One of the hottest areas of the market heading into this week was the Transports as the Dow Transportation Index was riding a streak of ten straight positive weeks- its longest weekly winning streak since 1989.  The index is down so far this week, so unless it can turn things around, the weekly streak will end just one shy of the 11-week record in 1989. This week’s decline aside, if you are a follower of Dow Theory, the strength in the Transports is positive.

The snapshot below is a custom portfolio of the members of the Dow Transports from our Trend Analyzer and is sorted by YTD performance.  Topping the list are shares of Avis Budget (CAR) which has more than doubled YTD.  Like CAR, most of the index’s biggest winners have also been beneficiaries from the re-opening trade as American Airlines (AAL), JetBlue Airways (JBLU), Alaska Air (ALK), and Southwest Airlines (LUV) round out the top five.  While re-opening stocks focused on transporting people have seen the biggest gains YTD, companies focused on the transportation of goods have lagged.  At the bottom of the list, shares of CH Robinson (CHRW(, United Parcel Service (UPS), Union Pacific (UNP), and CSX are all up less than 10% YTD.

As mentioned above, the recent strength in the Transports has been led by ‘people’ rather than ‘parcel’ transporters, but it’s interesting to see how leadership has shifted over time.  We broke out the Dow Transports based on those that transport people (CAR, ALK, LUV, UAL, DAL, AAL, and JBLU) versus those that transport stuff (all the others) and then calculated the relative strength between the two baskets.  In the chart below, a rising line indicates outperformance on the part of ‘people-movers’ versus ‘parcel-movers’ and vice versa.  In the early days of the pandemic even before the lockdowns started and the WHO declared a pandemic, the ‘people-movers’ cratered on both an absolute and relative basis.  They continued to drop after, and it wasn’t until mid-May that they finally bottomed on a relative basis.  The period from late May through early June was strong for the ‘people-movers’, but as the summer wave accelerated, they quickly ran out of steam.  From there, there was little in the way of outperformance from either group.

In early November, the ‘people-movers’ got a boost from the Pfizer (PFE) announcement regarding preliminary results of its COVID vaccine, but throughout the winter there was still little leadership among either group.  It wasn’t until February of this year when vaccine rollouts picked up steam and fatigue from a winter of remaining stuck at home, that Americans finally really started to start going out again providing a huge boost for the ‘people-movers’.  More recently, even as Americans are more optimistic than ever about moving around heading into the Summer, the ‘people-mover’ stocks have stalled out relative to the ‘parcel movers’ which continue to rally. Whether this is just a period of consolidation following a big rally or something else remains to be seen, but it’s noteworthy that even as passenger air traffic continues to pick up and more airlines recall staff, the transports most leveraged to travel are at the same level they were at in late February. Click here to view Bespoke’s premium membership options for our best research available.

Last week, we repeatedly noted how there has been rotation back into growth-oriented sectors like Technology and Consumer Discretionary.  For example, mega-cap names like Tesla (TSLA), Apple (AAPL), and Amazon (AMZN) have been some of the top performers in the second quarter whereas they were some of the worst performers in Q1.  As a result of the strong performance of these names which all have heavy weights in the S&P 500 Growth ETF (IVW), the ETF has undergone some notable price action over the past couple of weeks.  At the start of April, IVW finally broke back above its 50-DMA after repeatedly failing to do so throughout March.  Last week, that rally continued as the ETF also broke out above its February highs.

That sort of strong technical picture is not true for all growth stocks though. Instead, it is more of a market cap story.  The Russell 2,000 Growth ETF (IWO) has been stuck in a downtrend over the past few months with another failed attempt to change that last week.  Whereas IVW is extremely overbought (at least two standard deviations above its 50-DMA) as of Friday’s close, IWO is trading below its 50-DMA.

In the chart below we show small-cap growth relative to large-cap growth through the ratio of IWO to IVW.  Throughout the fall and winter, small-cap growth had been outpacing its large-cap peers as the ratio shot higher.  But in mid-February, the ratio peaked and in the past month, it has more sharply pulled back as a rotation into large-cap growth has taken place.  In fact, the ratio has fallen over 10% in the past month!  As shown in the second chart below, there have not been many times since the two ETFs began trading in 2000 in which the ratio has fallen as sharply in such a span of time.  The most recent instance was one year ago during and in the immediate aftermath of the bear market. Before that, it was almost a decade since the next most recent occurrence.

