In addition to monthly statistics on residential construction released by the US Census earlier this week, there was also a quarterly update on attributes of newly started homes. The data tends to have pretty severe seasonality, so we have seasonally adjusted all of the series below.

Starting with who starts home construction, the vast majority of houses are built for sale by a builder. While there are some owner-built homes, contractors are about twice as common when it comes to single family houses. Multifamily starts are almost exclusively built for rental, with the number started for sale remaining near record lows.

Single family homes are almost always detached, free standing on all four sides. Homes that are attached to others but are still single family are less common.  Note the massive drop-off in detached during the housing crash.  We’re still not even back to average pre-housing bubble levels for detached single family starts at this point.

Among multifamily units, there used to be a respectable number of multifamily starts with less than 20 units, but over the last half decade or so virtually all starts of multifamily projects have involved projects with more than 20 units.

Finally, the Census also details the size of houses that have been started in the most recent quarter. As shown, from the 1990s to the mid-2010s, the median square footage of newly started homes rose by 20%. Since then, however, changes in taste and affordability have forced builders to economize: median square footage has dropped to the lowest levels since the 2010s and is still falling.  Based on square footage trends, it looks like “McMansion Hell” peaked in 2013 and slowly but surely people are coming to their senses.  More expensive land reducing footprints, less preference for space, and a desire to reduce sticker prices have all driven lower square footages.

For multifamily, the size of unit starts is a little bit more volatile and hasn’t tended to rise or fall consistently over time.  Sign up for Bespoke’s “2020” special and get our upcoming Bespoke Report 2020 Market Outlook and Investor Toolkit.

Even before today, 2019 had been a great year for Target (TGT).  While many retailers have succumbed to the forces of gravity, TGT was up over 65% YTD through yesterday’s close.  After this morning’s earnings report, though, TGT is up another 14%, taking its total YTD gain to over 95%, or nearly a double!  Looking at the chart below, there have been a number of gaps higher in the stock this year, and that’s because much of the stock’s gains have come in reaction to earnings.  For example, of the 60 points that the stock has added to its share price this year, 42 of those points have come on the four days that the stock reported earnings!

While TGT has been one of the top-performing stocks in the S&P 500 this year, you may be surprised to learn that it actually still has a slightly below-market multiple.  That’s right, while the S&P 500 currently trades at about 20.6 times trailing earnings, TGT’s P/E ratio is slightly less at 20.13. While it may come as a surprise to hear that TGT still trades at a below-average multiple, there are actually three other stocks in the S&P 500 that are up by more on a YTD basis and also have lower P/E ratios than the S&P 500.

The table below lists the 23 stocks in the S&P 500 that are up by more than 50% YTD and still have below market multiples.  Topping the list are two semiconductor stocks – Lam Research (LRCX) and KLA Corp (KLAC).  Given their cyclicality, semiconductors often trade at below-market multiples, so the fact that they are trading at near-market multiples suggest that they aren’t cheap right now.  Bulls would counter that the sector has become less cyclical as evidenced by the relatively shallow down cycle the sector saw last year.

Right above TGT, another notable name is Xerox (XRX).  Even after the stock has essentially doubled this year following a takeover offer from HP, it still trades at less than 10 times earnings.  Granted, it’s Xerox, but still, it’s not common to see a stock double and still trade at less than 10 times earnings.  Looking through the rest of the list, there are a number of other semiconductor-related stocks (AMAT, STX, and QCOM), but another group that stands out is the homebuilders as DR Horton (DHI), PulteGroup (PHM), and Lennar (LEN) have all rallied more than 50% but still trade cheaper than the S&P 500.  Sign up for Bespoke’s “2020” special and get our upcoming Bespoke Report 2020 Market Outlook and Investor Toolkit.

