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.

After hitting a multi-decade low last week, seasonally adjusted initial jobless claims rose back above 200K.  While a minor deterioration, the current level of claims remains one of the strongest readings on record.

While claims are at a healthy level, the seasonal adjustment has had a flattering effect recently. Unlike the SA number, on a nonseasonally adjusted basis, no recent week has seen a sub-200K reading with the current week falling to 267.5K from 283.9K the prior week.  From a seasonal perspective, claims falling week over week is very much normal for the given week of the year (50th) with nearly 90% of years since 1967 experiencing such a decline.  Only five other weeks of the year have seen claims fall WoW more consistently.

Delayed one week to initial jobless claims, continuing claims hit a new low for the pandemic of 1.845 million in the first week of December.  The marks the strongest reading since the week of March 13, 2020.

Including all other programs creates an additional week of lag making the most recent data through the final week of November.  Total continuing claims as of that week ticked higher to 2.46 million versus 1.95 million the previous week.  That is the highest reading since the end of October. Even though pandemic era programs have now technically expired, the pickup in claims was broad across programs but regular state claims were the main driver of the overall increase. Click here to view Bespoke’s premium membership options.