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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Real Estate

Millennials Are Supercharging the Housing Market by Nicole Friedman (WSJ)

A look at the fruits of Millennials’ aging-in to prime homebuying years, a process that many prognosticators had assumed would never happen but is now creating significant stress on housing markets. [Link; paywall]

Almost fell victim to real estate related wire fraud this evening. by ATX RE Podcast (Threadreader)

Wire instructions for a large real estate transaction are a tricky thing, with scammers working hard to get inside the information loop between buyers and their escrow officers. [Link]

Tech

Corner Stores Are the New Darlings of the Global Tech Industry by Louise Matsakis (The Atlantic)

The humble bodega or corner store is a massive locus for global commerce, especially outside of the developed world, and that’s led tech companies to focus on them as the way to get further imbedded in commerce. [Link; soft paywall]

Her Instagram Handle Was ‘Metaverse.’ Last Month, It Vanished. by Maddison Connaughton (NYT)

An Australian artist had been using the handle @metaverse for almost a decade, but the corporate rebrand from Facebook led the company to kick her off the site in order to take the handle. [Link; soft paywall]

POTUS Pondering

Jimmy Carter’s exposure to nuclear danger by Arthur Milnes (CNN)

The harrowing story of future President Jimmy Carter’s plunge into the Chalk River, Ontario nuclear reactor in 1952; Carter and his unit were in charge of helping Canada prevent a complete disaster early in the nuclear age. [Link]

How a 100-year-old newspaper became the go-to way to influence Biden by Hailey Fuchs and Max Tani (Politico)

Joe Biden’s hometown newspaper is on the desk of the Oval Office every morning, allowing it to become prime real estate for anyone that has an ad budget and a desire to reach the President’s eyes. [Link]

Europe

New Dutch government abandons ‘frugal’ label with big spending plans by Mehreen Khan (FT)

The new coalition government in the Netherlands is pushing the small northern European economy away from the tight budget fiscal approach, with spending including the construction of two new nuclear reactors, free childcare, and higher minimum wages. [Link; paywall]

European investors can access Cathie Wood’s ARK ETFs for first time by Jamie Gordon (ETF Stream)

Exchange-traded products that offer leveraged exposure to ARK Invest products are now available for trading in Europe. [Link]

Conspiracy

A QAnon con: How the viral Wayfair sex trafficking lie hurt real kids by Jessica Contrera (WaPo)

The mid-2020 viral obsession with an invented link between Wayfair and sex trafficking not only proved a monumental waste of resources for all involved, it also put children in danger and put actual trafficking victims in peril. [Link; soft paywall]

Boosters

Will we always need Covid-19 boosters? Experts have theories by Helen Branswell (STAT)

A review of evidence related to the need for repeated vaccine booster doses, with no firm conclusions. It’s certainly possible that three doses will be all most adults need, but there isn’t enough evidence either way to tell at this point. [Link]

Labor Markets

Life after quitting: What happened next to the workers who left their jobs by Heather Long and Maggie Penman (WaPo)

While in aggregate quits are associated with higher wages and more stability, in practice leaving a job isn’t a silver bullet that will solve the challenges of workers. [Link; soft paywall]

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Have a great weekend!

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Below is a look at a handful of charts published this week that we thought were interesting or noteworthy.  Receive charts and analysis like this in your inbox daily by signing up for a two-week trial to Bespoke Premium.

So far in December, the Consumer Staples sector has far outperformed the Consumer Discretionary sector. Although this is great for holders of stocks like Procter & Gamble (PG) and Pepsico (PEP), this has historically been an ominous sign for the broader market. When Consumer Staples has outperformed Consumer Discretionary by 10+ percentage points on a month to date basis, the broader S&P 500 has struggled in the intermediate term, at least going back to 1990. Take a look at the charts below to gain further insight into this phenomenon.

Unlike prior recessions, the US share of the aggregate global market cap did not decrease significantly during the COVID crash. This is largely due to the fact that this recession was global by nature, whereas previous pullbacks were more concentrated into the US. Since the bottom of the COVID crash, the proportionate share of the US has risen by 4.97 percentage points.

Although performance from the broader emerging markets category has been negative on a year to date basis, there are certainly pockets of strength. Taiwan, India, and Russia have all seen double digit gains so far this year, but countries like Brazil, China, and South Korea have weighed down related indices and ETFs.

SPLV, which tracks low volatility members of the S&P 500, has been significantly outperforming the S&P 500 over the last two weeks. This week, the spread between SPLV and SPY hit the highest level seen since 1/31/20, which was less than a month before the COVID crash. SPLV outperformance tells us that investors are wary about the prospects of the market and are flocking to safer names.

