We are kicking off October with a relatively light few days on the economic data front.  Overnight, Manufacturing and Service PMIs were released alongside Retail Sales for multiple countries including Germany, Italy, Switzerland, France, and the UK.  Japan’s quarterly Tankan business surveys were updated with most series missing expectations.

Back home this morning, the US Manufacturing PMI for September came in right inline with expectations.  ISM Manufacturing and Prices Paid were released shortly after and both came in below expectations.  After no releases tomorrow, Wednesday will round out the ISM and PMI releases with the services portion of both indicators.

On Friday, we will see if the labor market continues its hot streak when Nonfarm Payrolls for September hits the tape.  Payrolls and U3 unemployment are estimated to decline once again while hours are expected to go unchanged.  Average hourly earnings are predicted to see a slight downtick in YoY growth.  See the table below for the rest of the upcoming US data releases this week.  You can always check out the day’s economic releases here with our Economic Monitor.

After surging to a multi-year high in August, the ISM Manufacturing index pulled back slightly more than expected in September, falling from 61.3 down to 59.8 versus expectations for a drop to 60.0.  As shown in the chart, though, activity is still at extremely robust levels.

In terms of the commentary of this month’s report, it was generally positive, but that strength is being clouded by the issue of tariffs, which is showing up in a number of sectors like Computer and Electronic Products, Chemicals, Furniture, and Plastics.

As far as the breakdown of this month’s report is concerned, breadth was relatively weak.  On a m/m basis, just four categories improved while six declined.  Production was one bright spot, as were Export and Import Orders, which is a bit surprising given the recent barriers to trade. The only other category to show a m/m increase was Employment.  On the downside, the most notable decline was Prices Paid.  That index dropped from 72.1 down to 66.9 which is the lowest monthly reading of the year and largest m/m decline since last June.  Here again, one would expect the increasingly tense trade environment to be having upward rather than downward pressure on prices.

From a seasonal perspective, investors have now cleared what has historically been the worst month of the year for the US equity market (September), and we now enter what is normally the best stretch of the year.

Below is this morning’s snapshot from our interactive Price Database, which shows the median change of the S&P 500 over the next week, month, and 3 months based on the last 10 years worth of price action.  Bespoke’s Price Database is available for use by Bespoke Premium and Bespoke Institutional members, and it’s just one of many unique investment tools at their disposal for daily use.

There is green lighting up our gauges!  Over the next week (10/1-10/8), the S&P 500 has seen a median gain of 1.18% based on the last 10 years worth of price action.  Over the next month, the median change has been +2.72%, and over the next 3 months (10/1-12/31), the gain has been +7.07%  The 3-month return of +7.07% represents “Perfect” seasonals, meaning it’s the best stretch of the calendar year compared to all other 3-month periods.

September had a rough final week as US equities fell after further trade tensions and other political news.  You can see this through this morning’s Trend Analyzer snapshot.  Six ETFs are overbought, 8 are neutral, and none are oversold.  Except for the Nasdaq 100 (QQQ), every one of the major US Index ETFs is down from where they were this time last week with long tails moving out of overbought territory.  Fortunately, October seems to be starting off on the right foot with news coming out this morning that Canada will be joining in on the NAFTA replacement deal.  Stocks are set to open higher following this news.

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.

Social Media

Twitter says bug may have exposed some direct messages to third-party developers by Zack Whittaker (TechCrunch)

A bug in Twitter’s back end may have let third-party developers read and store private direct messages between users. [Link]

Facebook Security Breach Exposes Accounts of 50 Million Users by Mike Isaac and Sheera Frankel (NYT)

In another huge breach of security for a social media network, Facebook announced a breach this week that had exposed full account control of more than 50 million users; what’s worse, that access could have spread across other connected applications as well. [Link; soft paywall]

New Studies

How universal free preschool in DC helped bring moms back to work by Bryce Covert (Vox)

By offering a guaranteed placement for all children in preschool, without costs to parents, Washington, DC was able to generate an extremely substantial increase in labor force participation. [Link]

World War II and African American Socioeconomic Progress by Andreas Ferrara (University of Warwick Working Paper Series)

The last period of significant socioeconomic progress and upward mobility for black Americans was during the middle of the last century. This paper argues that progress was a function of tight labor markets and labor shortages, rather than some sort of shift in the moral fiber of the nation as it marched towards desegregation. [Link; 96 page PDF]

A Hedge Fund Manager Who Drives a Ferrari Will Probably Underperform by Amy Whyte (Institutional Investor)

Using public vehicle records, the authors match hedge fund managers to their wheels and find that sports car drivers tend to underperform peers who make more staid vehicular choices. [Link]

Country-level social cost of carbon by Katharine Ricke, Laurent Drouet, Ken Caldeira and Massimo Tavoni (Nature)

