulls will look for a series of higher highs and higher lows that would eventually form a new uptrend.  Start a two-week free trial to one of our three membership levels for Bespoke’s most actionable research.

For the first time since last October, Steel Dynamics (STLD) closed above its 200-DMA yesterday. This comes after the stock has remained in a long term downtrend over the past year after the first round of tariffs on steel were imposed.  Although the company is not out of the woods yet on the political front, this long term downtrend was broken earlier this summer. Afterward, the stock pulled back to retest its downtrend.  STLD then made a higher low at the end of August (8/27), and has since risen over 23%. In the process, STLD not only took out its 50-day moving average, but it also closed marginally above its 200-DMA, holding above there today.

Even with the recent move higher, STLD’s yield remains attractive.  With a current yield of just under 3%—$0.24 per share paid quarterly—the dividend yield is higher than both the average for the broader S&P 1500 and the Materials sector which are 1.76% and 1.96%, respectively. In regards to other S&P 1500 steel companies, along with Nucor (NUE), STLD has the joint highest dividend yield. The growth rate of STLD’s dividend has also outpaced the sector dramatically.  The dividend grew by 24.82% over the past year and 13.7% over the past five years.  By both measures, this is nearly twice the growth rate of other stocks in the sector. That growth has been in spite of the past year and a half’s trade headwinds. Furthermore, with the dividend payout ratio at 27.36%, the company still has plenty of cushion to pay shareholders in the event that earnings do decline.  Start a two-week free trial to Bespoke Institutional to access our interactive Security Analysis tool and much more.