In November of last year, we took a look at the performance spread between the equal and market cap weighted versions of the S&P 500. The chart below provides an update through the end of September where positive readings indicate outperformance of the equal-weight S&P 500 and negative readings indicate outperformance of the market cap weighted index.  In March 2020, as the market was plunging from the February peak and bottoming towards the end of the month, mega-caps such as Apple (APPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Facebook (FB) significantly outperformed the broader market, resulting in a 5.68 percentage point spread between the return of the equally weighted and market cap weighted S&P 500. Whereas the equal-weighted index declined 18.19% in March 2020, the market cap weighted index dropped ‘just’ 12.51%. In a reversal of these trends, the equal-weighted index outperformed between the months of September 2020 and March 2021, rallying 30.84% while its market cap weighted counterpart gained 18.14%. Over these months, there was a maximum monthly spread of 3.37 percentage points in favor of the equal-weighted index, which occurred last December. In recent months, mega-caps briefly took back the reins before the trend reversed in September when the equal-weighted index outperformed by 0.82 percentage points.

With the month of September behind us, the table below lists the 18 stocks in the S&P 500 that finished the month up over 10%, and less than a quarter of the stocks in the index (22%) finished the month higher.  Overall, the average performance of stocks in the index was a decline of 3.7 percentage points. While short-term performance has been weak, on a YTD basis, 81.42% of S&P 500 stocks are up on the year, and the overall average gain is 18.90%. Of the stocks that have rallied 10%+ in September, more than half are from the Energy sector and another three come from the Financials sector. Click here to view Bespoke’s premium membership options.

Q3 and the month of September are now in the books, and it was not a great period for US equities.  As shown in our asset class performance matrix below, the sole portion of the US equity market that was higher in September was Energy stocks.  Every other sector, theme, and major index was lower on the month. As for global equities, performance was more mixed with declines ranging from 11.73% for Brazil (EWZ) to a 3.55% gain for Russia, though, most country ETFs were lower on the month.

Commodities had a good month particularly in the energy space with crude oil (USO) gaining 9.41% and Natural Gas (UNG) rising an astounding 31.59%.  That lifted the total gain in Q3 to 54.13% while it has returned almost 120% year to date; the best performer for both time periods.  Precious metals, namely silver (SLV), on the other hand, was hit particularly hard.  As for cryptos, Ethereum (ETHE) was another top performer YTD and in Q3, but September pared those gains. ETHE fell 13.62% in September while Bitcoin (GBTC) also fell by double-digit percentages. Click here to view Bespoke’s premium membership options.

As the S&P 500 continued to decline over the past week, survey results from the American Association of Individual Investors have shown investor sentiment has taken a more negative tone. 28.1% of respondents this week reported as bullish versus 29.9% last week.  While lower, that is still several percentage points above the recent low of 22.4% from a couple of weeks ago.

Bearish sentiment picked up the bulk of those losses to bullish sentiment as 40.7% reported pessimistic sentiment this week.  That is the highest reading in exactly a year. With bearish sentiment having risen by 13.5 percentage points since the low of 27.2% in the week of September 9th, it is now a full standard deviation above its historical average of 30.55%.

Even though bearish sentiment came in at a new high, the bull-bear spread was only slightly lower at -12.6.  That is still above the low of -16.9 from two weeks ago.

Bearish sentiment did not pick up all of the losses to bullish sentiment either. Neutral sentiment was also slightly higher this week gaining 0.2 percentage points.

Other readings on sentiment are also echoing the decline in optimism.  One other sentiment indicator, the National Association of Active Investment Mangers’ Exposure Index, has also seen a significant drop this week. This index shows how exposed managers are to equities with a reading of 200 being the max and meaning respondents are leveraged long whereas -200 would be leveraged short.  A reading of +100 (-100) would indicate managers are full long (short), and a reading of zero would indicate they are market neutral.  The index has fallen in back-to-back weeks now with this week seeing a 22.68 point drop to the lowest level since May.  That week over week change also ranks in the bottom 5% of weekly moves going back to the start of the data in 2006, although there have been a handful of similar if not larger drops in the past year like a 26.98 point decline in mid-August and a 40.93 point drop back in May. Now at 55.02, the index indicates managers have stepped back and are far less exposed to equities than they have been for most of the past year. Click here to view Bespoke’s premium membership options.

This week’s initial jobless claims number disappointed with a surprise increase to 362K rather than the anticipated 21K decline to 330K.  After that increase, claims are at the highest level since the first week of August when total adjusted claims were 15K higher at 377K.

While seasonally adjusted claims were disappointing, the unadjusted number actually improved week over week falling back below 300K. Albeit lower, claims are still off their low of 265.9K from two weeks ago which could be expected given the seasonal tendency for claims to rise at this time of year. With the program’s official end date now a few weeks in the rearview, PUA claims remain muted, but there was actually an increase of early 2K this week.

Seasonally adjusted continuing claims fell this week to 2.802 million.  Although lower, that was not as large of a decline as expected. That makes for the second-lowest reading of the pandemic outside of the first week of September when continuing claims came in at 2.715 million.

On a non-seasonally adjusted basis and including all auxiliary programs creates a couple of weeks of lag to the data making the most recent reading through September 10th.  That was the first week of data to encapsulate the end of pandemic programs, and the drop was significant. Total claims across all programs were more than cut in half falling 6.22 million to 5.03 million. As could be expected, declines in PUA and PEUC claims drove that decline with the two programs shedding a combined 6.49 million claims. That being said, these two programs still have a total of over 2 million claims left on the table and likely to fall off over the coming weeks. Click here to view Bespoke’s premium membership options.