Bespoke’s Morning Lineup – 12/31/24 – That’s a Wrap
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“the cause of the disease is not clear.” – China People’s Daily, 12/31/2019
To view yesterday’s CNBC segment, you can just click on the image below.
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Of the international markets that are open for trading on this last day of the year, it’s been a mixed session. In Asia, China’s Manufacturing PMI came in weaker than expected, barely hanging onto growth at 50.1, and in Korea, CPI for December rose 0.4% m/m, double consensus expectations. In Europe, the STOXX 600 is up about 0.25%, but Germany and Italy are closed while other major exchanges will have early closes. Here in the US, futures are looking to close out a lousy December on a positive note, and the only economic report on the calendar is an October update of Case Shiller Home Price indices. While the tone is positive, barring a major rally, the S&P 500 will close out the month with a decline of over 1%.
It started five years ago today with a short statement from China about a flu outbreak in a market that most people had never heard of. Whatever. What’s everyone’s plan for New Year’s? More stories started to show up on Drudge Report in the following days. Coronavirus? Who’s got limes? As January continued, the story picked up steam. Hey, you hear about that flu-thing in China? On January 20th, the first case in the US showed up in Washington State. Wow! But they probably got it in China. Three days later, China put the entire city of Wuhan, a population of 11 million under complete lockdown, and pictures started circulating of trucks driving down the streets spraying disinfectant into the air. What? They would never do something like that here! Then, people started getting sick on cruise ships. People always get sick on cruise ships. What else is new? Then, more cases started to show up in Arizona, California, and other parts of the country, and there was also a breakout in Italy. Maybe I should have bought some of those masks after all. From there, the case counts started to explode, and markets sold off. Where can I find a roll of toilet paper? In early March, an outbreak in New Rochelle, NY resulted in the first US “containment zone” and then the shutdowns/lockdowns started. Within weeks schools and businesses across the country were closed. The skies were silent, highways were deserted, and the country was ‘masked up’ and closed for business. Wow. They really did do that here.
The first half of 2020 will likely go down as the strangest period of most people’s lives, and it will take decades for the full story and impact of Covid to be realized. In the markets, though, the reaction was swift. Equities initially rallied to start 2020 but peaked in mid-February. At its closing low in March 2020, the S&P 500 was down over 30% YTD, and at their respective lows in the first half of 2020, every sector was down at least 20% with three sectors – Energy, Financials, and Industrials – down over 40%. It was enough to make any investor with a retirement account sick, and some no doubt attempted to cut their losses and raise cast into the declines.
The pain in markets from Covid was short-lived, though, and showed once again that panicking in the markets rarely works out. While many sectors adapted and managed to thrive despite onerous restrictions, the flood of stimulus unleashed on the global economy drove the rebound. Through yesterday’s close, not only is every sector higher now than it was when Covid made its public debut, but the S&P 500 is up over 80%, and all but two sectors are up over 30%.
As shown in the chart below, the biggest winner has been Technology, and deservedly so. Without the technology that different parts of the economy utilized during and after Covid, the economy would have been in a much different place now. While no sector is down since the start of 2020, Real Estate has been the worst-performing sector with a cumulative gain of just 5.7%. The sharp increase in interest rates during this span has been the major culprit, but the fact that companies are still having trouble getting their employees into the office hasn’t helped either.
The Closer – Globalizing Gas, Positioning – 12/30/24
Log-in here if you’re a member with access to the Closer.
Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a look into the explosion of US natural gas exports (pages 1 and 2). We then review the latest positioning data (pages 3 – 6).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Daily Sector Snapshot — 12/30/24
Chart of the Day: Seeing Red
Concentration
On Friday, we published our annual recap report for 2024. The report provides a complete rundown of everything that went on across financial markets this year, including the trend of incredible concentration in stocks up at the top. Replicated below is a chart from that report showing the combined market cap of the S&P 500’s eight largest stocks as a percentage of total S&P 500 market cap for each year going back to 1994.
Currently, the eight largest members of the S&P—at the moment those are the Magnificent Seven names plus the newest trillion-dollar stock: Broadcom (AVGO)—account for 35.6% of S&P 500’s total market cap. That’s a record high. We would also note that the growing share of the S&P 500’s market cap that this small handful of stocks accounts for isn’t exactly a new phenomenon. Over the past decade, the largest stocks’ share of market cap has steadily been growing, and actually, this isn’t the only record high to highlight with prior records being set at 29% at the end of 2021 and 30% last year. With that said, the 5.6 percentage point jump versus last year is one of the largest one-year increases in concentration at the top that we’ve seen.
Drilling down a step deeper, below we again show the collective share of S&P 500 market cap possessed by the eight largest members for each year since 1994, but this time with a breakdown by sector. Of the current group of largest stocks, half belong to the Tech sector: NVIDIA (NVDA), Apple (AAPL), Microsoft (MSFT), and Broadcom (AVGO). Of course, zooming out for context, the Tech sector, as a whole, holds a historically massive S&P 500 weighting at 32%, but these four stocks alone account for a huge share (21.5 percentage points) of that. In other words, the S&P 500 is heavily concentrated in Tech, and Tech is heavily concentrated in these four stocks.
As for the other largest members, Communication Services names—Meta Platforms (META) and Alphabet (GOOGL)—account for a combined 7.21% of the S&P 500’s total market cap and the remaining two names from the Consumer Discretionary sector—Tesla (TSLA) and Amazon (AMZN)—are to thank for 6.95%.
