Bespoke’s Consumer Pulse Report — July 2022
Strength Follows Weakness
Whether you’re looking at monthly, quarterly, or first-half performance, this year’s S&P 500 performance has been quite weak. As investors, we must avoid falling into the sunken-cost fallacy and are forced to be forward-looking.
Starting with weak months, there have been a total of 83 months in the post-WWII era in which the S&P 500 declined at least 5%. In fact, this has occurred three times in 2022 alone, and if the current pace continues will top the post-WWII high in 2008 when there were five months of 5%+ declines. Click here to learn more about Bespoke’s premium stock market research service.
In addition to 5%+ monthly declines, we also looked at periods where the S&P 500 declined 10%+, as well as six-month periods when the S&P 500 fell 20%+ (with no prior occurrences in the last three months). Over the following day, performance was inline with the historical average following 5%+ monthly declines and 10%+ quarterly declines, but the first trading day following a six-month decline of 20%+ was much better than the historical average. Over the following week and month, though, the picture looks different as performance after 10%+ quarterly declines has been much better than average while performance following 20%+ six-month declines has been well below average. In terms of the week and month after 5%+ monthly declines, returns have pretty much been in line with the historical average.
Taking a look at positivity rates (percent of the time the S&P 500 has posted gains in a respective period), the S&P 500 has boasted above average rates following a monthly decline of 5%+ in both the next day and month, but rates are lower over the following week. After quarterly declines of 10%+, positivity rates were lower in the following day, but above average for the following week and month, coming in at 61.9% and 71.4%, respectively. On the downside, positivity rates were much lower following the first rolling six month decline of 20%+ in the next week and month, coming in at 40.0% for both. Investors should note that the first occurrence of a 20%+ rolling six month decline occurred on June 16th. Click here to learn more about Bespoke’s premium stock market research service.
The Bespoke 50 Growth Stocks — 6/30/22
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were no changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. You can learn more about our subscription offerings at our Membership Options page, or simply start a two-week trial at our sign-up page.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Gasoline Burning Up
As we noted in today’s Chart of the Day, inflation data has been moderating and so too have gas prices as demand has pulled back and refinery output rises as we discussed in last night’s Closer. Roughly two weeks ago, AAA’s national average price for a gallon of regular gasoline peaked just above $5. Granted it is still elevated, but that price has fallen to $4.86 today. Taking one step further up the supply chain, Gasoline futures peaked even further ago on June 9th and have fallen 14.5% since then. As shown in the second chart below, that decline is now putting the past several month’s uptrend on the ropes.
While both the national average and gasoline futures have been rolling over, the decline in the latter has been far larger as those prices tend to slightly lead retail prices. As for the size of that disconnect, taking the spread of the one-month percent change of the two measures of gasoline is historically wide at 14.4 percentage points. The last times such a divergence has been observed were earlier this spring, last fall, and back in 2020. In those periods, such divergences were short-lived. As shown in the bottom chart where we overall the AAA national average and Front Month Gasoline futures, moves in the futures market tend to lead prices at the pump, in other words, it is unlikely retail prices will continue to fly in the face of lower futures prices. Click here to learn more about Bespoke’s premium stock market research service.
2022: Where Nothing Can Go Right
2022 has seen the bulls get slugged with a number of heavy blows. The S&P 500 has already experienced 14 separate one-day declines of 2% or more this year. That’s nine more than the entire total for 2021!
While there are still another six months left in the year, only ten other years have seen as many or more 2% daily declines in their entirety! At the current pace, 2022 would see 28 daily declines of 2%+, which would rank as tied with 2009 for the third most in the post-WWII period trailing only 2002 (29) and 2008 (41). Not great company. If 2021 was the year where nothing could go wrong for investors, 2022 has been the year where nothing is going right. Click here to learn more about Bespoke’s premium stock market research service.
Where Have All the Bulls Gone?
After two weeks of sub-20% readings, the share of respondents to the AAII sentiment survey reporting as bullish has risen back up to 22.8%. That increase in optimism comes on what has been pretty choppy price action in the past week as the S&P 500 had risen then given up roughly 3% since the last update of the AAII numbers.
The increase in bullish sentiment broke a streak of back-to-back-to-back declines, and the opposite shift in sentiment could be seen for bearish sentiment. The percentage of respondents reporting as pessimists fell by 12.6 percentage points in the latest week bringing the reading back below 50%. While the double-digit decline was large, the first week of June actually saw an even bigger drop of 16.4 percentage points.
The significant inverse moves in bullish and bearish sentiment have resulted in the bull-bear spread to move higher, but at -23.9, sentiment continues to heavily favor the bears.
In fact, taking a four-week moving average of the bull-bear spread shows that the reading has been below -10 (meaning on average bears have outnumbered bulls by at least 10 percentage points) for 23 straight weeks. That continues to close in on the record six-month streak that ended in February 1991 as bulls are few and far between.
Given the drop in bears this week was far larger than the increase in the number of respondents reporting as bullish, the bulk of the sift went to the neutral camp. That reading rose 8 percentage points to 30.5%. While that only leaves the reading at the highest level since the week of June 9th, it was the largest one-week increase since the last week of March and ranks in the top decile of all week-over-week moves on record. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Matrix of Economic Indicators – 6/30/22
Our Matrix of Economic Indicators provides a concise summary analysis of the US economy’s momentum. We combine trends across the dozens and dozens of economic indicators in various categories like manufacturing, employment, housing, the consumer, and inflation to provide a directional overview of the economy.
To access our newest Matrix of Economic Indicators, start a two-week free trial to either Bespoke Premium or Bespoke Institutional now!
Chart of the Day: Confusion Reigns As Fed Ramps Up Tightening Into Slowing Inflation
B.I.G. Tips – If We’re Ever ‘Due’
Claims Consistent
Seasonally adjusted initial jobless claims came in at 231K which was ever so slightly above expectations of 230K. Meanwhile, last week’s number brought up the low end of the recent range after a 4K upward revision to 233K. That means the most recent read actually showed an improvement versus the previous week whereas before it would have been a modest deterioration in the number. Regardless, claims remain well off of the multi-decade lows from earlier in the spring, but even at current levels, the only historical periods with parallels for as strong of a level were just before the pandemic and the late 1960s to early 1970s.
We would also note that even though claims are up versus the early spring, the reading has seen very little movement in the past month. Quantifying this, the four-week rolling standard deviation in claims has fallen below 1 for only the seventh time on record going back to 1967. The past six times this happened were: April 1988, March 1990, September 2006, August 2016, and June 2019. That is not to say that claims are either improving or deteriorating in any sort of significant way, but rather claims have been remarkably stable in recent weeks.
On a non-seasonally adjusted basis, claims have likewise been little changed over the past few weeks having gone from 206.1K two weeks ago, to 206.4K last week to 207.4K this week. Without much movement, this week’s reading on claims continues to show a stronger reading than comparable weeks pre-pandemic even if they have come off of recent lows from earlier this year.
When taking seasonality into account, as shown in the second chart below, that lack of movement in the claims number is not exactly unwarranted for the current period of the year, but it is likely to change as the next few weeks have consistently seen claims experience a brief and sizable uptick.
Turning over to continuing claims, the rise off of pandemic and multi-decade lows has been much less severe. In the most recent week’s data through June 17th, continuing claims fell from 1.331 million to 1.328 million. Click here to learn more about Bespoke’s premium stock market research service.
