Bespoke’s Morning Lineup – 10/8/24 – China Reopens
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.
“It was a grand sight but hellish in the extreme; streets, houses, trees, and everything in one grand furnace.” – Thomas Foster
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
As the southeast US attempts to pick up the pieces from Hurricane Helene at the end of September, and Florida braces for the second landfall of a major hurricane in two weeks, today also marks the 153rd anniversary of the Great Chicago Fire which devastated the city over nearly three days. Ironically, the current disaster in the southeast was due to too much rain, while a primary factor behind the Chicago Fire was not enough rain. As William Bross, one of the Chicago Tribune’s owners at the time, reflected after the fire, “Under the burning sun for so many weeks, the whole city became virtually a tinderbox.” The city had been dealing with a lack of rain for months, and in the 22 days leading up to the blaze, there was only one rain event with a total of just 0.11 inches. With these types of extremes, it’s hard to find stability.
It’s still early, but there’s some stability in equity markets this morning and treasury yields have helped as the 10-year yield is unchanged and the 2-year yield is slightly lower. Crude oil is also giving up some of yesterday’s gains with a decline of nearly 2% but remains above $75. Overnight in Asia, China finally reopened for trading after the National Holiday, and the Shanghai Composite picked up right where it left off with a gain of 4.6%. However, Hong Kong was down 9.4% for its worst day since October 2008, and Japan’s Nikkei fell 1.0%. In Europe this morning, the STOXX 600 was down over 1% but has regained ground throughout the session and is now down just 0.5%.
We now have just four weeks left until Election Day and the start of the mid-term election season. Below we show the performance of the S&P 500 in the four weeks leading up to Election Day for every year since 1945. We have also included blue bars to indicate presidential election years. Overall, the S&P 500’s performance during these years has been weaker than all other years. In years when Americans vote for President, the S&P 500’s median performance in the four weeks leading up to Election Day has been a gain of 0.82% compared to a median rally of 1.89% for non-presidential election years. While median performance in non-election versus election years varies, the consistency of positive returns is identical at 68%.
While you would expect the market to be more volatile leading up to a presidential election year versus all other years, the opposite has been the case. Of the 19 presidential election years shown, the S&P 500’s maximum gain was 5.6% while its maximum decline was just 1.5%. In non-election years, however, the range has been much wider with a maximum gain of 15.6% in 1974 (and three other years when the S&P 500 rallied over 10%) and a maximum decline of 21.4% in 1987.
As we head into the final four weeks, the country looks more divided than ever regarding its preference (or who it dislikes least) for President. Based on tabulations from RealClear Politics (RCP), Harris currently holds a 2.1 percentage point lead at the national level, but in the battleground states, Trump has a modest lead. Meanwhile, in betting markets, Trump has a 3.3 percentage point lead.
Based on the Electoral Map, RCP has Trump in the lead at 219 to 215 with 104 votes still in toss-up states, while if you include the toss-up states, Trump has a 24 electoral vote lead at 281 to 257. Lastly, within the 12 battleground states, Harris holds the lead in six, Trump in five, while Pennsylvania, which is tied with Illinois for the fourth most electoral votes of any state (19) is tied. Whether your horse is Harris or Trump, there’s something in this table for everyone!
The Closer – Milton, Central Banks, Positioning – 10/7/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin tonight by noting the impacts of Hurricane Milton on insurance stocks (page 1) followed by a rundown on central bank activity (page 2). We then preview this week’s Treasury sales (page 3) before finishing with a review of the latest positioning data (pages 4 – 7).
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Daily Sector Snapshot — 10/7/24
Chart of the Day: Generac (GNRC) Around Hurricanes
B.I.G. Tips – Analysts Turning More Bearish Ahead of Earnings Season
Bespoke’s Morning Lineup – 10/7/24 – The Calm Before the Storm
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.
“We learn from history that we don’t learn from history!” – Desmond Tutu
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s a quiet morning on the economic calendar today, but things will pick up later in the week with the releases of CPI on Thursday and then PPI and Michigan Sentiment on Friday. Besides the economic data, earnings season will kick off later this week when the big banks like Blackrock (BLK), JPMorgan Chase (JPM), and Wells Fargo (WFC) report on Friday morning. Outside of the Financials, we’ll also get reports from Pepsi (PEP) tomorrow, and Delta (DAL) Thursday morning. So, enjoy the calm while it lasts. More importantly, the west coast of Florida is anxiously watching the path of Hurricane Milton which is expected to rip through the state from west to east later this week.
Last week may have been the fourth straight week of gains for the S&P 500, but the gain’s magnitude was the smallest of the last four weeks. While the week ending 9/13 saw the S&P 500 rally over 4%, every week since has seen a smaller percentage gain. Gains are still gains, though, and outside of the Russell 2000, other major US indices finished last week higher and remained at overbought levels.
At the sector level, the picture looks different. While just three sector ETFs finished last week up by more than 1%, four finished down by over 1%. Leading the way lower, Consumer Staples, Materials, and Real Estate were down more than 1.5%. On the upside, geo-political worries in the Middle East pushed the Energy sector ETF (XLE) up by close to 7%, and it was the best week for the sector since mid-October 2022. While there was a lot of dispersion in sector performance last week, one consistent across all eleven sectors has been that they are all up by double-digit percentages.
