S&P 500 At 52-Week Lows
The S&P 500 plummeted more than 3% today and traded at a 52-week low (on a closing basis) for the first time since 3/23/20. This marks the end of a 536 trading day streak in which the S&P 500 did not close at a 52-week low. So, how has the benchmark US index traded following prior days when it closed at a 52-week low? On an average basis, when the S&P 500 closes at a new 52-week low, it averages a gain of 7 basis points the following day and 63 basis points over the following week. In the next month, the S&P 500 averages a gain of 158 basis points.
The streak that ended today was the seventeenth longest on record and the 20th streak where it went at least 500 trading days without a 52-week low. Following the end of prior streaks, near-term forward returns have been quite weak. Over the next week, the S&P 500 averaged a loss of 50 basis points, which is 60 bps less than the average for all periods. Over the following month, the average gain was about half of that of all periods (+0.3% vs +0.6%). Apart from the next six months, positivity rates were also lower across every time period we looked at. In the next year, the S&P 500 averaged a gain of 6.6% (median: 13.0%) versus 8.0% for all periods.
The S&P 500 has only declined by 2%+ to set a new closing 52-week low 24 times (for the first time in twelve months) since 1928. Following these occurrences, the index averaged a decline of 1.3% (median: -0.5%) over the following week, which is 140 basis points below the average of all periods. Over the following month, the S&P 500 averaged a gain of just 20 basis points (median -1.1%), which is again, lower than the average of all periods. Over the following three and six months, average returns were better than average, although median returns were mixed. One year later, the average performance was slightly better than the average for all periods, but the median return was more than twice the historical average. Click here to view Bespoke’s premium membership options.
Chart of the Day: Post-Fed Tumble Reaches Day Three
April 2022 Headlines
Bespoke’s Morning Lineup – 5/9/22 – Buyer Strike Continues
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“History provides a crucial insight regarding market crises: they are inevitable, painful, and ultimately surmountable.” – Shelby M.C. Davis
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The post-FOMC hangover has carried through the weekend as foreign equities and now the US are all trading sharply lower to start the week. Higher interest rates, higher inflation, and higher geopolitical tensions remain the key headwinds facing the equity market and fixed income, and they don’t show many signs of abating at this point. The only thing equities have going for them is that every major US index heads into the week at oversold levels.
In today’s Morning Lineup, we recap the shifting sentiment in the tech sector to profits over growth (pg 4), Chinese trade date (pg 6), investor sentiment (pg 6), and a lot more.
With equities poised to open down over 1% this morning, the S&P 500 will be trading right near new lows for the year and right around lows from last April and May. It’s been a while since the S&P 500 has traded at a 52-week low, but that’s a real possibility this morning.
Looking at where sectors stand heading into the week, the snapshot below from our Trend Analyzer shows that last week was a mixed picture for markets. While Real Estate, Consumer Discretionary, and Consumer Staples were all down over 1%, Energy surged over 10%, while Utilities managed to rally over 1%. On a YTD picture, the trend remains the same. YTD it has been basically Energy and everything else.