As for the rest of the sectors, 2024 is going to end with Financials not having a single stock in the eight largest S&P members for the first time since 2009. This is thanks to Broadcom (AVGO) unseating Berkshire Hathaway (BRK.B) as the index’s eighth largest stock. Meanwhile, Industrials hasn’t had a stock land in the top eight since 2015, and Consumer Staples has now gone a decade without a top eight stock. In the past five years, Health Care has only found its way into this group once in 2022, but otherwise, it has been absent. Materials, Real Estate, and Utilities haven’t had a member land in the top eight largest stocks in any year since at least 1993.
Again, the present situation is historic. Aside from there never having been such a large share of the S&P 500’s market cap coming from the top, there also hasn’t been a year since at least 1993 when these top eight stocks have had such narrow sector representation. As shown below, only three sectors are represented among the S&P 500’s top eight stocks. Historically, it has been most common to see six different sectors represented among these eight names.
Bespoke Matrix of Economic Indicators – 12/30/24
Our Matrix of Economic Indicators provides a concise summary analysis of the US economy’s momentum. We combine trends across the dozens and dozens of economic indicators in various categories like manufacturing, employment, housing, the consumer, and inflation to provide a directional overview of the economy.
To access our newest Matrix of Economic Indicators, start a two-week free trial to either Bespoke Premium or Bespoke Institutional now!
The Bespoke 50 Growth Stocks — 12/30/24
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. There were 12 changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. With Bespoke Premium, you’ll receive a number of daily market updates from us along with our weekly newsletter and a portion of our investor tools. With Bespoke Institutional, you’ll receive everything that’s included with Premium plus additional daily macro analysis and more stock-specific research.
To see all 50 stocks that currently make up the Bespoke 50, simply start a two-week trial to Bespoke Premium or Bespoke Institutional.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated monthly on Thursdays unless otherwise noted. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning after publication. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Bespoke’s Morning Lineup – 12/30/24 – Rolling Over into Year End
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“When people are intimidated about having their own opinions, oppression is at hand.” – Jimmy Carter
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Former President Jimmy Carter didn’t leave office as the most popular President, but his years after serving in the Oval Office helped to improve his legacy as one of the most admired men in modern American history. Since 1946, Gallup has run an annual survey asking Americans “What man that you have heard or read about, living today in any part of the world, do you admire most? And who is your second choice?” In the survey’s history, Billy Graham tops the list with 61 of the top 10 finishes. Ronald Reagan ranks a distant second with 31 top-ten finishes, but right behind him, Jimmy Carter ranks third with 29, slightly ahead of Pope John Paul II (27) and Bill Clinton (26). Living to just over 100, the 39th President lived a full life.
US futures were trading just modestly lower until shortly before 8 AM Eastern but have weakened considerably since then on little news. Overnight in Asia, Japan and Korea both ended their trading years on a negative note with Japan’s Nikkei down 1% and the Kospi down a more modest 0.2%. In terms of economic data, Japan’s Manufacturing PMI came in below 50 for the sixth straight month. Trading in Europe had been much more subdued than in Asia, but these indices have also seen a pickup in the selling as US futures rolled over. Here in the US, both today and tomorrow will be full trading sessions, and markets will be closed on Wednesday for New Year’s Day.
Getting back to the US, this morning’s weakness will put the S&P 500’s 50-day moving average back into play after it held that level on Friday. As shown in the chart below, the technical picture isn’t looking particularly positive as we close out the year. The index has been gradually trending lower since its peak on 12/6. What a difference a few weeks make.
Brunch Reads – 12/29/24
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles 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.
Wounded Knee: On December 29th, 1890, one of the darkest chapters in US history unfolded at Wounded Knee Creek in South Dakota. What began as an effort by US troops to disarm a band of Lakota Sioux quickly escalated, leaving approximately 300 dead.
The Lakota, part of the Sioux Nation, had been participating in the Ghost Dance movement, a spiritual practice that sought to restore their lands and way of life. US authorities, who feared it might inspire rebellion, saw this movement as threatening. Tensions came to a head when US troops, led by the Seventh Cavalry, intercepted Chief Spotted Elk (Big Foot) and his band as they traveled to the Pine Ridge Reservation. The group was ordered to set up camp at Wounded Knee, where soldiers surrounded them. The next morning, as soldiers began disarming the Lakota, a gunshot, its source still debated, triggered chaos. Armed with Hotchkiss guns, the troops opened fire on the encampment.
Though some soldiers were awarded Medals of Honor for their actions, for the Lakota and other Native communities, it remains a searing reminder of the suffering endured during westward expansion.
Health & Wellness
The effects of ‘brain rot’: How junk content is damaging our minds (El País)
“Brain rot” being named Oxford’s Word of the Year says a lot about how people feel about endless scrolling and junk online content. Research shows that doomscrolling can mess with your brain, shrinking grey matter, shortening attention spans, and making it harder to focus. Experts say the key isn’t just cutting back on screen time but being intentional about what you’re watching and making room for real-world activities. [Link]
Continue reading our weekly Brunch Reads linkfest by logging in if you’re already a member or signing up for a trial to one of our two membership levels shown below! You can cancel at any time.
The Bespoke Report — 2024 Recap
Our Bespoke Report – 2024 Recap is now available for Bespoke subscribers. This report is a must-read rundown of everything that went on across financial markets in 2024. Below is a look at some of the topics covered:
- The year in headlines
- Thematic performance
- Seasonality
- Sector performance
- Sector weightings
- Mega-caps
- Earnings triple plays
- International markets
- Earnings themes
- ETF performance matrix
You can read our 2024 Recap by signing up for our 2025 All Access Special that gets you the first two months of Bespoke Institutional access for just $20, or start a two-week trial to our Bespoke Premium plan. You can review our membership plans here to help make your decision.
