Daily Sector Snapshot — 11/29/23
Chart of the Day: December Seasonals
Bespoke’s Morning Lineup – 11/29/23 – Legend
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.
“Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation,” – Warren Buffett
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Futures are firmly higher this morning with the S&P 500 indicated to open higher by 50 basis points (bps) as treasury yields continue to decline. It was barely more than a month ago that the yield on the 10-year peaked above 5%, but this morning it’s back below 4.30%. The catalyst for this morning’s rally appears to be positive inflation data out of Europe which has continued the optimism following some dovish Fedspeak yesterday. Economic data this morning has been generally positive as GDP was revised higher and Core PCE was lower than expected.
Whenever a company announces the death of a high-level executive within the organization, the statement always includes some form of boilerplate about how “so and so” was an integral part of the organization, and it wouldn’t be the same without them. In yesterday’s statement from Berkshire Hathaway announcing the death of Charlie Munger, Buffett’s statement that “Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation,” may have sounded a lot like those typical platitudes, but in this case it couldn’t have been truer.
In 31 of the 46 years that Munger was at the company, Berkshire Hathaway outperformed the S&P 500. More importantly, though, in the fifteen years that Berkshire underperformed the S&P 500, the average underperformance was 13.2 percentage points whereas in the 31 years that Berkshire outperformed the S&P 500, the average margin of outperformance was 20.9 percentage points. So, not only did Berkshire outperform the S&P 500 more than twice as often as it underperformed, but when it did outperform, the gap was much wider than when it underperformed. The chart below compares the growth of $100 invested in Berkshire Hathaway when Charlie Munger officially joined the firm in 1978 to the growth of $100 invested in the S&P 500 on a total return basis. While $100 invested in the S&P 500 in 1978 is worth $16,527 today, that same $100 invested in Berkshire Hathaway is worth nearly $400,000 today! Not bad for two guys who started out in an Omaha grocery store.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Daily Sector Snapshot — 11/28/23
Chart of the Day – Unlucky Thirteen?
Bespoke Stock Scores — 11/28/23
Home Prices See Big Bounce Off 2023 Lows
The latest S&P CoreLogic Case Shiller home price data for September was released today and showed a 0.3% month-over-month (m/m) increase in home prices at the national level. Fifteen of twenty cities saw prices rise m/m, with Detroit, New York, and Las Vegas jumping the most, and Minneapolis, Denver, Seattle, Dallas, and Portland seeing declines. Year-over-year, Detroit, San Diego, New York, and Chicago are up the most at 6%+, while three cities are down year-over-year: Portland, Phoenix, and Las Vegas.
We highlight how these home price indices have changed over various time frames in the table below.
Home prices have jumped significantly from their lows at the start of 2023. Each of the twenty cities tracked peaked at some point in 2022 and then pulled back and made a low in either January or February of this year. In the chart below, we show how much home prices have jumped in each region from their respective 2023 lows. San Diego and Detroit have seen home prices rally more than 10% already, while Chicago, Cleveland, and Boston are up 8%+.
Below is a look at how much home prices are currently up since February 2020 right before COVID hit. As shown, the composite and national indices are up roughly 45% since COVID began, while Miami and Tampa — two Florida cities — are up the most at roughly 70%. On the other end of the spectrum, San Francisco, Minneapolis, DC, and Portland are up the least since February 2020 at 30-34%.
Finally, below we show how much home prices are up in each city versus their peaks seen during the last housing bubble in the mid-2000s before the Financial Crisis. The national index is now up 69% from its prior housing bubble peak, while Dallas and Denver are up the most at 133% and 126%, respectively. Chicago, Las Vegas, and DC are the cities up the least versus their prior housing bubble peaks at 25% or less.
Below is a look at historical pricing for the twenty Case Shiller cities and the three national indices. Cities in green are at all-time highs.
After the mid-2000s housing bubble burst and prices collapsed following the Financial Crisis, many thought it would take generations to get back to the peak levels seen prior to the crash. Now those prior peaks look like mere bumps in the road after the surge we’ve seen for housing so far this decade.
Gold Closes in on New Highs
In last night’s Closer and today’s Morning Lineup, we discussed areas in commodity markets that have been selling off. One that has avoided those declines has been gold. As shown below, gold’s outperformance isn’t exactly new. Gold relative to a broad basket of commodities massively outperformed early on in the pandemic, but that outperformance reversed up through the spring of 2022. The past year and a half has seen that outperformance generally return, especially over the past couple of months.
Amidst that outperformance, the yellow metal has been rallying since its early October low having gained 11.5% since then. That brings the commodity back within 0.65% of its 52-week set in May and 0.77% below the all-time high from August 2020 (what had been the first all-time high in nearly a decade). However, since the 2020 high those levels have repeatedly acted as tough resistance.
Bespoke’s Morning Lineup – 11/28/23 – Is It Dry Yet?
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.
“Unlike the mediocre, intrepid spirits seek victory over those things that seem impossible.” – Ferdinand Magellan
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Futures are lower across the board this morning, but the magnitude of the implied losses is extremely small with the Nasdaq leading the way lower, and it’s only down 0.25%. On the economic calendar today, we’ll get Case Shiller Housing data at 9 AM and then Consumer Confidence and the Richmond Fed report at 10 AM. In Europe, most equity benchmark indices are also lower, but again, the magnitude of the losses is generally modest as only France’s CAC 40 is down over 0.5%. Overall, there has been little conviction in markets since Thanksgiving.
Is the paint dry yet? As you might expect for a shortened session after Thanksgiving, trading activity was very slow last Friday. More surprising, though, was the fact that yesterday’s trading was extremely quiet as well. Putting the two together, the S&P 500’s percentage spread between the intraday high and the intraday low over the last two trading days has just totaled 0.31%.
In terms of how this two-day spread stacks up over time, the chart below shows the S&P 500’s rolling two-day trading range over the last five years. The last two days rank as the narrowest spread of the entire post-Covid era, and you have to go back to Christmas Eve 2019 to find a narrower range over a two-day period. With a narrow range like that, is it any wonder why the VIX is trading under 13? What’s that saying about dull markets again?
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.