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Bespoke Brunch Reads: 5/8/22
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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Blood In The Streets
Paul Tudor Jones says he can’t think of a worse financial environment for stocks or bonds right now by Yun Li (CNBC)
Macro hedge fund manager Paul Tudor Jones argues that the environment couldn’t get much worse, which at least has the ring of a contrarian opportunity…after all, if things can’t get worse, next they have to get better. [Link]
The Popping of the Bubble Stocks: An Update by Ray Dalio (LinkedIn)
Bridgewater’s Dalio declares a bubble in US equities has popped, but isn’t optimistic about the path forward for the market from here. [Link]
Tiger is suffering one of the biggest hedge fund drawdowns in history by Robin Wigglesworth (FTAV)
Massive tech hedge fund Tiger has been cut nearly in half this year as tech and growth stocks that it tends to hold get uniquely crushed. It’s unclear whether the fund can weather declines these large and remain a going concern. [Link; registration required]
Stocks and Bonds Are Falling in Lockstep at Pace Unseen in Decades by Gunjan Banerji (WSJ)
The combined drop in stocks and bonds isn’t unprecedented, but it’s highly unusual and it is extreme, putting pressure on investors across markets for it’s unusual one-two hit to brokerage balances and retirement accounts. [Link; paywall]
Citi acknowledges trading error after flash fall in some European shares by Joshua Franklin and Philip Stafford (FT)
A human error by a Citibank trader led to an 8% collapse in benchmark Swedish equity index on Monday; the drop didn’t last long despite the “bungled” execution on a basket of shares Citi was trading for a client. [Link; paywall]
Blue Bird
‘I Don’t Really Have a Business Plan’: How Elon Musk Wings It by Ryan Mac, Cade Metz and Kate Conger (NYT)
An inside look at the aggressive and free-wheeling world that Elon Musk inhabits, with little negative feedback and lots of micromanagement. [Link; soft paywall]
Investment Management
Wells Fargo Accidentally Kills Off FA in Letter to Clients by James Rogers (Financial Advisor IQ)
After an advisor left Wells Fargo’s wirehouse for an affiliate of Kestra Financial, WFC accidentally sent out a letter to his clients announcing his death. [Link]
Fidelity to Allow Retirement Savers to Put Bitcoin in 401(k) Accounts by Anne Tergesen (WSJ)
The 401k giant will soon allow investors to allocate retirement funds to bitcoin, opening the tax-advantaged investment accounts of employees at more than 20,000 companies to the crypto markets. [Link; paywall]
This $500 Billion Private Club for Family Offices Is Booming by Benjamin Stupples (Bloomberg)
As the number of family offices bloom, they’re starting to share information and education via an informal club that hosts regular events for its 250 members representing AUM of nearly half a trillion dollars. [Link; soft paywall]
Slowing Demand
Former Fed Vice Chair Quarles Says U.S. Is Likely to Suffer Recession by Rich Miller (Bloomberg)
After being ousted from the Fed when his term on the FOMC was complete, former Vice Chair for Supervision Randall Quarles thinks the Fed will need to hike so much that a recession will take place. [Link; soft paywall]
Americans Are Showing Inflation Fatigue, and Some Companies See a Breaking Point by Sharon Terlep (WSJ)
After spending two years busily buying everything they could get their hands on, American consumers are starting to balk at some of the prices that they’re being charged for discretionary items. [Link; paywall]
A third of small retailers can’t pay rent as financial struggles spike again by Ben Unglesbee (Retail Dive)
One in three smaller retailers are unable to cover their rent, with almost half saying their rent has risen over the next six months; smaller retailers aren’t able to absorb costs and pass on price hikes as well as larger retailers. [Link]
Shaky Lending
Used-Car Dealer Debuts Subprime Auto Bond Even as Sector Weakens by Adam Tempkin and Charles E Williams (Bloomberg)
Car-Mart, a used auto retailer targeting subprime quality buyers, priced an ABS backed by lower-quality loans yesterday and was able to sell them despite a steep concession demanded by investors. [Link; soft paywall]
‘Buy now, pay later’ is sending the TikTok generation spiraling into debt, popularized by San Francisco tech firms by Joshua Bote (SFGate)
Buy now, pay later (BNPL) is a way to take on debt at a potentially lower cost than credit cards. But 91% of consumer loans in California from 2020 were BNPL loans, and the seductive nature of the loans which lower the upfront cost of paying for big ticket items is starting to prove a challenge for some borrowers. [Link]
Data Privacy
CDC Tracked Millions of Phones to See If Americans Followed COVID Lockdown Orders by Joseph Cox (Vice)
CDC policymakers used anonymized location data to see how the public responded to curfews and other activity restrictions. While there is no evidence the CDC misused the data, FOIA requests reveal significant potential privacy concerns from the project. [Link]
Google lines up with Apple and Microsoft to nix passwords in favor of nearby-device authentication by Rob Pegoraro (Fast Company)
Major device and software companies are moving towards an open architecture that relies on identify verification on a smartphone in order to access other systems like laptops or PCs. [Link]
Location, Location, Location
$1-million milestone: Orange County median home price hits seven figures. by Andew Khouri (MSN/LAT)
Orange County is a sprawling Southern California polity with a diverse population, but housing has rapidly spiraled out of reach: the median home price has topped $1mm, a 22% jump versus a year ago. [Link]
I-Team: Body found in barrel in Lake Mead may date back to 1980s, more likely to appear as water recedes, Las Vegas police say by David Charns (8NewsNow)
A murder victim who was stuffed into a barrel in the 1980s was discovered in Lake Mead recently; authorities expect more such remains to emerge as brutal drought lowers the lake’s level. [Link]
Ball Games
What the heck is going on with the baseball? Everything you need to know about MLB’s scoring drought (ESPN)
Offense as measured by both batting average and scoring is among the lowest in league history to start this season as home runs disappear thanks to an intentional set of changes to the ball itself which may have gone further than expected. [Link; auto-playing video]
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Have a great weekend!