Looking at the Energy sector specifically, in addition to last week being the best week for the sector in nearly two years, it also broke the downtrend it has been in since the spring highs. The big gains for Energy may spark concerns over inflation, especially with CPI and PPI coming up this week, but at this point, the bulk of the rally in the sector can be chalked up to geopolitics. If the gains were more due to concerns over inflation and higher demand, Materials should have also rallied, and with a decline of 1.8%, it was the second worst-performing sector last week.
Brunch Reads – 10/6/24
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles 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.
Bad Blood Bout: On October 6th, 2018, UFC 229 became the most-watched event in UFC history and certainly in Mixed Martial Arts. The event drew massive attention for its main event between Conor McGregor and Khabib Nurmagomedov, generating more than 2.4 million pay-per-view buys. That staggering figure is only behind two Floyd Mayweather boxing matches, one against McGregor. Anybody who pays attention to the fighting world knows the huge draw of Conor McGregor. Couple that with a matchup against the undefeated Khabib and a bad-blood backstory, and people are bound to tune in. It’s a recipe that has worked for decades.
In retaliation to McGregor’s friend being confronted by Khabib and his team in a hotel lobby, McGregor infamously attacked a bus carrying Khabib and other fighters at UFC 223, throwing a dolly at its window. Personal attacks were made in dark press conferences, and the stage was set. Khabib controlled most of the fight with his signature wrestling ability before ultimately submitting McGregor in the fourth round with a neck crank. Immediately after, Khabib made a shocking move, jumping the caging and attacking McGregor’s cornerman. While an all-out brawl ensued outside the cage, another began inside as members of Khabib’s team ambushed McGregor. Whether you bet on the Irishman or Russian, UFC 229 lived up to the hype.
Education
Sorry, Harvard. Everyone Wants to Go to College in the South Now. (WSJ)
More Northern high school seniors are choosing Southern universities like Clemson, Alabama, and Georgia Tech, drawn by lower tuition, school spirit, and a more laid-back, politically neutral atmosphere. The pandemic played a big role, with students seeing life carry on in Southern schools while the Northeast remained locked down. It’s led to an 84% increase in Northerners attending Southern public schools over the past two decades, and many are staying in the region post-graduation to take advantage of booming job markets. The trend is reshaping both college landscapes and local economies. [Link]
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The Bespoke Report – Q4 Equity Market Pros and Cons
This week’s Bespoke Report is an updated version of our “Pros and Cons” edition for Q4 2024.
With this report, you’re able to get a complete picture of the bull and bear case for US stocks right now. It’s heavy on graphics and light on text, but we let the charts and tables do the talking!
On page three of the report, you’ll see a full list of the pros and cons that we lay out. Slides for each topic are then provided on page four and beyond.
To read this report and access everything else Bespoke’s research platform has to offer, sign up for Bespoke’s 50/20 special today. Our 50/20 special gets you a full year of Premium for half off, then 20% off per month after the first year. SIGN UP HERE.
Daily Sector Snapshot — 10/4/24
Bespoke’s Morning Lineup – 10/4/24 – Show Us The Jobs!
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.
“Being an intellectual creates a lot of questions and no answers.” – Janis Joplin
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Call it the calm before the jobs storm, but equity futures have drifted into positive territory as we approach the September non-farm payrolls report. A tentative agreement on the port strike has also helped sentiment. In Asia, Chinese markets remain closed for the National Holiday, but the Hang Seng was open, and it rallied another 2.8% taking its weekly gain to 10.2%. Hong Kong’s Manufacturing PMI for September ticked up to 50.0% from 49.4 in August, so that helped investor sentiment heading into the weekend. The Nikkei gained a more modest 0.2% in Japan and finished the week down 3%. India finished the day down 1.0% as the September Services PMI fell more than expected to 57.7 from 60.9 in August.
In Europe this morning, the tone is mostly positive as markets look to end a negative week (STOXX 600 down over 2%) on a positive note. While French Industrial Production came in higher than expected (1.4% vs 0.3% forecast), Retail Sales in Italy and Spanish Industrial Production unexpectedly declined.
For a Federal Reserve that is more concerned about the job market than inflation, it feels as though this morning’s employment report hasn’t had quite the buildup of other reports in the past. Be that as it may, history would suggest a weak report. As shown in the chart below, since 1998, the September change in non-farm payrolls (reported in early October) has consistently come in weaker than expected. Of the 26 prior reports, the initial headline reading has missed expectations nearly 70% of the time, and the median spread relative to expectations has been a miss of 47K.
With economists expecting a headline reading of 150K, history would suggest a possibility of a sub-100K number. That would be just the second such reading since the start of 2021 and the last three months! So does that mean a weaker-than-expected print is in the bag? Nothing is ever that easy, and while the September report has historically been weak, last year’s initially reported number was the biggest beat relative to expectations since at least 1998 (although it was ultimately revised down by 90K in the ensuing months).
It has been over two weeks since the Fed cut rates, so we wanted to step back and see how various asset classes and market sectors have performed. Starting with asset classes, commodities have been the biggest winners with gold up over 4% and crude oil rallying 3.8%. After that, the Nasdaq, US Dollar Index, Bitcoin, and the S&P 500 have rallied between 1% and 2%. Lastly, on the downside, US Treasuries and the Russell 2000 have declined.
At the sector level, given the surge in oil prices, the Energy sector has been the top-performing sector with a gain of over 6%. Communication Services and Utilities have followed with a rally of over 3.5%. No matter what the environment has been this year, it seems there’s no stopping the Utilities sector. On the downside, Consumer Staples, Health Care, and Real Estate have all declined over 2% as interest rate-sensitive sectors (besides Utilities) have felt the pressure of rising rates.
