Looking at the relationship between the largest of the large (Nasdaq 100) and the smallest of the small (Russell 2000) over the last 25 years, we can’t help but think of an old-time roller coaster with steep inclines and declines along the way.  The runup of the Nasdaq 100 relative to the Russell 2000 in the late 1990s that peaked in March 2000 was nearly vertical, and the decline from that peak was just as steep.  Once things bottomed out for the Nasdaq 100 in mid-2006, it embarked on a steady period of outperformance that started to accelerate in early 2016 and then really took off with the COVID outbreak in early 2020.  Then in early September of last year, the Nasdaq 100’s relative strength peaked with the onset of the ‘big shift’.  In the months following the Nasdaq 100’s relative peak in early September, the index saw its largest margin of underperformance relative to the Russell 2000 since the bursting of the Dot Com bubble.

The chart below takes a more detailed look at the ratio between the two indices going back to just 2017.  While the Nasdaq 100’s recent underperformance relative to the Russell 2000 has been sharp, it wasn’t nearly as steep as its vertical outperformance at the onset of COVID.  In recent weeks, the Nasdaq 100 has seen a sharp rebound on both an absolute and relative basis.  Since March 12th, the Nasdaq 100 is up over 5% while the Russell 2000 is down over 5%.  What’s noteworthy about this bounce is that it occurred just above the uptrend line from the early 2016 lows and nearly at the exact same spot as the ratio was at the start of February 2020 when the pandemic was just getting ready to explode.  Click here to view Bespoke’s premium membership options for our best research and market analysis available.

With the major US indices pressing to new record highs, sentiment has picked up considerably in the past week.  Bullish sentiment measured in the AAII weekly sentiment survey came in the top 5% of all prior weekly readings after rising by 11.1 percentage points to 56.9%.  That makes for the largest one-week increase since the week of November 12th when bullish sentiment leaped 17.88 percentage points to 55.84%.  This week also surpassed that November reading to make for the highest level of bullish sentiment since the first week of 2018 when 59.75% of respondents reported as bullish.

Bearish sentiment was already low headed into this week, but the reading fell another 2.8 percentage points to 20.4%.  That is marginally lower than the reading of 20.6% from two weeks ago making for the lowest level of bearish sentiment since April 2019.

The big jump in bullish sentiment borrowed more heavily from the neutral camp.  The percentage of respondents reporting as neutral collapsed 8.3 percentage points to 22.7%.  Similar to bullish sentiment, that was the biggest single-week decline since November 12th and the lowest reading since that same week.

These moves mean sentiment now largely favors the bullish camp.  In fact, the bull-bear spread rose to 36.5 which is the highest level since the first week of 2018.

To see what these types of sentiment readings mean for equity market returns, make sure to log in.  If you aren’t currently a client, sign up for a free trial to one of Bespoke’s research offerings to view the rest of this report.

When it comes to the fixed income space, 2021 has been a rough year.  Just about every area of the sector you look at, YTD returns have been negative.  Below is a snapshot of a custom portfolio of fixed income-related ETFs from our Trend Analyzer.  Two things in the snapshot stand out.  First, the only ETF in the group above its 50-DMA is the High Yield Bond ETF (HYG).  Not only is it above its 50-DMA, but it’s also overbought!  Given the recent strength in HYG, it is also the only ETF in the group that is up YTD with a gain of just under 1%.  While short-term US Treasury related ETFs are down less than 1%, the TIPS ETF is down over 1% (TIP), total bond market ETFs are down over 3% (AGG and BND), the emerging market fixed income ETF is down close to 5%, while longer-term US Treasury ETFs are down over 10%!

Also noteworthy about the high yield bond market is the fact that the B of A High Yield Master Index just made a new all-time high on a total return basis, taking out its mid-February high.  Apropos to its name, high yield has been a high point of the fixed income sector.  Click here to view Bespoke’s premium membership options for our best research available.

Initial jobless claims were expected to fall to 680K this week, which would have been just 22K above the pandemic low set two weeks ago.  Instead, claims ticked higher for a second week in a row to 744K. Additionally, last week’s print of 719K was revised higher to 728K.

On a non-seasonally adjusted basis, the current week of the year (14th week) typically sees a higher reading in jobless claims. In fact, since 1967 when the data begins, the current week of the year has seen a week over week increase in initial claims 88.9% of the time. Of all weeks of the year, it is the third most consistent in experiencing higher claims.  Given this seasonality, unadjusted claims rose 18.2K from last week. Although higher sequentially, that is still at the lower end of the past year’s range.  Pandemic Unemployment Assistance (PUA) made up for that weakness, though.  PUA claims fell by over 85K to a new pandemic low of 151.75K.  That meant on a combined basis (regular state claims plus PUA claims), initial jobless claims were just slightly above the past year’s low from two weeks ago.

Continuing claims were also better this week falling to a new low of 3.734 million. While that marked the twelfth week in a row that claims have fallen and any new low is certainly welcome, we would note that the pace of improvement has decelerated.  As shown below, continuing claims have been flattening out recently with this week’s 16K decline in seasonally adjusted continuing claims a prime example.  That 16K improvement actually marked the smallest decline of the past year.

The most recent data factoring in all other unemployment programs is through the week of March 19th. Total claims were somewhat flat for that week with only a small decline from 18.249 million to 18.196 million.  Big declines in regular state claims (-134.5K) and the Extended Benefits program (-230.78K) were largely offset by sizeable increases in PUA claims (+203.29K) and Pandemic Emergency Unemployment Compensation (+117.11K). In other words, the picture can be painted as improving or more of the same depending upon which program you are looking at.

In the past, we have noted the changing composition of continuing jobless claims with extension-based programs like Extended Benefits and PEUC taking up an increased share of total claims. For the most recent week, that picture is a bit mixed up.  While the 230.78K decline for the Extended Benefits program meant these claims fell to the lowest since early December at 787K, PEUC claims (which is also a larger program with 5.6 million claims) were higher and in the middle of the past several weeks’ range. Together, these two extension programs’ share of total claims has peaked for the time being but still account for over 35% of total continuing claims. Click here to view Bespoke’s premium membership options for our best research available.