Volatility in Chinese markets has caused the broader emerging markets ETF, EEM, to move aggressively to both the upside and downside over the last few trading days. Yesterday, EEM gained 8.05%, but the move came after the ETF moved 6.1% lower between last Thursday and Tuesday’s close. All-in-all, the ETF round-tripped to the levels seen on Wednesday of last week, but EEM is still down 8.5% year to date. Since EEM began trading in 2003, the ETF has gained a little over 300%, which constitutes annualized performance of 7.7%.

The move yesterday was high relative to historical daily moves, ranking as the 13th largest single-day upside move in its history. Larger moves were seen during the Financial Crisis and the COVID Crash. Obviously, these are not great periods to be compared to, but the occurrences were near the bottom of the pullbacks.

EEM’s daily spread versus the S&P 500 yesterday reached its highest positive level since the Financial Crisis. The last time the daily spread was above that of yesterday was on 11/21/08, in which the daily spread was +9.0%. The last time the spread even came close to this figure was during the COVID crash. Yesterday’s reading was 6.1%.

In spite of the S&P 500 gaining back some ground in the past week, sentiment has continued to shift in an increasingly pessimistic direction.  For a second week in a row, less than a quarter of respondents to the AAII sentiment survey reported a bullish.  At 22.5%, however, current levels are still slightly above the low of 19.2% from one month ago.

Bearish sentiment meanwhile climbed another 4 percentage points with just under half of respondents reporting as such.  Albeit elevated, bearish sentiment is not as high as the 50%+ readings reached in January and February.  As for another reading on bearish sentiment from the Investors Intelligence survey, bearish sentiment is at the highest level since the March 2020 COVID low.

The bull-bear spread is extremely low at -27.3 but that is not quite as low as those past couple of weeks when over half of respondents reported as being bearish.

Not all of the increase to bears came from bulls.  As shown below, neutral sentiment fell from 30.2% down to 27.8%.  That is only the lowest level since the end of February. While bullish and bearish sentiment are both over a full standard deviation away from their historical averages, neutral sentiment is much more inline with its own historical average.  Whereas all weeks since the start of the survey has seen neutral sentiment average a reading of 31.4%, this week’s reading was only a few percentage points away.  Click here to view Bespoke’s premium membership options.

The latest data on residential housing for the month of February generally came in better than expected today and showed some positive longer-term trends.  Starting with the actual numbers, Housing Starts increased 6.8% m/m, and while growth in multi-family units was higher than the headline number, single-family units still showed healthy growth of 5.7%.  Building Permits actually showed a modest decline in February, falling 1.9%, but single-family units barely even declined.  On a regional basis, despite weaker sentiment from homebuilders in the Northeast in yesterday’s report from the NAHB, both Housing Starts and Building Permits in the Northeast grew more than 20% m/m which was easily the strongest showing of any region.

From a longer-term perspective, the 12-month average of Housing Starts made another post-financial crisis high in February rising to its highest level since March 2007.  Typically, this reading starts to roll over well in advance of a recession, so the fact that it’s hitting multi-year highs now should provide some relief to those who are concerned about the flattening of the yield curve.

It isn’t just Housing Starts that are making new highs on a 12-month average basis.  The 12-month average of Building Permits also ticked up to the highest level since February 2007.

Finally, the chart below shows the 12-month average of single-family Building Permits and Housing Starts.  For much of the last year, the average of single-family units was starting to show signs of rolling over as supply chain issues slowed down activity in the sector.  Given housing’s leading nature relative to the business cycle, this was somewhat concerning, even if the issue was more supply rather than demand-driven.  February’s report, though, was encouraging in that both Permits and Starts showed increases again in their 12-month averages.  Click here to view Bespoke’s premium membership options.

Seasonally adjusted jobless claims continue to ping back and forth within their recent range between 200K and 300K.   Still off the sub-200K readings from the end of last year, jobless claims fell from 229K to 214K this week. That is the lowest level since the last week of 2021 when they were 7K lower. Even though there has been no new notable low, the current level is still healthy and consistent with pre-pandemic levels that had not been observed at any other period after the early 1970s.

Jobless claims continue to have seasonal tailwinds at this point of the year and typically do not seasonally bottom until several weeks later. The current week of the year has historically been one of the strongest in terms of consistency of declines in the non-seasonally adjusted number. Since 1967, 92.7% of the time claims have fallen week over week during the current week of the year, and this year was no exception. At 202.9K, it was only slightly above the low of 196K from two weeks ago.  That level is also still slightly above the readings for the same week of the year prior to the pandemic (2018 and 2019).

Delayed an additional week making the most recent reading through the first week of March, seasonally adjusted continuing claims fell to a fresh low of 1.419 million. That is the strongest reading on continuing claims since February 1970. Click here to view Bespoke’s premium membership options.