S&P 500 Stock Seasonality – 1/22/18
While we don’t ever suggest that investors should base their trading solely on the calendar, there is evidence that the market and many stocks do indeed follow seasonal patterns. This makes our S&P 500 Stock Seasonality report a useful addition to every investor’s toolbox. Using the last ten years worth of price data, our Stock Seasonality report looks at the average returns for the S&P 500, its eleven sectors, and its 500 individual stocks. In the report, we highlight the five stocks in each sector that have historically been the best and worst performers over the next two weeks. For each stock, we also include information such as average returns, the percent of time each stock or sector is positive/outperforms the S&P 500, and its historical performance over the next two weeks for each of the last ten years. The Stock Seasonality report is published on a weekly basis on Mondays, and it is available to all Bespoke Premium and Bespoke Institutional subscribers.
One stock that we wanted to highlight this week is Electronic Arts (EA). With a median gain of 7.77% and positive returns in eight of the last ten years, EA is a gamer’s paradise in the upcoming two-week period. So, what typically drives EA to such strong gains during this period? Earnings. EA typically reports earnings right towards the end of January, so its Q4 report is almost always covered in the span of the next two weeks. This year, EA report on 1/30 after the close, and given the stock’s track record, expectations will be high. If the company misses expectations, you can expect to see a reaction like the ones we saw during this period back in 2008 of 2016.
What’s even more amazing about EA’s performance in the upcoming two-week period is that it has historically been only the third-best performing stock in the S&P 500 during this period!
For active traders, our Stock Seasonality report is an excellent tool to help keep track of the best and worst times of year for the overall market, sectors, and individual stocks. To see the report and which two stocks have performed even better than EA in the upcoming two-week period, sign up for a monthly Bespoke Premium membership now!
Chart of the Day: Italy Breaks Out Of 10 Year Base
Bespoke Brunch Reads: 1/21/18
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.
HQ2
Here’s How the 20 Contenders for Amazon HQ2 Stack Up by Patrick Clark (Bloomberg)
An amusing rundown of the 20 metros shortlisted for Amazon’s second headquarters, which promises to bring more than 50,000 jobs. [Link; auto-playing video]
To Woo Amazon, Cities Tackle Everything From Traffic to Housing (WSJ)
A slightly different perspective with a similar angle: what various cities and states are trying to do to make sure that they get the nod from the huge e-commerce player. We are curious, though, why it takes Amazon to catalyze discussions around potential solutions to these various challenges. [Link; paywall]
Crypto
Price manipulation in the Bitcoin ecosystem by Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman
An investigation of trading on the now-defunct Mt Gox exchange which led to the currency’s first rise above $1000. [Link; registration required]
The Fat Controller of the Lightning Network by Frances Coppola (Coppola Comment)
Coppola argues that while Lightning may work well as a way to facilitate bitcoin payments, it cannot both fulfill its intended role and remain decentralized. [Link]
Society
American Views: Trust, Media and Democracy (Gallup/Knight Foundation)
Gallup conducted a wide-ranging national poll assessing Americans’ views of the media, with wide-ranging implications for civic engagement and voting. [Link; 71 page PDF]
Global Risks 2018: Fractures, Fears and Failures (WEF)
A series of possible headwinds for the world economy and political order that may or may not be getting enough attention at the start of the new year. [Link]
The Young
Eating the Young by Dean Dad (Confessions of a Community College Dean)
Quick observations about the shifting priorities of society away from younger people and towards other aims, especially those of older Americans. [Link]
How a 22-Year-Old Discovered the Worst Chip Flaws in History by Jeremy Kahn, Alex Webb, and Mara Bernath (Bloomberg)
A profile of the twenty-something German who works at Google and discovered a massive security flaw related to Intel chips used across the tech world. [Link]
Economic Research
Did Import Competition Boost Household Debt Demand? by Jean-Noel Barrot, Erik Loualiche, Matthew Plosser, and Julien Sauvagnat (NY Fed Liberty Street Economics)
Using a novel approach to measuring import competition and regional differences in import penetration appear to have driven higher and less viable borrowing by consumer units exposed to the new competition. [Link]
That time when American banks basically existed to fund the government by Matthew C. Klein (FTAV)
In the 1940-1960 period, as much as 70% of assets at depository institutions were either US Treasury securities or Fed Funds reserves. In other words, the banking system used to exist purely to fund the federal government! [Link; registration required]
Dystopia
User succumbs to a seizure in virtual reality while other players can only watch by Megan Farokhmanesh (The Verge)
VRChat players were shocked as they watched another user collapse in an epileptic seizure; they were unable to assist someone that could have been anywhere in the world. [Link]
Real Estate
Japan’s lost lands: why a fifth of the nation’s territory is worthless by Robin Harding (FT)
As much as 20% of the country has either no owner of record or an impossible maze of inheritances, absentee owners, or some impediment to establishing who actually has control of the land. [Link; paywall]
Advertising
TV, retail, advertising and cascading collapses by Benedict Evans (Ben Evans)
As business models shift away from retail, advertising spending patterns will necessarily shift, adding to the impact of declining linear TV time. [Link]
Politics
The Daily 202: Unexpected defeat in rural Wisconsin special election sets off alarm bells for Republicans by James Hohmann (WaPo)
While there’s tentative evidence that tax reform have created a bottom in Presidential approval ratings and generic ballot headwinds for Republicans for now, Democrats are racking up a surprising series of wins in minor races around the country and portend disappointment for the majority party in 2018 midterm voting. [Link]
Hoops
The Secret History of the Golden State Warriors’ Unstoppable Play by Ben Cohen (WSJ)
An oral history of a play that moved from Colorado State & Montana to BYU to Iowa State and eventually to the NBA and the Golden State Warriors. The gifs littered through the piece make understanding the play very easy. [Link; paywall]
Food
How to Pesto (Eataly)
Most commonly found in green form with basil, garlic, pine nuts, and parmesan, pesto can also be made in a mind blowing diversity of ingredients, flavors, and colors. [Link]
Have a great Sunday!