While carbon emissions have a global impact and therefore a general level of social cost for the whole world, this paper gets a bit more detailed and argues the distribution of those costs are not equal across countries. [Link]

Dark Money

How Dirty Money Disappears Into the Black Hole of Cryptocurrency by Justin Scheck and Shane Shifflet (WSJ)

An in-depth investigation of how cryptocurrencies help launder proceeds from credit card fraud and Ponzi schemes around the world. [Link; paywall]

2 Investigators: Fans Scammed Out Of Millions Of Dollars By Fake Celebrity Accounts by Pam Sekman (CBS Chicago)

A local news network in Chicago reveals the story of people convinced to send thousands of dollars to Dubai or other strange locales, duped by fake accounts purporting to be real-life celebrities. [Link]

Drugs

Instagram has a drug problem. Its algorithms make it worse. by Elizabeth Dwoskin (WaPo)

While Instagram is better known for its totally legal influencer culture (across fitness, travel, food, interior design, and a litany of other topics), it’s also a booming advertising venue for illegal drugs. [Link; soft paywall]

On Ecstasy, Octopuses Reached Out for a Hug by JoAnna Klein (NYT)

We’re curious what the proposal to feed an octopus MDMA looked like, but that aside a recent study used doses of the drug to show how similar the strange animals are to humans. [Link; soft paywall]

Autonomous Vehicles

Baidu just made its 100th autonomous bus ahead of commercial launch in China by Kirsten Korosec (TechCrunch)

While this story is somewhat out of date, it does help illustrate progress being made by tech companies in China; in this case, on level 4 (capable of taking over driving in certain conditions) mini-buses. [Link]

The Amazin’s

Gary Keith and Ron, the Magi of Mets Nation by Devin Gordon (NYT Mag)

The antics of Mets broadcasters is helping keep interest in the once-again lowly Mets alive late in a season that saw the squad knocked out of playoff contention months ago. [Link; soft paywall]

Liberalism

The Economist at 175 (The Economist)

10,000+ words on the classic liberal perspective (note: “liberal” in this case is not synonymous with “left wing” as is often the common use in the United States) of The Economist, 175 years after the magazine was launched and in the midst of a global discussion about the fruits of an approach which elevates freedom over pre-modern approaches to political organization. [Link; soft paywall]

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Have a great Sunday!

Week 3 Results: 9-6, Overall: 26-17 (60.5%)

Outside of financial markets, we’re also sports fans here at Bespoke.  With new legal sports betting avenues now available across the US, we figured we’d have some fun and pick each NFL game versus the spread this season (as of Saturday evening).  Let’s see how we do…on to Week 4.

We were 9-6 in week 3, bringing our overall record through 3 weeks to 26-17 (60.5%).

2018 NFL Week 4 Bespoke Picks:

Cincinnati at Atlanta (-4): Cincinnati +4

Tampa Bay at Chicago (-3): Tampa Bay +3

Detroit at Dallas (-2.5): Dallas -2.5

Buffalo at Green Bay (-10): Green Bay -10

Philadelphia (-3) at Tennessee: Philadelphia -3

Houston at Indianapolis (Even): Indianapolis Even

Miami at New England (-7): New England -7

NY Jets at Jacksonville (-9): Jacksonville -9

Cleveland at Oakland (-2.5): Oakland -2.5

Seattle (-3) at Arizona: Seattle -3

New Orleans (-3) at NY Giants: NY Giants +3

San Francisco at LA Chargers (-11.5): LA Chargers -11.5

Baltimore at Pittsburgh (-3): Baltimore +3

Kansas City (-4.5) at Denver: Kansas City -4.5

Week 4 Picks: 9 Favorites, 5 Dogs; 8 Home, 6 Away

2018 NFL Week 3 Bespoke Results:

New Orleans at Atlanta (-1.5): New Orleans +1.5 (Win)

San Francisco at Kansas City (-6.5): Kansas City -6.5 (Win)

Oakland at Miami (-3): Miami -3 (Win)

Buffalo at Minnesota (-16.5): Minnesota -16.5 (Loss)

Indianapolis at Philadelphia (-7): Indianapolis +7 (Win)

Green Bay (-2.5) at Washington: Green Bay -2.5 (Loss)

Cincinnati at Carolina (-3): Cincinnati +3 (Loss)

Tennessee at Jacksonville (-9.5): Tennessee +9.5 (Win)

Denver at Baltimore (-5.5): Denver +5.5 (Loss)

NY Giants at Houston (-6): NY Giants +6 (Win)

LA Chargers at LA Rams (-7): LA Rams -7 (Win)

Chicago (-4.5) at Arizona: Chicago -4.5 (Loss)

Dallas at Seattle (-1.5): Seattle -1.5 (Win)

New England (-7) at Detroit: New England -7 (Loss)

Pittsburgh (-1) at Tampa Bay: Pittsburgh -1 (Win)