With just five prior occurrences, there is not a particularly large sample size for these types of moves, but returns have tended to be strong following past times that the ratio of IWO to IVW has fallen by at least 10 percentage points in a single month. For both ETFs, returns have been stronger than their relative norms over the following weeks and months. Small-cap growth has perhaps performed slightly better on average although that is due to smaller declines following the late 2000 instance. In other words, big outperformance of large-cap growth in the past has been generally good for growth stocks. Click here to view Bespoke’s premium membership options for our best research available.

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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The Fed

The Fed Is Making Wall Street Forecasters Pay Attention to Black Unemployment by Matthew Boesler (Bloomberg)

With the Federal Reserve altering its targets for the labor market to be more broad-based, forecasters are focusing on the most down-trodden parts of the labor market instead of headline data. [Link]

To catch a falling knife: US Treasuries and the Fed (Part 3) by Chris Marsh (Exante Data)

A dive into the mechanical relationships that underpin US Treasury markets, which will be forced to digest another robust year of issuance in 2021. [Link]

COVID

“We Are Hoarding”: Why the U.S. Still Can’t Donate COVID-19 Vaccines to Countries in Need by Katherine Eban (Vanity Fair)

With the various vaccine candidates delivering far more doses than looked possible during the period when their contracts were negotiated, the US is likely to have a large vaccine surplus this year, but not one that can be passed on to other countries. [Link]

Probable airborne transmission of SARS-CoV-2 in a poorly ventilated restaurant by Yuguo Liah, HuaQian, JianHang, Xuguang Chen, Pan Cheng, Hong Ling, Shengqi Wang, Peng Liang, Jiansen Li, Shenglan Xiaoa, Jianjian Wei, Li Liu., Benjamin J. Cowling, and MinKangd (ScienceDirect)

A detailed case study illustrating how important ventilation is for preventing outbreaks of COVID in relatively confined areas. [Link]

Investing

The Bubble Burst by Michael Batnick (The Irrelevant Investor)

A post-mortem on the rapid increase in value for the NBA’s blockchain-enabled video clip collectibles called “Top Shot”, which peaked at a market value of more than $2bn (greater than the median NBA franchise’s value) in February. [Link]

Individual Investors Retreat From Markets After Show-Stopping Start to 2021 by Caitlin McCabe (WSJ)

Online brokerage volumes, “meme” stock prices, and options activity are all sliding into reverse as the equity market craze that started the year starts to wear off from unsustainable levels of froth. [Link; paywall]

Venture

Patreon’s Valuation Triples to $4 Billion as Platform Draws Creators, Fans by Maria Armental (WSJ)

The latest fundraising round for subscription site Patreon values the company at $4bn, with growth tech hedge fund Tiger Global Management stepping in to the fray along with a range of other existing holders. [Link; paywall]

The new Normal: How one Midwestern town got swept up in the electric vehicle boom by Matt McFarland (CNN Business)

The electric vehicle boom is already having a huge impact on at least one small Midwestern town: Normal, IL is the site of battery-powered truck company Rivian (valued at $27.6bn), which has an edge over other EV truck contenders in the race to deliver emission-free pickups to the market. [Link]

Why the Air Force has its own venture capital fund by Mark Sullivan (Fast Company)

AFVentures will serve as a venture capital fund that can invest in and nurture potential defense technology investments on behalf of the Armed Forces’ airborne wing. [Link]

Roaring 20s

Sources: NBA aims for full arenas for 2021-22 season with increased testing, vaccines by Baxter Holmes (ESPN)

Widespread testing, vaccines, and biometric data are all keys to running NBA games at full capacity this year, with the league planning to put as many people in seats as will fit when games start in the fall. [Link]

Spring breakers face rental-car shortage by David Meyer (NYP)

With a return to normal summer holidays, the cost of renting cars has soared amidst a national shortage of vehicles, driving a 30% increase in prices nationally. Following bankruptcies and reductions in capacity, there just aren’t enough cars available. [Link]

Job Training

Job Training That’s Free Until You’re Hired Is a Blueprint for Biden by Steve Lohr (NYT)

A nonprofit offers a different model of job training: one where only students who actually find a job have to pay of the training, reducing the risk of upgrading skills. [Link; soft paywall]

Wardrobe

Why Are Furio’s Shirts So Good on The Sopranos? by Gabriella Paiella (GQ)

An investigation of the shirts worn by Neapolitan mafioso Furio Giunta, who made a habit of draping himself in flowing silk ensembles that made the rest of the show’s characters look downright wooden. [Link]

Sleep

Why You Stay Up So Late, Even When You Know You Shouldn’t by Ashley Lauretta (Wired)

“Sleep procrastination” is a coping method that relies on technology and anxiety to drive sufferers into late-night binges on phones or computers, keeping them awake far longer than they intended to be. [Link; soft paywall]

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