The Bespoke Report — The Thousands Add Up — 1/19/18
The Closer: End of Week Charts — 1/19/18
Looking for deeper insight on global markets and economics? In tonight’s Closer sent to Bespoke clients, we recap weekly price action in major asset classes, update economic surprise index data for major economies, chart the weekly Commitment of Traders report from the CFTC, and provide our normal nightly update on ETF performance, volume and price movers, and the Bespoke Market Timing Model. This week, we’ve added a section that helps break down momentum in developed market foreign exchange crosses.
The Closer is one of our most popular reports, and you can sign up for a free trial below to see it!
See tonight’s Closer by starting a two-week free trial to Bespoke Institutional now!
Bespokecast Episode 20 — @Chigrl — Now Available on iTunes, GooglePlay, Stitcher and More
Our newest episode of Bespokecast is now available! Be sure to subscribe to Bespokecast on your preferred podcast app to gain access to our full collection of episodes. We’d also love for you to provide a review as well!
In this episode of Bespokecast, we have a conversation with @Chigrl. Tracy is an independent trader who focuses on futures markets, with a great deal of expertise and focus on oil and other energy markets. We discuss her approach to trading, including both day trading and swing trading, across commodity futures markets. We also get to hear her take on the current geopolitical backdrop of the Middle East, the future of oil supple and demand, and why living in cold climates is the best. If you’re a home cook and want to try the buffalo wing recipe she mentions, you can find step-by-step details in the thread on Twitter here.
To listen to our newest episode or subscribe to the podcast via iTunes, GooglePlay, OvercastFM, or Stitcher, please click the button or links below. Please note that third-party podcast feeds may update at a lag of a few hours to this blog post.
Earnings Season Off to an Okay Start
Even though we’re now a couple weeks into earnings season, just 78 companies have released their quarterly numbers since January 8th. Using our Earnings Screener (available to Bespoke Institutional members), we’re able to quickly see how stocks are performing in reaction to their earnings reports over any time period. Since January 8th, the 78 stocks that have reported have averaged a one-day change of 0.19% on their earnings reaction days. That’s pretty solid. Going back to 2001, the average stock that has reported has gained 0.09% on its earnings reaction day, so this season has been better than average so far.
While volatility measures have picked up slightly over the last couple of weeks, stocks that have reported earnings have actually been less volatile than normal. The 78 stocks that have reported since January 8th have averaged a one-day move of +/-3.57% on their earnings reaction days. Since 2001, the average stock that has reported has moved +/-5.63%.
While the numbers so far have been stable, we’ll really see how things shake out beginning next week when a few hundred more companies release earnings.
Bespoke’s Quick-View Chart Book — 1/19/18
Each weekend as part of our Bespoke Premium and Institutional research service, clients receive our S&P 500 Quick-View Chart Book, which includes one-year price charts of every stock in the S&P 500. You can literally scan through this report in a matter of minutes or hours, but either way, you will come out ahead knowing which stocks, or groups of stocks, are leading and lagging the market. The report is a great resource for both traders and investors alike. Below we show the front page of this week’s report which contains price charts of the major averages and ten major sectors.
In our Chart Book, a green headline means the chart hit a new 52-week high this week. As you can see below, this week all five major US indices hit a new high, while every sector but Utilities and Telecom (two defensives) hit a new high. That’s a lot of green. Folks, take a snapshot of this one, because it doesn’t get much better than this.
You can view our entire S&P 500 Chart Book by signing up for a 14-day free trial to our Bespoke Premium research service.
B.I.G. Tips – When Are High Yields a Problem?
For anyone who was concerned about the flattening of the yield curve in recent months, you can breathe a little easier now that long-term Treasury yields are moving steadily higher. As of Thursday afternoon, the yield on the 10-year US treasury ‘spiked’ to 2.62%, putting it right near its 52-week high of 2.63% from last March. If that level is taken out in the next few days, that would take the yield to the highest levels since 2014.
When looking at the current levels of longer-term Treasury yields, a bit of perspective is in order. The chart below shows the change in the yield on the 10-year US Treasury since the start of the bull market in March 2009. During this span, the 10-year has traded in a range from 1.36% on the downside to 3.99% to the upside. Taking the mid-point of those two extremes gives us a mid-point of 2.68%. With the yield on the 10-year currently right at 2.62%, yields are still in the lower half of their bull market range!
So what can we expect from the market with longer-term Treasury yields on the move higher? To answer this question, we just published a B.I.G. Tips report which looks at how equities have reacted to prior increases in rates throughout the current bull market. Included in this report is an analysis of which sectors have typically reacted the best and worst to moves in yield.
For anyone interested in the trends we uncovered, check out the report by signing up for a Bespoke Premium membership now!
The Closer — Housing & Crude — 1/18/18
Log-in here if you’re a member with access to the Closer.
Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, we update our summary of residential construction activity, as well as EIA petroleum market tracking.
See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!