B.I.G. Tips – Election Cycle Seasonality
Record Inflow into High Yield (JNK)
High yield bonds proxied by the third largest ETF tracking the space, the SPDR Bloomberg High Yield Bond ETF (JNK), went on a solid 3% run last week. That ranks as the fifth best performing fixed income ETF in our Trend Analyzer. That resulted in the ETF to close above its 50-DMA for the first time since late August. Today, the ETF has reversed those gains and is hovering slightly back below that moving average.
Although from a technical standpoint that could mean Friday’s breakout was a pump fake, the move was backed by near record volumes hence a record single day inflow. As shown below, roughly $980 million went into JNK on Friday, surpassing the previous record of $774 million set this past January. While total assets have been on the downswing for the past couple of years leaving plenty of room to go until the ETF is back up to its size from its peak in the summer of 2020, that single day inflow did put an impressive dent in those recent outflows. Click here to learn more about Bespoke’s premium stock market research service.
Chart of the Day – November Seasonality and Beyond
Gold Tarnished
The end of October is now here and barring a massive turnaround by the close, gold is on pace to once again end the month lower. Gold peaked back in August of 2020, but since the spring it has taken a more dramatic leg lower. In spite of a high inflationary environment, the often-considered to be go-to inflation hedge has been on a relentless streak of declines. With October’s lower close month to date, gold has now dropped for a record seven months in a row. Going back to 1975, there have been a handful of other streaks lasting for five or six months, but none until now extended out to seven.
Although the current decline has been a record in length, the degree to which gold has fallen during it has not been as severe as some of the prior streaks of 5 months or more. For example, in 1976, 1981, and 1982 gold fell well over 20% compared to the current 16.1% decline. While we do not have a crystal ball to see if gold will end this streak in November, we would note that during the month that snaps these streaks, gold’s performance tends to be particularly strong with an average gain of 5.5% compared to the norm of only a 0.5% rally for all months since 1975. Similarly, gold tends to find itself higher three, six, and twelve months later with stronger than normal performance. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 10/31/22 – Giving Some Back
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“It’s better to burn out than to fade away.” – Neil Young
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
After an exceptionally strong end to last week, equities are in a bit of a letdown mode to close out October as S&P 500 futures are down about 0.30% with the Nasdaq weaker. A number of weak data points out of China and Europe along with continued geo-political concerns haven’t helped sentiment. The 10-year yield is firmly above 4% again this morning and crude oil prices are nearly 2% lower and back below their 50-DMA. It’s been nice over the last several sessions not to have to contend with the FOMC, but that will all change on Wednesday when they will likely raise rates by 75 bps for an unprecedented fourth straight meeting.
We’ve seen some wild finishes to the trading week lately. Over the last 12 weeks, there has only been one Friday where the S&P 500 didn’t finish up or down at least 1% (9/16), and over the last six weeks, the last trading day of the week has seen a gain or loss of at least 1%. Not only that, but the last trading day of the week has become even more volatile over the last four weeks. Of the four Fridays this October, the S&P 500 has rallied or declined at least 2% each time. The first two Fridays of the month experienced declines of 2.8% and 2.4%, respectively and the last two Fridays have seen gains of 2.4% and 2.5%.
Prior to this month, going back to 1952 when the five-trading day week was established on the New York Stock Exchange, there were only four times when the last trading day of the week had a daily move of +/-2% for three straight weeks, but none of those streaks never extended to four. There’s a first for everything, though, and this month’s streak is the first time in over 70 years that the S&P 500 has ever had four straight 2% gains or losses to end a trading week.
Last Friday’s 2%+ gain for the S&P 500 capped off what was a weekly gain of just under 4% for the S&P 500 in what was a broad rally. Sectors leading the way higher were Industrials, Utilities, Financials, Real Estate, and Consumer Staples which all had gains of over 6%. Health Care and Technology also marginally outperformed the S&P 500 gaining over 4%. On the downside, Communications Services was by itself the to downside as negative reactions to earnings from Alphabet (GOOGL) and Meta (META) weighed on the sector. Lastly, even though they all rallied over 1.5%, Consumer Discretionary, Energy, and Materials all underperformed.
As far as the major indices are concerned, the chart patterns for both the Nasdaq 100 and the S&P 500 look very similar. The key difference between the two is that while the S&P 500 managed to rally back above its 50-DMA last week, the Nasdaq 100, weighed down by weakness in mega-cap stocks and their reactions to earnings, has yet to break above that critical level.
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Bespoke Brunch Reads: 10/30/22
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read 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.
