Chart of the Day: Albemarle Acting Awesome
Individual Investor Sentiment – Uh Oh
With the Dow suddenly hitting record highs on what seems like a daily basis, you would expect to see individual investor sentiment improve, and that’s exactly what we saw this week. According to the weekly sentiment survey from AAII, bullish sentiment surged 9.4 percentage points to 45.66% from last week’s reading of 36.22%. That move represents the largest one week increase since early July and the highest weekly reading since mid-February. While we’re not quite at the 50% reading yet, we would note that the last time optimism in this survey neared the 50% level was in late December. That wasn’t the exact top of the market right before the correction, but it was close to it.
While bullish sentiment starts to rise, bearish sentiment is back down in the mid-20 percent range, which is a level it has seen repeatedly throughout the year.
So if all the new bulls didn’t come out of the bearish camp, where did they come from? As shown in the chart below, the pool of undecideds continues to shrink as it fell from just under 33% last week to 29.22% this week. That’s the lowest level since mid-July.
Jobless Claims Move Back Down
After a week where jobless claims ‘surged’ to 215K, this week they resumed their downward trend falling to 207K versus expectations for a reading of 215K. This now makes it a record 187 straight weeks that claims have been at or below 300K, 52 straight weeks that they have been at or below 250K (longest streak since 1970), and 13 straight weeks where they have been at or below 225K (longest streak since 1969).
Despite the decline in claims this week, the four-week moving average moved slightly higher rising from 206.5 up to 207K. Even with the increase, though, claims are now just 1K above their multi-decade low of 206K from two weeks ago.
On a non-seasonally adjusted (NSA) basis, claims ticked down to 165.2K. For the current week of the year, that’s the lowest reading since 1969, and it’s also more than 117K below the average for the current week of the year dating back to 2000.
Morning Lineup – Yields Busting Out
Global bond yields have been on the rise all night and all morning continuing the trend that started in US Treasuries yesterday. Equity futures are trading lower in reaction, and semis will be an area to watch again as Deutsche Bank is the latest in the chorus of sell-side firms to cut numbers on the group. Despite the uptick in negative analyst commentary, the Philadelphia Semiconductor index has traded up for five straight days. If the sector can squeeze out a sixth straight day of gains in spite of the negative commentary, that could signal a turn for the group.
As mentioned above, interest rates are the main focus today. At the short end of the curve, the 3-month Treasury yield continues to move steadily higher hitting a level of 2.22% this morning.
There’s been nothing ‘steady’ about yields at the longer end of the curve, though, as the 10-year yield broke out to 3.22%- its highest yield since 2011!
With that breakout in the long end of the curve, the yield curve has spiked from its recent lows in the 70-bps range to just under 100 bps today.
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Divergent Start to October
Below is a snapshot of asset class performance to start the month of October. We also include performance over the last month and year-to-date.
The month has gotten off to a pretty strange start, with equity ETFs going in different directions. Small-cap ETFs have gotten hit very hard, while large-caps are in the green. Both consumer sectors are in the red, with Consumer Discretionary (XLY) off by 2% already. On the upside, Energy (XLE), Financials (XLF), and Industrials (XLI) have seen a wave of buying.
Outside of the US, Brazil (EWZ) is already up 9% in October, while India (PIN) is down more than 3%. Prior to September, India had been performing relatively well this year, but an 11.85% drop over the last month has sunk the country’s equity market deep into the red. China (ASHR), Hong Kong (EWH), and Mexico (EWW) are all down more than 2% this month already as well.
Commodities ETFs are on fire, especially energy-related ones. Oil (USO) is up 3.6% month-to-date, while natural gas (UNG) is up 8%. Finally, Treasury ETFs have fallen quite a bit so far in October as interest rates have broken out higher.
The Closer — Bonds Breaking, Hawkish Talk, Brazilian Polls Firming — 10/3/18
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Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, we discuss the rip higher in bond yields today. While investors may focus on the outright levels of yields, more impressive was the steepening of the curve as yields moved up. We also review hawkish Fed speakers that helped precipitate the move as well as a discussion of weekly EIA petroleum market data. Finally, we chart the consolidation of Brazilian polling behind two specific candidates ahead of Sunday’s election.
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Bespoke Consumer Pulse Report — September 2018
Bespoke’s Consumer Pulse Report is an analysis of a huge consumer survey that we run each month. Our goal with this survey is to track trends across the economic and financial landscape in the US. Using the results from our proprietary monthly survey, we dissect and analyze all of the data and publish the Consumer Pulse Report, which we sell access to on a subscription basis. Sign up for a 30-day free trial to our Bespoke Consumer Pulse subscription service. With a trial, you’ll get coverage of consumer electronics, social media, streaming media, retail, autos, and much more. The report also has numerous proprietary US economic data points that are extremely timely and useful for investors.
We’ve just released our most recent monthly report to Pulse subscribers, and it’s definitely worth the read if you’re curious about the health of the consumer in year two of Trump’s economy. Start a 30-day free trial for a full breakdown of all of our proprietary Pulse economic indicators.
Chart of the Day — Intel (INTC) and Others Breaking Out Of Downtrends
Bitcoin Lingers
With bitcoin down over 66% from its highs earlier in the year, it may sound pretty unbelievable, but the standard bearer of the crypto-currency space is still up over 50% on a y/y basis. That’s right, back in early October 2017, bitcoin was trading at a price of just $4,283 compared to today’s price of $6,463. Bubbles can take quite a long time to fully deflate!
With bitcoin still trading up over 50% from where it was a year ago, it is actually outperforming all but 12 individual stocks in the Nasdaq 100 during that span. Just to show how timing really is everything when it comes to investing, while just 12 Nasdaq 100 stocks are outperforming bitcoin over the last year, on a YTD basis every single one of them has outperformed bitcoin.
Eurozone Real Retail Sales Miss Again
Last night, data was released for Eurozone Real Retail Sales. For the 7th month in a row, the indicator missed economist estimates. This is the second longest streak of misses since 2007 when the indicator missed for 9 straight months ending in December 2007.
Sales reported for August were down -0.2% versus estimates of a gain of 0.2%. The prior month also saw a large downward revision to -0.6% from the original -0.2% number. This is on the back of less than exciting releases—especially on a YoY basis—for Markit Composite and Services PMIs for the Eurozone area that also came out last night.
As you can see in the chart below, historically, Retail Sales have been reliably correlated to Consumer Confidence. But in the past few years we have witnessed the two indicators begin to diverge. The silver lining to this divergence is it helps to explain the misses. Since the two have moved in sync in the past, economists rely on confidence data to predict upcoming sales, and the two moving further apart throws off estimates.
