German Consumer Confidence
The GfK reading for German Consumer Confidence for January of 2022 was released this morning and came in at -6.8, continuing its roll-over from a recent post-COVID high. This is the second consecutive month-over-month decline and the lowest reading since June of 2021. At current levels, consumer sentiment in Germany remains well off its pre-COVID levels, and one factor behind the slower rebound (besides the fact that COVID won’t go away) could be what seems like a relentless increase in prices as supply chain issues persist and energy prices surge.
While prices have been rising, consumers seemingly expect the rapid rate of increase to be temporary as price expectations look to have peaked for the time being. It’s also worth pointing out in this chart that while sentiment levels are still well below pre-COVID levels, price expectations are well above pre-COVID levels.
Besides higher prices, rapidly rising numbers of COVID cases are obviously another factor weighing on consumer sentiment in Germany. In the chart below, we plot the monthly average number of COVID cases in Germany to Consumer Confidence since the start of 2020. While there has been a limited inverse relationship between the two series, the recent drop in sentiment against the surge in cases cannot be dismissed. Click here to view Bespoke’s premium membership options.
Chart of the Day – Pareto Principle in Market Cap Share
Bespoke’s Morning Lineup – 12/21/21 – Trying For a Turnaround
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“The best stock to buy is the one you already own.” – Peter Lynch
It looks like we are going to at least try for a turnaround this Tuesday as US equity futures are all firmly in positive territory the morning after it was announced that the Omicron variant was now the dominant COVID strain in the US. If data released so far proves to be accurate, this is a good thing as this strain of COVID appears to be much weaker in severity than the Delta strain, even if it is more transmissible.
There’s no economic data on the calendar today, so there won’t be much in terms of specific potential catalysts to drive the market, but lately, the market hasn’t seemed to need excuses to move in one way or the other.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
They closed well off their intraday lows yesterday, but the major US averages still finished the day down more than 1%. For the S&P 500, yesterday’s bounce came right at support from the prior highs in early September, and the index did not take out its lows from early October. With futures higher this morning, bulls are hoping it marks the start of a year-end rally, but if yesterday’s lows don’t hold, the end of 2021 won’t be pretty.
While the S&P 500 hasn’t quite taken out its lows from October, the Nasdaq 100 did. Not only that, but even after yesterday’s rebound, QQQ remains below its highs from early September. That may change after today, but the index still has work to do before technicians will become more comfortable with the technical picture.
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Daily Sector Snapshot — 12/20/21
Chart of the Day: Monday Down Opens
Bespoke’s Morning Lineup – 12/20/21 – 9…
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“Times and conditions change so rapidly that we must keep our aim constantly focused on the future.” – Walt Disney
There are less than ten trading days left in 2021, but investors don’t appear to be in a positive mood to close out the year. Futures are kicking off the week on a down note again as all of the major averages are indicated to open down by 1% or more. Commodities are lower, the 10-year yield is lower, and international markets are under even more pressure than US stocks. The surge of the Omicron variant has really started to impact activity in regions where the numbers are rising as consumers stay home. While no one is expecting a return to the situation of Spring 2020, this time around the easy fiscal and monetary conditions that helped to grease the skids in the past aren’t around now.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
It’s not often that the S&P 500 drops more than 2% during a week but four out of eleven sectors actually finished the week 1% higher. That was the case last week, though, as the sheer size of Technology and Consumer Discretionary and their declines of more than 4% dragged the entire market lower. These two sectors weren’t even the worst performers as Energy’s plunge had a five-handle on it! On the upside, Health Care, Real Estate, Consumer Staples, and Utilities all rose more than 1%, but because of their relatively low weights in the S&P 500 (besides Health Care), it wasn’t enough to stem the drag of Tech and Consumer Discretionary.
Even after their respective declines last week, Technology and Consumer Discretionary are still both up more than 20% YTD while Energy’s gain is close to 50%. Concerns over the Omicron variant, a tighter Fed, and fiscal and monetary drags in 2022 have been the primary drivers weighing on investor sentiment, and the fact that many investors are sitting on enormous gains has them only more willing to take some profits.
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Bespoke Brunch Reads: 12/19/21
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!
The Bespoke Report Newsletter – 12/17/21 – Be Careful What You Wish For
Daily Sector Snapshot — 12/17/21
BIG Charts of the Week – 12/17/21
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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.
The charts above are interesting and made readily available to non-members, but the research we publish for members in our Chart of The Day is even more informative. You can get access to our Chart of the Day and more by enrolling at the Bespoke Newsletter membership level, which costs just over a dollar per day ($395 annually). Get started with a 14 day trial today!
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If you would like to receive everything that we offer, the Bespoke Institutional membership is right for you. On top of the reports that we mentioned above, you will have access to our Little Known Stocks Report, Conference Call Recaps, daily Closer, and all of our interactive investor tools. Start your 14 day trial to Bespoke Institutional today.