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Energy
Halliburton profit tops Wall Street estimates as oil activity booms by Liz Hampton & Shariq Khan (Reuters)
Oil services company Halliburton announced a very strong third quarter this week, with the CEO characterizing demand as “stronger than I have ever seen at this point in the year”. [Link]
U.S.-Saudi Relations Buckle, Driven by Animosity Between Biden and Mohammed bin Salman by Stephen Kalin, Summer Said, and Dion Nissenbaum (WSJ)
Saudi Arabia’s next king has made a habit of mocking the American President, complicating relations between the former top oil producer and the United States. [Link; paywall]
Perks
Citadel, Blue Owl Expand in Connecticut in Bid to Cut Commutes by Natalie Wong, Hema Parmar, and Lizzie Kane (Bloomberg)
Finance firms are offering more office space close to where their employees live in a bid to bring down the time commitment of commuting and getting more people into the office. [Link; soft paywall]
Content
Pinterest, Headspace offer free mental health resources to content creators: ‘We wanted to inspire the people who do the inspiring’ by Renée Onque (CNBC)
Social media companies dependent on popular content creators are starting to lure talent with some perks that might not make much sense to those of us not struggling under the burden of social media fame. [Link]
YouTube’s richest creator MrBeast is seeking a $1.5 billion valuation in what could be a massive milestone for influencer-led business by Alice Hearing (Fortune)
YouTube’s highest-paid creator is trying to sell a stake in his sprawling content and brand empire valued at $1.5bn, in what could be a landmark in finance for this area of entertainment. [Link]
Education
Students Are Using AI to Write Their Papers, Because Of Course They Are by Claire Woodcock (Vice)
With a relatively simple prompt, AI language tools are able to craft essays that fool professors and earn students the easiest of A’s. [Link]
Pandemics
So far, this flu season is more severe than it has been in 13 years by Lena H. Sun (MSN/WaPo)
Almost 900k flu cases and 360 deaths have piled up already this season, with caseloads highest in the US South and Southeast. This is the worst start to a flue season since 2009 so far. [Link]
COVID-19 Origins: Investigating a “Complex and Grave Situation” Inside a Wuhan Lab by Katherine Eban and Jeff Kao (Vanity Fair)
A report issued by the minority staff of the US Senate Committee on Health, Education, Labor, & Pensions released this week argued the COVID-19 pandemic was “more likely than not the result of a research-related incident”. This article investigates that thesis from a non-virological perspective. [Link]
Tech
Amazon readies 172,000-square-foot Kirkland factory to build Kuiper satellites by Alan Boyle (GeekWire)
Amazon is planning to ramp up a global fleet of more than 3,000 satellites that will provide broadband internet. Scaling up production will require a massive Washington facility. [Link]
Intel CEO Calls New U.S. Restrictions on Chip Exports to China Inevitable by Tim Higgins and Asa Fitch (WSJ)
The largest American chip manufacturer viewed a fight over chips as inevitable given the approach that each country has taken to geopolitical conflict and control of high-end semiconductors. [Link; paywall]
Sports
Buffalo Bills unveil first design images of their new $1.4 billion stadium by Jessica Golden (CNBC)
One of the smallest NFL markets will play host to a stadium that will cost taxpayers $850mm. Despite the climate, the final field will remain open to the elements. [Link]
Climate Change
Perfume’s Best Scents Are Being Snuffed Out by Natasha White (Bloomberg)
The feedstock for some of the most iconic scents in the world owe their intensity to the terroir and microclimate of a tiny town in the French Riviera which has been hit hard by drought, raising the specter of a world without Chanel No. 5. [Link; soft paywall]
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Have a great weekend!
The Bespoke Report – 10/28/22 – Stocktober Surge
This week’s Bespoke Report newsletter is now available for members.
We’re on pace for the best October on record for the Dow and the strongest month period for that index since the 1970s. But that masks two facts which should give bulls little comfort: rallies are more violent during bear markets and there is no sign the Federal Reserve is ready to call it quits on its tightening cycle. We take a look at earnings, which are deteriorating versus recent earnings seasons including both lower beat rates and more guidance cuts, and the global backdrop including soaring policy rates that have yet to be felt fully by economies around the world. We also review a very busy US economic data week in detail, covering everything from wage growth to manufacturing activity to savings rates. We cover all that and much more in this week’s Bespoke Report.
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Bespoke Matrix of Economic Indicators – 10/28/22
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.
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Bespoke’s Morning Lineup – 10/28/22 – Stalling Out
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“We have never said that we’re perfect. We’ve said that we seek that. But we sometimes fall short.” – Tim Cook
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
We’re seeing another day this morning where Nasdaq futures are much weaker than the broader market. The culprit this morning is Amazon.com (AMZN) which is trading down over 13% after dropping as much as 20% in after-hours trading. The Nasdaq is indicated to open down over 1% while the S&P 500 is down by about half that. Treasury yields are higher this morning, and the 10-year yield briefly traded back above 4% before falling following the latest batch of economic data. Another factor contributing to the weakness in the tech sector is a report that the Biden Administration is considering adding additional restrictions on technology exports to China.
It’s been a busy morning of economic data and the Employment Cost Index (+1.2%), Personal Income (+0.4%), and PCE Prices (+0.3%) were all in line with forecasts. Personal Spending (+0.6%) was higher than expected, and at 10 AM we’ll get Pending Home Sales and Michigan Confidence.
What a month it has been for the Energy sector. Since its recent low in late September, the S&P 500 Energy sector has rallied about 30% and is currently within 4% of its early June high. Looking at a longer-term chart of the sector shows that it has consistently found support at the trendline that extends back to the higher low it made in late 2020. The fact that it managed to bounce at that support during the last leg lower was impressive given that it followed what was a lower high for the sector in late August.
With its gain of over 60% YTD, Energy has trounced the market on a YTD basis, and while the sector has yet to take out its high from June, its performance gap with the S&P 500 did manage to make a new high yesterday as it’s now outperforming the S&P 500 by 80 percentage points YTD.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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