It may be July but due to the government shutdowns this Spring, the Federal deadline for filing taxes was delayed by three months.  With that in mind, the table below summarizes the performance of the S&P 500 in the weeks leading up to and after the Federal tax deadline over the last twenty years.  Obviously, the major caveat is that the performance numbers shown from prior years are for the month of April, while this year is the only time the deadline has been in July.

Historically speaking, the S&P 500’s performance in the weeks leading up to the Federal tax deadline have been positive but hardly anything worth writing home about.  In the two weeks leading up to the tax deadline, the S&P 500 averaged a gain of 0.05% but with gains less than half of the time (9 out of 20).  In the week leading up to the tax deadline, the results were nearly identical at +0.06% with gains exactly half of the time.  With the backdrop of those historical results, the S&P 500’s performance leading up to tax day this year has been better than average with a gain of 1.87% over the last two weeks and 0.14% over the last week.

While returns leading up to the tax deadline haven’t been anything special, returns one and two weeks after the tax deadline have been much stronger than average.  One week after the Federal tax deadline, the S&P 500 has averaged a gain of 0.87%, and two weeks later the average gain has been 1.50%.  The market has also been pretty consistent to the upside in the days after tax day as the S&P 500 has been up three-quarters of the time.  Americans were reportedly quick to put their stimulus checks into the market back in the Spring, so will they double-down with their refund checks?  Like what you see? Click here to view Bespoke’s premium membership options for our best research available.

The last two trading days have certainly been out of the ordinary in terms of relative performance between the Nasdaq and the Dow.  Since Friday’s close, the Nasdaq is down 1.2% while the Dow is up 2.2%.  That performance spread of 3.4 percentage points in the last two trading days is the widest gap between the two indices (in the Dow’s favor) since May and then in March.  While there have been two prior occurrences in the last three and a half months, if you take a longer view, this type of short-term outperformance by the Dow has been uncommon.  Before the occurrences in March and May, you have to go all the way back to September 2008 to find the last occurrence and then before that July 2003.

Before 2002 and going back to the late 1990s, there were a number of occurrences on both the way up and even more so on the way down.  Given the market’s performance following the last time we saw a high frequency of periods with similar performance gaps, let’s hope the performance disparity of the last two days doesn’t become a trend. Like what you see? Click here to view Bespoke’s premium membership options for our best research available.

So far this year, the US equity market has been a story of big winners…and then the other 99% of the market.

Seven S&P 500 stocks stand out in terms of contribution, with the “Big Five” tech or tech adjacent names (AAPL, AMZN, FB, GOOG, MSFT) and two others that get a bit less discussion (NFLX, NVDA) each accounting for at least a +0.3 percentage point impact on the overall index performance this year.  On average, these top seven are up 45% YTD, versus an 11% decline for the rest of the index.  That’s why the equal-weighted S&P 500 is underperforming so badly: the majority of stocks are way, way behind a furious rally in some of the biggest names.

Currently, the top seven stocks by contribution have added 6.7% to the index in 2020, which itself is still down a bit over 1% on the year.  That means that the rest of the stocks in the index have cost the S&P 500 over 8% in 2020.  We went into further detail on contribution to total earnings as well as YTD gains in last night’s Closer report, which is available to Bespoke Institutional members.  Click here to start a two-week free trial.

Just about a month ago, we noted how the Citi Economic Surprise Index for the United States reached a new record high as economic data broadly rebounded.  In the time since then, the US surprise index has left that record in the dust. Since the first new record high on June 15th, the US index has not just continued to rise but has more than doubled with 19 of the past 22 days marking a fresh record high!

Likely helped by the US strength at least in part, the index for the entire globe has also entirely recovered.  The global index is at its highest level since March of 2017 and in the 98th percentile of all readings since the start of the index in 2003.  Meanwhile, that strength has not been echoed in the indices for the Eurozone and Emerging Markets. The Eurozone index fell sharply in the first half of the year. Although it has staged a rapid recovery since mid-June, it is still negative meaning reports are generally missing forecasts.  Although it never fell as sharply as other areas of the globe, the index for emerging markets likewise remains in negative territory and in the bottom 13% of all readings.  Click here to view Bespoke’s premium membership options for our best research available.