According to survey results released by the Small Business Association, inflation is tied with taxes for the second most important problem for small businesses, trailing only the quality of labor. Inflation has not ranked at this level since 2008, when it briefly became the number one issue that small businesses faced.

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According to Bloomberg market cap readings, as of yesterday’s close, the United States had a 44% share of aggregate global stock market cap; topping the next largest country, China, by a factor of over four.  As shown below, the US has seen its share of world market cap increase by 2.84 percentage points so far in 2021, which is a huge gain.  This shouldn’t come as too much of a surprise, though, given that the US has outperformed nearly every major country stock market this year.  In terms of other countries that have seen an increase in share this year, China has increased by 0.38 percentage points, while India has increased by 0.42 percentage points.  The two big losers this year have been Japan and Hong Kong, with each losing more than a percentage point of share.  Members of the European Union have an aggregate share of 9.82%; less than a quarter of the share of the United States. All told, the top 20 countries hold 93.06% of global market cap, and the top five have a 68.70% share.

During the mid-2000s bull market leading up to the Global Financial Crisis, the US was consistently losing its share of global market cap to the rest of the world.  From the end of the Dot Com Crash to the peak just before the Financial Crisis, the US lost more than 15 percentage points of share.  That was a banner period for both emerging and developed markets outside of the US.  Since 2009, though, the US has been steadily gaining ground with some acceleration in the past couple of years as US equities have generally outperformed the rest of the world. Notably, the COVID crash did not result in the US shedding any significant share of market cap seeing as the sell-off was a global affair.  Instead, the US has seen its share increase nearly 5 percentage points since the COVID Crash low.

The US has been increasing its share versus the rest of the world for more than a decade now, and at some point one has to think this trend will reverse for a bit.  International equity markets, especially emerging markets, have essentially gone nowhere versus their levels from the mid-2000s.  There are plenty of investors out there that have taken on more and more exposure to international markets in recent years because of their relative weakness to the US, and so far nothing has materialized.  Click here to view Bespoke’s premium membership options.

Over the last two weeks, low volatility names have outperformed the broader market. The PowerShares S&P 500 Low Volatility ETF (SPLV) has ticked 6.83% higher over the last 10 trading days as of yesterday’s close. During the same time period, the SPDR S&P 500 ETF (SPY) moved 4.36% higher. Investors have poured into safer names so far in December, but SPLV has still underperformed SPY on a YTD basis. Over the last three months, the performance of these two ETF’s has been essentially identical with SPLV breaking out to all-time highs, while SPY struggles to break out.  Although investors are not necessarily selling off equities broadly, they are gaining exposure to lower volatility names, which could be interpreted as taking a more conservative posture.

The two-week performance spread between SPLV and SPY is currently at an elevated level, and as of earlier this week (12/14) was at its widest level since 1/31/20, which is less than a month before the COVID correction began. Investors should watch the performance of low volatility names moving forward, as continued outperformance would signal that investors are becoming increasingly risk averse. Click here to view Bespoke’s premium membership options.

The S&P 500 is hovering right near record highs but recent sentiment readings would have you thinking otherwise.  The AAII‘s reading on bullish sentiment fell from 29.7% last week to 25.2% this week.  That is the lowest reading on bullish sentiment since the week of September 16th when it was at 22.4%.

Bearish sentiment, in turn, rose 8.8 percentage points to 39.3%.  While that was the largest one-week uptick in bearish sentiment since mid-September, the actual level of bearish sentiment was even higher only two weeks ago.

Neutral sentiment fell by a similar amount to bullish sentiment this week.  After hitting one of the highest levels of the past couple of years last week, neutral sentiment moderated to 35.4% this week.

While the AAII survey showed overall bearish tones this week, the NAAIM Exposure Index has taken an even more pessimistic turn.  This index ranges from +200 (leveraged long) to -200 (leveraged short) and this week the index fell to 52.2.  That indicates reporting investment managers’ exposure to US equities is roughly 50%.  That is the lowest reading since this past spring and prior to that, the spring of 2020 was the last time with as low of a reading.

Given the rise of bearish sentiment across indicators this week, our sentiment composite has now fallen to the lowest level since May 2020.  This composite averages across the current readings (normalized by standard deviations from the historical average) for the bull-bear spreads of the AAII and Investors Intelligence surveys and the NAAIM index. Click here to view Bespoke’s premium membership options.