With a 500-point decline in the Dow last Friday and a 500-point gain today, volatility in the markets has picked up, but days like the last two pale in comparison to the most extreme up and down days of the upcoming week in market history.  For these two extremes, we have to go all the way back to 1950 and 1931.

The worst market day of the current week in the history of the S&P took place on 6/26/1950 when the S&P fell 5.4%.  Stocks jolted downward that day on the uncertainty surrounding the Communist invasion in Korea with North Korean tanks crossing over the 38th parallel and invading the South Korean capital of Seoul. President Truman condemned the ‘latest aggression in Korea in defiance of the Charter of the United Nations’ and pledged his full support of U.N. efforts to end the fighting.  The nature of the support and whether American troops would be sent to Korea if the U.N. requested them, however, was left unanswered.

The fact that the Soviets were considered responsible for this aggressiveness brought into focus the fact that like Korea, Germany was a split country with a lack of military force in place to prevent a Soviet-sponsored proxy invasion. The worrying implications of the invasion resulted in heavy price action reminiscent of the fall of France on 5/21/1940 (-9.14%) as volume surged to the highest levels since that day.

The S&P’s decline on June 26th, 1950 had been preceded by a year-long bull run marked by a resurgence of public participation in markets. At the market open, imbalances were so wide between bids and offers that it took certain issues upwards of an hour to open for trading, and once they opened for trading, selling was exacerbated by stop-loss orders. Liquidations continued to come through the market in waves, with trading periodically coming to a standstill only to be interrupted by larger volumes of even more aggressive selling, with the low of the day being the close.  How bad was the selling?  For the entire day, only 59 of the 1,256 (4.7%) issues traded were up on the day. Radio Corporation was the heaviest traded issue of the day on 124,000 shares, slipping 2 1/4 points to a price of 19 5/8, Chrysler lost 7 to 73, and General Motors fell 6 3/8 to 90 1/8.

Selling in June 1950 continued right up through mid-July and the S&P dropped about 14% from its peak to trough.  As bad as the day was, the market would erase this loss by 9/15, less than two months later, and it kept rallying from there.  Click here to view Bespoke’s premium membership options.

The best market day of the current week in the history of the S&P took place on 6/22/1931 when the S&P rallied 10.5%. Over the weekend of 6/21/1931, President Hoover unveiled a proposal to put a one-year moratorium on upwards of a quarter billion dollars of World War I reparations and war debts owed to the United States.  Hoover noted that “The purpose of this action is to give the forthcoming year to the economic recovery of the world and to help free the recuperative forces already in motion in the United States from retarding influences from abroad.”  Wall Street initially loved Hoover’s plan to help alleviate the Great Depression in Europe, and investors, previously starved for good news, cheered the plan.  Those Wall Street firms with international connections reported a surge in foreign demand for equities, and professional traders sought out the most shorted stocks and caught the shorts flat-footed squeezing them out of their positions.  The brighter economic outlook also provided a lift to commodity prices.

Unfortunately, the bullish party ended early, and just as the losses from 6/26/1950 were erased within two months, the gains from 6/22/31 were gone by early September.  Hoover’s moratorium, which didn’t have anywhere close to universal support in the US and Europe, didn’t pass in Congress until that December.  In that ensuing period, though, Germany would have not just a currency crisis but a banking collapse as well, and then soon after Great Britain abandoned the gold standard.  As optimistic as Wall Street was on 6/22/1931, all of the gains were erased by 9/8 of that year, and the market continued its slide right up through mid-1932 when it made the final Great Depression lows – 70% below where it closed on 6/22/31!  Click here to view Bespoke’s premium membership options.

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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History

The “Quaker Comet” Was the Greatest Abolitionist You’ve Never Heard Of by Marcus Rediker (Smithsonian Mag)

A fascinating biography of little-known Quaker abolitionist Benjamin Lay, whose fiery condemnation of slavery was among the first of the faith in America, long before the Delaware Valley became a hotbed of anti-slavery sentiment. [Link]

Who were the world’s first bakers? by Sarah Reid (BBC)

New evidence has pointed to the use of flour and bread baking in Australia tens of thousands of years before the previous consensus start of baking in the Middle East much closer to our contemporary period than it was to the ancient breadmaking of Aborigines 50 millennia ago. [Link]

Personal Profiles

This Is the Story of a Man Who Jumped Into Lake Michigan Every Day for Nearly a Year by Julie Bosman (NYT)