As we highlighted in an earlier blog post and in last week’s Bespoke Report, the S&P 500 has pretty much been moving in a single direction over the past month, and that direction is up.  Given this run, as of yesterday’s close, the S&P 500 has closed above its 10-day moving average for 29 consecutive trading days.  The last time the S&P 500 closed below the 10-DMA was on October 9th.  Even intraday, the index only briefly dipped below the 10-DMA once on November 14th.  While it is on the ropes today as the S&P 500 has tipped below the average intraday, that 29-day streak is notable.  In the past 20 years, there have only been a handful of longer streaks. One of these occurred earlier this year ending at 40 trading days in early March. The current streak would need to last for another two and a half weeks if it is to take out both this streak and the longest of the past 20 years from 2010. That lasted for 42 consecutive days.

One more point on the S&P 500’s momentum: yesterday also marked just the third day where the S&P 500 fell this month.  As the S&P 500 trades lower today, down about 0.77% as of this writing, the index is looking at its first back to back decline since October 8th.  That is a streak of 30 consecutive trading days without a back to back decline.  While the streak for days above the 10-DMA is impressive, this streak is even more impressive.  The only other time in the past twenty years that ran as long was back in 2005; ending on the 30th day.  The only longer streaks occurred way back in 1955 and 1950, and both were 37 trading days.

Combining these two criteria, the S&P 500 has spent 29 days above the 10-DMA without also experiencing back-to-back declines.  Back in 2004, there was one streak nearly as long at 28 trading days, but in the history of the S&P 500, there has only been one other such run that was longer. That was in 1955, ending at 36 days. Start a two-week free trial to Bespoke Institutional to access the Bespoke Report and other research.

The S&P 500 opened lower this morning, so since we don’t seem to get these opportunities much anymore, we wanted to highlight just how benign the US equity market has been in recent weeks.  While downside gaps aren’t uncommon, using SPY as a proxy, the S&P 500 has now gone 31 trading days without a downside gap of 0.50% or more at the open.  For perspective, it has now been over a year since the S&P 500 had a longer stretch of time without at least one downside gap of 0.50%.  To find a longer streak, you would have to go back to October 2018 when the S&P 500 went 47 trading days without a 0.50% decline and before that January 2018 when there was a streak of 53 trading days without a 0.50% decline.

If you’ve been paying attention, the dates 10/22/18 and 1/29/18 likely stir up bad memories if you are a bull. From the close on 10/22/18, the S&P 500 went on to decline 15%, while in the weeks that followed the end of the 1/29/18 streak, the S&P 500 dropped 10%.  Before you start heading for the hills, though, we would also note that there were a number of similarly long streaks following the election in 2016 and throughout 2017 that were just as long or longer and when those streaks came to an end, there was little negative impact on the equity market’s performance going forward. Sign up for Bespoke’s “2020” special and get our upcoming Bespoke Report 2020 Market Outlook and Investor Toolkit.

With year three of the current four-year Presidential Election Cycle coming to an end in six weeks, below is an updated look at the average performance of the S&P 500 in each year of the cycle going back to 1928.  As shown, years one and two have historically been weaker than years three and four of the cycle.  The S&P has been up 56.5% of the time in both year one and year two, but the index has been up 81.8% of the time in year three and 72.7% of the time in year four.  Year three has been by far the best year of the cycle with an average gain of 12.81%, and the playbook has stuck to the script in year three of the current cycle with the S&P up 24.5% year-to-date.  While year four has historically been consistently positive with gains 72.7% of the time, the average change for the S&P in year four (+5.71%) is just barely better than the average change in years one and two.

Below we show the S&P 500 under Trump so far versus a composite of the S&P four-year Presidential cycle.  The S&P gained 19.4% in year one of the current cycle versus an average year-one gain of 5.7%.  Year two is historically the worst year of the cycle with an average gain of just 4.54%, and in Trump’s second year, the S&P actually fell 6.2%.  So far this year, the S&P is up 24.5% versus the average gain of 12.8% during year three of the cycle.  As shown in the chart, year four generally trends positively but experiences pullbacks shortly after Q1 and again in October leading up the Election Day before closing out the year strong.  Sign up for Bespoke’s “2020” special and get our upcoming Bespoke Report 2020 Market Outlook and Investor Toolkit.