The US stock market has begun 2018 on a very positive note with the S&P 500-tracking SPY ETF up 1.3% YTD already.  But stock markets outside of the US are doing even better so far this year.  Below we provide snapshots of regional and country ETFs from our extremely useful Trend Analyzer tool that’s available at the Bespoke Premium and Bespoke Institutional level.

As shown in the first snapshot below, regional ETFs have moved sharply higher within their normal trading ranges.  All but one (Europe hedged) are trading in overbought territory, with the large majority at extreme levels (>2 standard deviations above their 50-DMAs).  Emerging markets ETFs like EEM, ILF, IEMG, and VWO are leading the way with YTD gains of 2%+ already.

Below is a snapshot of country ETFs tracked using our Trend Analyzer tool.  Here again, all but a few are now extremely overbought.  The three China ETFs are up the most YTD with gains of 4%+, and Brazil (EWZ) is up 4% as well.  Russia (RSX) — 2017’s worst performing country ETF — is up 3.65% already in 2018.  The only country that hasn’t joined the party yet is Indonesia (EIDO), which is down 18 basis points on the year.  Even with its small year-to-date decline, EIDO is still up over 1% over the last 5 trading days dating back to the end of December.

Start using our popular Trend Analyzer tool now with a 14-day free trial to Bespoke Premium!

After a two-month pullback from the highest levels of the cycle, the ISM Manufacturing report for December showed a nice rebound.  While economists were forecasting the headline number to come in at 58.2, which would have been unchanged from November, the actual reading came in at 59.7, and that’s the third highest monthly reading of the recovery.

A look at this month’s commentary also shows more of the same, as sentiment is unequivocally positive.

Below we break out this month’s ISM Manufacturing report by its various subcomponents.  Whether you look at a m/m or a y/y reading, breadth in the report was extremely positive. The only two components that were down relative to November were Customer Inventories and Employment, while only Customer Inventories declined on a y/y basis.  Relative to last month, the real standout was New Orders, which rose from 64.0 up to 69.4.  That’s the highest reading for this component since January 2004, and before that period, you have to go back to the early 1980s to find a period when this component was higher.

Forget about Lexus.  It was definitely a “December to Remember” for sales of Ford F-Series trucks. Sales totals from Ford for December were just released, and the results were strong.  As shown below, total sales of F-Series trucks came in at 89.4K for the month which was the best December since 2005 and the third best December since 1996.  Trucks are not only higher margin, but they are often purchased by small businesses and contractors so they provide a good read on the health of the small business sector. Based on these sales totals, small businesses are expanding.

With December’s numbers in the books, total sales of F-series trucks for all of 2017 came in just shy of 900K at 897K.  That’s up nearly 10% from last year.  It was the 4th best year for F-series since 1996 and the best since 2005.

Bespoke co-founder Paul Hickey appeared on CNBC’s Closing Bell on Tuesday to discuss the market’s strong start to the year.  To view the segment, click on the link below.

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.

The Big Apple

The Most Expensive Mile of Subway Track on Earth by Brian M. Rosenthal (NYT)

Massive cost inflation on capital projects related to New York City transit is driven more by rampant fraud and excess than the admittedly significant challenges inherent to construction in the dense urban environment. [Link; soft paywall]

Crime in New York City Plunges to a Level Not Seen Since the 1950s by Ashley Southall (NYT)

Murders in the country’s largest city have fallen by nearly 90% since 1990 and are at a record low for periods with reliable data. The decline has been consistent for 27 years straight. [Link; soft paywall]

Biology

Crispr Isn’t Enough Any More. Get Ready For Gene Editing 2.0 by Megan Molteni (Wired)

5000 papers in 5 years have mentioned Crispr, the gene editing protocol discovered in 2012. Here’s a rundown of the next wave of techniques that will be used for gene editing. [Link; auto-playing video]

As World Eats More Meat, U.S. Soy Is Losing the Battle to Feed Animals by Jeff Wilson and Tatiana Freitas (Bloomberg)

The US soybean crop’s protein yield fell to 34.1% this year, a tie with 2008 for the lowest since at least 1986, putting US farmers at a disadvantage when it comes to international sales of the harvest. [Link]

Tech

Freed From the iPhone, the Apple Watch Finds a Medical Purpose by Daisuke Wakabayashi (NYT)

With the ability to receive data connections thanks to wireless transmitting capability, the Apple Watch is starting to fulfill the medical promise of the device. [Link, soft paywall]

Blockchain Pumping New Life Into Old-School Companies Like IBM by Olga Kharif (Bloomberg)

If the hype around the adoption of blockchain technology for a myriad of roles is to be believed, IBM is in an excellent position to benefit. [Link; auto-playing video]

Emerging Markets

Emerging Markets: Growing in Maturity? by Richard Barley (WSJ)

The MSCI EM stock index turned 30 this week, and over those three decades lots has changed. Now, with constituent countries at 35% of the global economy, the index looks totally different from its origins. [Link; paywall]

Economics

Ten Economic Questions for 2018 by Bill McBride (Calculated Risk)

Bill’s always excellent blog always features this annual outlook piece which sits the stage for the coming year of data. [Link]

Best Schematic Ever: Financial Frictions in Macro/Finance by Menzie Chinn (Econbrowser)

An amazing run-down of literature that details the frictions in financial and real markets which can inhibit efficiency and curtails the benefits of the construct. [Link]

Banking

Goodbye, George Bailey: Decline of Rural Lending Crimps Small-Town Business by Ruth Simon and Coulter Jones (WSJ)

Almost one-third of local rural counties have no local bank, versus less than 15% in the mid-1990s. The trend is part of a larger wave of consolidation in banking across the economy but is crimping rural communities to an especially large degree. [Link; paywall]

Long Reads

Minecraft (Alice Maz)

A fascinating read on the economy of a Minecraft server, with remarkable similarities and differences to and from the real-world version. [Link]

The Secret History Of The Russian Consulate In San Francisco by Zach Dorfman (Foreign Policy)

An almost impossible to believe story of soft espionage conducted against Silicon Valley and the US more generally from the foggy hills of San Francisco. [Link; soft paywall]

Have a great Sunday and a Happy New Year!