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“Life is fragile. We’re not guaranteed a tomorrow so give it everything you’ve got.” – Tim Cook

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There’s a positive mood across the global equity universe as stocks in Asia had a positive day, Europe is trading higher, and US futures are indicating a gain of about 0.6% at the opening bell, half of which can be attributed to Nvidia’s (NVDA) 9% pre-market gain.  Commodities are mixed but skewed to the downside, and both the dollar and US Treasury yields are slightly higher. It’s a busy morning for economic data with jobless claims, Chicago Fed National Activity Index, and Durable Goods at 8:30 and Kansas City Fed Manufacturing at 11:00.

The August pullback in equities has had the desired effect on sentiment as AAII’s weekly sentiment survey showed bullish sentiment declining for the third week in a row falling from 35.9% down to 32.3%.  That’s the lowest level since May 31st, and represents a nearly 20 percentage point decline from its recent peak of 51.4% on 7/19.

It’s hard to think about a more fitting statement from Tim Cook regarding his predecessor who resigned on this day twelve years ago.  After taking a leave of absence in January 2011 due to his battle with pancreatic cancer, Jobs formally stepped down as CEO on 8/24/11. The news was made public after the close, and shares fell sharply in the after-hours session before recovering.  The following morning AAPL dropped by just about 3% as analysts came out and defended the stock, and by the end of the day it was down less than 1%.  At first glance, the fact that the stock had such a muted reaction on news of the departure of one of the all-time greatest tech visionaries may seem counterintuitive, but Jobs had already given up most of his day-to-day responsibilities.  While no one could fill the shoes of a leader like Jobs, Tim Cook had (and continues) proved that he was more than capable of leading the company.  Just 41 days after formally leaving Apple, Steve Jobs passed away on 10/5/11.

The chart below shows the market cap of Apple since Steve Jobs returned to the company as CEO in 1997 through today.  Its market cap under Jobs is shown in blue, while Cook’s tenure is shown in green.  One of the most ironic aspects of the chart is that the vast majority of Apple’s market cap has accrued under Cook’s tenure.  When Jobs stepped down, Apple’s market cap was just under $348 billion compared to $2.8 billion today.  Put differently, more than 87% of the company’s current market cap came during the Cook years compared to less than 13% under Jobs.  Even crazier is the fact that in the 13 trading days that followed its peak on 7/31 through the close a week ago on 8/17, Apple lost more in market cap ($369 billion) than the company had accrued from the time it was founded through Jobs’ ultimate departure.

Obviously, this is a major oversimplification of the impact Steve Jobs had on Apple as well as the entire US economy, bit it also illustrates the importance of compounding, and Steve Jobs left Tim Cook with more than a substantial base to build off.

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See what’s driving market performance around the world in today’s Morning Lineup.  Bespoke’s Morning Lineup is the best way to start your trading day.  Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“Things always seem to end before they start.” – Lou Reed

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A few hours ago, it appeared as though we’d be seeing a respectable rally to start the trading day, but much of the gains have faded and there’s still nearly an hour left before the opening bell.  The pullback this morning has come in tandem with a sell-off in European stocks which are well of their highs of the day, and one catalyst has been a batch of mixed PMI readings for August.  While activity in the manufacturing sector did not shrink by as much as expected, Eurozone services sector activity unexpectedly contracted.  In Asia, most major indices were positive during the session, but China was a notable laggard as the CSI 300 fell 1.64% taking its MTD decline to just under 8%.

Weakness in China has really acted as a drag on the performance of Emerging Markets as an asset class as the country accounts for 30% of the entire index, but closer to home, Mexico, which has a much smaller representation in the index, has been moving in the exact opposite direction. The chart below shows the performance of the iShares China (MCHI) and Mexico (EWW) ETFs over the last ten years. While the two ETFs performed similarly with each other from August 2013 through August 2015, they really started to diverge from late 2015 through the onset of COVID, and as concerns over supply chains intensified during the pandemic, Mexico’s renaissance began.  Despite periods in the last ten years where the performance of the two ETFs couldn’t have been more divergent, through yesterday’s close their performances was very similar; the MSCI China ETF (MCHI) was down 2.49% over the last ten years, while Mexico (EWW) was down 4.33%. On the chart, Mexico looks like the reflection of China much as the way a mountain range reflects on a lake.

The chart below shows the relative strength of EWW relative to MCHI over the last decade, and this chart further illustrates the roller coaster of Mexico relative to China. From late 2013 right through the onset of COVID, China steadily outperformed Mexico, but with the onset of COVID, the trend reversed abruptly, and in the span of three years has erased seven years of underperformance.

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