A revealing story of a man driven to frigid plunges into Lake Michigan by the pain of pandemic, politics, and at first anyways, a truly nasty hangover. [Link; soft paywall]

Three Hurricanes. A Deep Freeze. A Biblical Flood: Lake Charles Is America’s Climate Future by Zahra Hirji and Brianna Sacks (BuzzFeed)

The brutal stories of Lake Charles, Louisiana families that have lived through a brutal series of weather events. Houses and lives destroyed; they stand as a cautionary tale of climate change risks which loom over large swathes of the country. [Link]

Investing

Turn Turn Turn: Rotations Persist by Liz Ann Sonders (Charles Schwab)

While US markets have generally ground higher over the last couple of quarters, there has been a lot more going on under the surface, and that’s likely to continue. [Link]

Crypto

Bitcoin and the wealthy by Eva Szalay (FT)

An interesting dive into how some of the largest holder of bitcoin and other cryptocurrencies are thinking about managing their fortunes. [Link; paywall]

Crypto’s Weimar by Frances Coppola (Coppola Comment)

A post-mortem on the complete collapse of cryptocurrency TITAN and its stablecoin IRON, driven by poor design of the ecosystem that generated a “Weimar moment”. [Link]

Banking

Goldman Sachs reportedly plans to move more than 100 bankers to Florida by Lydia Moynihan (NYP)

A new Palm Beach office is luring dozens of Goldman employees who are marching south as their New York colleagues march back into the office. [Link]

Wall Street Banks Warn Their Trading Boom Is Over by David Benoit (WSJ)

Volatility and portfolio turnover drove a massive increase in trading activity during the pandemic, but banks are expecting that across FICC and equities Wall Street trading desks will book much less business going forward than they did during the last five quarters. [Link; paywall]

Boom & Bust

U.S. Housing Market Needs 5.5 Million More Units, Says New Report by Nicole Friedman (WSJ)

The shortfall in construction following the financial crisis has left US housing markets badly undersupplied and population has continued to grow steadily, leaving the US housing market badly short of units across the spectrum of housing types. [Link; paywall]

Honeywell Shuts Two Mask Factories as Face-Covering Demand Drops by Thomas Black and Shira Stein (Bloomberg)

As demand for N95 masks recedes, two manufacturing facilities spun up by Honeywell earlier this year will shutter, though another factory in the US continues to push out the masks. [Link; soft paywall]

Regulation

Lina Khan: The 32-year-old taking on Big Tech by James Clayton (BBC)

A profile of the surprisingly young chair of the Federal Trade Commission and her effort to target large digital companies with century-old antitrust regulations. [Link]

On this day in 2015, the Irish government accidentally legalised drugs for 24 hours by Rachael O’Connor (Irish Post)

Six years ago, a host of drugs were made totally legal for consumption and sale in Ireland thanks to a legal loophole that made the 1977 act banning 125 substances unconstitutional. [Link]

Psychology

How Humans Think When They Think As Part of a Group by Annie Murphy Paul (Wired)

Working together may not only improve efficiency by distributing tasks, but actually increase the total cognitive power of a group of people to something larger than the sum of their individual capabilities. [Link; soft paywall]

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Have a great weekend!

With the return of meme stocks and a focus on monetary policy, the blowup of Archegos Capital Management is a distant memory roughly three months in the rearview. Two stocks that were the main victims of the Archegos saga were Discovery (DISCA) and ViacomCBS (VIAC).  At their respective highs in March, DISCA had rallied 156.8% YTD and VIAC was up an even larger 169.3%. But as fast as those stocks ripped higher, they have erased the bulk of their moves.  Both stocks have fallen over 60% from their respective peaks.

As for where the two stocks stand today from a charting perspective, the moving averages provided DISCA with little to no support as it currently sits 15% below its 50-DMA. Additionally, the 50-DMA has recently crossed below its longer-term 200-DMA in the past couple of sessions. While DISCA has been in a steady downtrend, the chart of VIAC is a bit more constructive.  After the initial drop during the Archegos episode, the stock found support around its 200-DMA and has been fluctuating around that moving average ever since then. Like DISCA, the 50-DMA of VIAC has also recently fallen below the 200-DMA too.

From a longer-term perspective, the parabolic move earlier this year resulted in DISCA smashing out of the past five year’s range.  But the decline over the past few months has meant the stock is right back within that range once again. It is a similar story for VIAC. VIAC broke its multi-year downtrend in dramatic fashion earlier this year, but the declines over the past few months have brought the stock right back down to that trendline.  Click here to view Bespoke’s premium membership options.