For most major global equity markets, at some point this Fall a 52-week low has been put in place, with significant rallies since then.  As shown below, of the 22 ETFs tracking key country stock markets in our Global Macro Dashboard, the average gain off the low is now 22%. The largest of these rallies have come from Germany (EWG), Italy (EWI), and China (MCHI), which have all risen over 30%.  For China, that gain has come in the shortest span of time with October 31st being its low, whereas Italy and Germany’s lows were a few weeks further back.  One other interesting note regarding China is currently it trades only slightly above its 50-DMA whereas a majority of other country ETFs are in or at least near overbought territory. On the other end of the spectrum, the US (SPY) has experienced the most modest rally having only risen 13.82%.  India (INDA) is close behind with a 13.89% gain, although it bottomed before the rest of the world with its 52-week low being back on June 17th.

While much of the rest of the world has experienced a larger rebound off the lows, year to date performance between the US (SPY) and global equities excluding the US—proxied by the MSCI All World ex. US ETF (CWI)—is now very similar.  The US is marginally in the lead with a -14.12% YTD total return versus a 14.45% drop for CWI.  At the lows at the end of Q3, international markets were underperforming the US by more than 5 percentage points, but that gap has been closed during the current rally.  Click here to learn more about Bespoke’s premium stock market research service.  As always, past performance is no guarantee of future results.

Although the S&P 500 has had some positive technical developments like taking out the 200-DMA on the backs of a lack of hawkish Fedspeak, sentiment has been headed lower over the past couple of weeks. Per the latest survey data from AAII, only 24.5% of investors reported as bullish this week; down from 28.9% last week and a recent high of 33.5% the week before that. That nine percentage point decline in the past couple of weeks is not a particularly large drop and only brings the reading into the middle of this year’s range, however, it marks a distinct turnaround from what had been one of the most optimistic readings of the year only two weeks ago.

As bullish sentiment has been on the move, bearish sentiment has gone into hibernation and done a whole lot of nothing.  After being unchanged at 40.2% last week, bearish sentiment rose modestly to 40.4%.

In the history of the survey, that is the tightest three-week range on record and there have only been another dozen times in which bearish sentiment readings were even within a 1% range over a three-week span.  The most recent of those was last May, and there was another right around the time of the COVID Crash lows.  We would note that with bears little changed around 40%, the current instance marks the second highest bearish sentiment reading of these instances behind that March 2020 occurrence.

In terms of what it means for the S&P 500 when bearish sentiment moves so little as it has recently, near-term performance does not tend to be particularly favorable. One week out has averaged a 0.6% decline and one and three-month returns have been positive only half the time. As for longer-term performance though, the S&P 500 has tended to trade higher six months to one year out very consistently with gains over 90% of the time. Those gains are also slightly larger than the norm for all periods.

With sentiment taking negative tones, the bull-bear spread has reversed lower after some of the highest readings of the year last month.  Given the spread remains negative, the streak of below-zero readings has grown to a record 35 weeks in a row, surpassing the 2020 streak.

Given bears have not picked up the losses to bulls, nearly all of the difference has gone to neutral sentiment.  Neutral sentiment has risen to 35.1% which is 1.4 percentage points below the high from the first week of November. Click here to learn more about Bespoke’s premium stock market research service.

Initial jobless claims dipped this week erasing most of the prior week’s increase. Last week’s level was revised up by 1K to 241K and fell down to 225K in the most recent data. That is 10K below forecasts and continues what has been a fairly choppy trend in the indicator. Initial claims are going on roughly two months of switching back and forth between weekly increases and decreases with the most recent print in the middle of the past six-month range. In other words, there has not been much in the way of a consistent or clear pattern in jobless claims.

On a non-seasonally adjusted (NSA) basis, last week saw the usual dip in claims for Thanksgiving week.  For this week of the year, claims have historically only risen 29% of the time. While the direction of the move was consistent with history, the 50.5K decline in the unadjusted number was fairly significant, coming in around 12K more than the historical median for the comparable week of the year.  Due to that larger-than-normal drop, claims remain at impressive levels with only 1968 having seen a lower reading for the comparable week of the year.

Recent readings on continuing claims continue to starkly contrast with those solid readings in initial claims.  Whereas initial claims have returned to levels consistent with the few years prior to the pandemic for some time now, continuing claims have been well below their own pre-pandemic range. That is until this week.  Claims have continued to rise, and as of the week of November 19th (continuing claims are lagged an additional week to the initial claims number), continuing claims rose back above 1.6 million for the first time since the end of February.  That is also back into the low end of the pre-pandemic range.

We would also note that this week’s data marks six months out from the May 21st low of 1.306 million.  With claims having risen over 300K (or 23.12%) since then with a particularly sharp increase in the most recent print, that six-month rate of change appears to be a warning sign for recession.  As shown below, there is plenty of precedent for claims to have risen by as large, if not larger, of a degree in half a year, but every one of those periods has occurred in the midst of a recession. All that is to say that claims continue to sit at healthy levels for the moment but the picture is changing- for the worse. Click here to learn more about Bespoke’s premium stock market research service.

Prospective home buyers have finally gotten some relief at least in terms of mortgage rates. The national average for a 30-year fixed rate mortgage via Bankrate.com’s data is down to 6.78% from a high of 7.35% on November 3rd. While that remains at levels we haven’t seen since the early 2000s, the roughly half of one percentage point decline in the past three weeks is also remarkable.  As shown in the second chart below, on Monday, the national average had fallen 0.53 percentage points in a three-week span.  The only other time in which there was as large of a drop in that period of time was in September 2008.

Given rates for 30-year mortgages are at the highest level in a couple of decades, there has been little incentive for most homeowners to refinance resulting in refinance applications continuing to evaporate. Applications fell 12.87% week over week bringing the index down to the lowest level since June 2000.

Purchases applications have been more largely impacted by the recent reversal in rates.  The Mortgage Bankers Association’s purchase index has now risen four weeks in a row (the longest streak of consecutive increases since last November).  The 12.77% jump in purchase applications in that time has been the largest four-week jump since a 14.61% increase in November of last year.  Of course, that only puts a minor dent in the absolute collapse in mortgage activity over the past year.

Showing purchase applications on a non-seasonally adjusted basis better illustrates housing’s fall from grace this year.  Whereas applications started the year around some of the highest levels of the past decade for that time of year, this week they have hit the lowest level for the comparable week of the year of the past decade. That’s what happens when the FOMC embarks on one of the most aggressive tightening cycles in history!  Of course, the Thanksgiving holiday tends to negatively impact implications, and looking at 2014 (when the Thanksgiving drop occurred a week later than this year) applications were slightly lower than this year.

Shown another way, below we show the percent change in applications from each year’s respective annual peak out through 29 weeks later.  This year has seen applications fall 66%.  That was a similar decline to 2001, and the only year with a larger decline was in 2007.  Click here to learn more about Bespoke’s premium stock market research service.