Equity Market Pros and Cons — Q2 2022
This week’s Bespoke Report is an updated version of our “Pros and Cons” edition for Q2 2022.
With this report, you’re able to get a complete picture of the bull and bear case for US stocks right now. It’s heavy on graphics and light on text, but we let the charts and tables do the talking!
On page two of the report, you’ll see a full list of the pros and cons that we lay out. We then provide slides for each “pro” or “con” that we’ve highlighted.
To read this report and access everything else Bespoke’s research platform has to offer, start a two-week trial to Bespoke Premium.
Daily Sector Snapshot — 5/6/22
Bespoke’s Morning Lineup – 5/6/22 – April Jobs Report Better Than Expected
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“Invest in yourself. Your career is the engine of your wealth.” – Paul Clitheroe
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.
4,131.93. That’s the level the S&P 500 will have to close above today in order to end the four-week streak of declines. After yesterday, it’s hard to believe that the S&P 500 is still up on the week, but as long as it doesn’t fall more than 0.36%, that will remain the case. There’s still a lot for the market to navigate through between now and the 4 o’clock closing bell, including the April Non-Farm Payrolls report and a number of Fed speakers.
On the jobs front, Non-Farm Payrolls came in higher than expected (428K vs 380K), the Unemployment Rate was unchanged at 3.6%, and average hourly earnings rose by less than expected (0.3% vs 0.4%) and were up 5.5% on a y/y basis.
In today’s Morning Lineup, we recap overnight events in Asia and Europe (pg 4), the drawdown in Asian and European stocks (pg 5), other Asian and European economic data (pg 6), and a lot more.
As we pointed out in our Chart of the Day earlier this week, breadth, as measured by the S&P 500’s 10-day advance/decline (A/D) line had yet to reach (and still hasn’t) extreme readings relative to other pullbacks since 1990. Yesterday’s mauling, though, did mark the fourth time in the last ten trading days that the net A/D reading for the S&P 500 was -400 or less. Going back to 1990, there have only been four other periods where there have been this many or more ‘Nothing’ days in a 10-trading day span. The most recent was in March 2020 when there were a total of six in ten days. The other three periods were September 2015 (peak of four), October 2011 (peak of five), and October 2008 (peak of five).
Obviously, the periods shown above occurred during market downturns, and that is evident in the chart below where every red dot indicates days when the 10-day trailing total of ‘Nothing’ days was four or more. Looking at each of the prior periods below and measuring performance from the first day in each one when the 10-day total reached four, the S&P 500 continued to see additional declines over the following one, three, six, and twelve months in 2008, but for the other three periods shown, performance over the following three, six, and twelve months was positive. Is the current period more like 2008 or the other three periods? Or is it a completely different period altogether?
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Bulls Bloom
The latest reading on sentiment from the American Association of Individual Investors showed bulls stepped back in as the S&P 500 generally rallied in the past week. After a historic low of only 16.4% last week, the percentage of respondents reporting as bullish rose back up to 26.9%. That is the first time over a quarter of respondents reported as bullish since the end of March. The double-digit weekly increase was also the largest since last October.
The increase in optimism was met with a 6.5 percentage point drop in the share of respondents reporting bearish sentiment. Even after that decline, over half of the respondents responded as bearish. That is the first time with back-to-back weeks of over 50% readings since May 2020. The current level of 52.9% is also still in the top 3% of all readings going back to the start of the survey in 1987.
That means in spite of a small improvement, sentiment continues to heavily favor bears. The bull-bear spread returned to a more normal but still very low reading of -26.
Fewer respondents were also reporting that they expect equity market prices to hold steady as neutral sentiment fell to 20.3%. That was the lowest reading since November 2020 when it was only one percentage point lower than now. Click here to learn more about Bespoke’s premium stock market research service.
