Jobless Claims Edge Slightly Lower
Jobless claims saw only a slight decline last week falling from 216K down to 214K, which was just a tad above consensus expectations for a decline to 212K. While claims have increased 12K from their low print in mid-September, they have now been at or below 300K for a record 191 straight weeks, at or below 250K for 56 straight weeks, and at or below 225K for 17 straight weeks. They may have stopped falling, but they are still extremely low.
The four-week moving average also edged higher this week, rising from 212K up to 213.75K. That’s 6.75K above the cycle low of 206K from mid-September, and given recent trends, we wouldn’t expect this indicator to make a new low anytime soon.
On a non-seasonally adjusted (NSA) basis, jobless claims dropped to 197.5K. For the current week of the year, this is the lowest weekly reading since 1969. It is also close to 125K below the average for the current week of the year dating back to 2000.
October 2018 Asset Class Performance Snapshot
Below is our asset class performance matrix highlighting the total return of various ETFs across asset classes during the month of October. We also include YTD total return as well as the percentage change over the final two trading days of October.
While the last two days of October were extremely strong for equities, major US index ETFs still finished October down 5-10% across the board. The most pain was felt in smallcaps which still fell 10%+ on the month even after 2% gains over the last two days. Looking at sectors, Consumer Discretionary, Industrials, and Energy were all down 10%+ in October, while Utilities and Consumer Staples actually finished up 2%.
Outside of the US, Brazil was the big winner with an October gain of 19.03%, while Mexico was the big loser with a decline of 17.86%. While China was down 8% on the month, it saw a massive gain of 4.4% over the month’s final two trading days.
Commodities overall were down in October, but both natural gas and gold were up on the month. Fixed income ETFs were down in October as well.
Morning Lineup – Fresh Start
Not in many years have bulls been this happy to put a month behind them as the declines of October are relegated to the history books. November is looking to start off on a positive note, but we still have about an hour until the opening bell for the month even rings. On the economic front, its a busy day with Initial Claims, Unit Labor Costs, Non Farm Productivity, ISM Manufacturing, and Car Sales all due to be released throughout the day. Then, after the close Apple (AAPL) will headline the earnings parade. And that’s just today. Don’t forget about tomorrow’s jobs report either!
We’re never ones to turn our noses to a one-day gain of 1% in the S&P 500, but we would be lying if we didn’t say that the way the market finished up in the last hour of yesterday’s session to close out the month wasn’t a bit disheartening. After trading up as much as 2% heading into the final hour of trading yesterday, the S&P 500 moved steadily lower to close out the month and gave up just about half of its intraday gains. Just one of many examples we’ve seen recently of investors selling into the close.
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the Bespoke 50 — 11/1/18
Every Thursday, Bespoke publishes its “Bespoke 50” list of top growth stocks in the Russell 3,000. Our “Bespoke 50” portfolio is made up of the 50 stocks that fit a proprietary growth screen that we created a number of years ago. Since inception in early 2012, the “Bespoke 50” has beaten the S&P 500 by 78.4 percentage points. Through today, the “Bespoke 50” is up 174.9% since inception versus the S&P 500’s gain of 96.5%. Always remember, though, that past performance is no guarantee of future returns.
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The Closer — Cuts Priced, RSI Divergence, Wages Up, Crude Outlook Brightens — 10/31/18
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Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, we identify a broad positive technical signal across global equity markets. We also discuss still-rising earnings estimates in the US and Europe, priced rate cuts in the US in the two years starting a year from today, weekly EIA petroleum inventory data, and the employment cost index release today that showed further acceleration in US wage growth.
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Chart of the Day: What’s Next?
Crude Inventories: Up, But Inline
The EIA updated their weekly data for petroleum products this morning. Crude inventories rose to 426 million barrels this week, up 1.68 million from last week. While far from the highs of the past five years, this is only slightly above the five-year average for inventory levels. These numbers are in line with seasonal trends; oil inventories typically rise as refineries re-tool for winter product blends.
Strong demand from abroad paired with higher production has brought crude exports to their second-lowest deficit in the past five years. The smallest deficit actually came from earlier this month (10/5). Throughout this year, the deficit in crude exports has maintained a very low level relative to the last couple of decades.
As shoulder season comes to a close, refinery demand has started moving back to more normal levels. Refinery throughput has been at elevated levels for most of the year, and is still high relative to the past five years, but is much closer to the average than where it has been.
B.I.G. Tips – November 2018 Seasonality
Fixed Income Weekly – 10/31/18
Searching for ways to better understand the fixed income space or looking for actionable ideals in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.
This week we review the longest drawdown in the bond market in over three decades.
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Back to Back Gains: Finally!
The market gods are taking it right down to the wire, but the S&P 500 looks like it’s finally going to have back to back positive days! Heading into Tuesday, the S&P 500 had only seen five up days during the entire month, and none of those daily gains came back to back with each other. Yesterday and today have been a different story, though, as the S&P 500 is not only on pace for back to back gains, but also back to back gains of more than 1.5%! The last time that happened was back in June 2016 just after the Brexit vote.
Even with back to back gains Tuesday and Wednesday, this month’s showing will still be weak, to say the least. Since the lows of the Financial Crisis in March 2009, October will go down as only the fifth month where the S&P 500 had only one or no instances of back to back gains in a given month. The last occurrence was a year and a half ago in April 2017, and surprisingly enough, the S&P 500 was actually up during that month! The other three instances were in March and November 2015, when there was just one instance of back to back daily gains, as well as May 2010 when the S&P 500 had no instances of back to back gains. May 2010 was also similar to this October because we saw the largest sell program this month since the Flash Crash back on 5/6/10. Finally, along with May 2010, there have only been six other months in the post-WWII period where an entire month passed without a single instance of back to back gains. Thankfully, it’s almost over!
