Bespoke’s Morning Lineup – 12/2/19 – Futures Fading

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 free trial to Bespoke Premium.  CLICK HERE to learn more and start your free trial.

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Bespoke Brunch Reads: 12/1/19

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.

While you’re here, join Bespoke Premium for 3 months for just $95 with our 2020 Annual Outlook special offer.

Education

The price you can’t pay by Myles Udland (I’m Late To This)

An analysis of why the college admissions scandal that broke earlier this year hit home so hard and was so inevitable given the specific segment of society that it broke from. [Link]

Big Calculator: How Texas Instruments Monopolized Math Class by Maya Kosoff (Medium)

Do you ever wonder why the standard equipment for high school math classes hasn’t changed in decades? It won’t surprise you to discover huge profits behind pricey calculators. [Link]

Tech Mixed-topia

Alexa, Are You Disappointed in Me? Amazon’s Voice Gets More Range by Matt Day (Bloomberg)

While the core functionality of the Alexa voice assistant won’t change, how it speaks to you is getting an expanded range in its latest update. [Link]

Mass. State Police Tested Out Boston Dynamics’ Spot The Robot Dog. Civil Liberties Advocates Want To Know More by Ally Jarmanning (WBUR)

Police in Massachusetts are using a Boston Dynamics robot in tests with their bomb squad, raising questions about the deployment of robotic tools by police forces. [Link]

Economics

A charity dropped a massive stimulus package on rural Kenya — and transformed the economy by Dylan Matthews (Vox)

A summary of new research studying large gifts of cash to the poor in East Africa: obviously there were positive impacts on recipients but there were also large multipliers and limited inflation effects, adding to the overall benefits of the transfers. [Link]

Giving Thanks for Property Rights by Caroline Baum (E21)

Forgive some of the hyperbolic language, because this account of how private property rights helped cement the Plymouth Colony in New England is worth a read. [Link]

Sports

Wall Street Wades Into Sports Gambling as Legalization Spreads by Annie Massa (Bloomberg)

With live legal sports betting spreading across the country, markets hawks are gearing up to dump capital into the evolving market. [Link; soft paywall]

Podcasts

The pod delusion by Matt Labash (Spectator)

Polemic against the spreading scourge of audio content that has come to dominate both the media and the personal lives of many would-be hosts. [Link]

Weather

The weather is big business, and it’s veering toward a collision with the federal government by Andrew Freedman (Greenwich Time/WaPo)

With falling costs to launch satellites and crunch data, private weather forecasters are now competing with NOAA to provide detailed weather information and warnings. [Link; auto-playing video]

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Have a great weekend!

The Closer: End of Week Charts — 11/29/19

Looking for deeper insight on global markets and economics?  In tonight’s Closer sent to Bespoke clients, we recap weekly price action in major asset classes, update economic surprise index data for major economies, chart the weekly Commitment of Traders report from the CFTC, and provide our normal nightly update on ETF performance, volume and price movers, and the Bespoke Market Timing Model.  We also take a look at the trend in various developed market FX markets.

The Closer is one of our most popular reports, and you can sign up for a free trial below to see it!

See tonight’s Closer by starting a two-week free trial to Bespoke Institutional now!

Next Week’s Economic Indicators – 11/29/19

Even with a holiday and a shortened session Friday leaving no US releases in the past 48 hours, it was a very busy week for economic data with 36 releases in the first three days.  Most of this data came in stronger than expected or above the prior reading where there were no forecasts.  While the bulk of the week’s data was strong, manufacturing data, namely from the regional Fed indices, was mixed. We started off with a weaker Chicago Fed National Activity Index on Monday.  The index fell from -0.45 last month to -0.71 rather than the expected improvement to -0.2.  The Dallas Fed’s index was also out on Monday and it improved more than expected as well as versus the prior month. On Tuesday, the Richmond Fed’s gauge on manufacturing was also worse than expected. On the bright side, other manufacturing hard data like durable goods came in much stronger than both the previous month and consensus forecasts.  Housing data was also solid this week with better than anticipated home price growth shown in two of the three indicators: the quarterly Home Price Purchase Index, FHFA, and Case-Shiller (only the Case-Shiller index was weaker than expected, albeit up from the prior month). The second release of third-quarter GDP was the most notable indicator of the week with a much stronger than expected reading which showed the economy grew by 2.1% QoQ versus estimates of a 1.9% growth rate.

We kick off December with another busy few days next week.  Final November Markit and ISM numbers will kick off the week on Monday. While Markit is not expecting any change from the preliminary readings, ISM is expected to improve to 49.2 which would still be a contractionary print.  In hard manufacturing data, later in the week we will see final durable and capital goods numbers for November.  Vehicle sales figures will be the only release on Tuesday followed by the service counterparts to Markit and ISM indices on Wednesday as the rest of the week’s main focus will be on labor data.  After a surprisingly strong release last month, Nonfarm Payrolls is again expecting a strong print showing 190K jobs created in the month of November.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Sentiment In A Food Coma

The American Association of Individual Investors released their weekly survey tracking investor sentiment, and in spite of even more record highs being put in place in the past week, the survey’s results did not show any major shifts and bullish sentiment remains below the historical average. The percentage of bullish respondents fell slightly this week (0.6 percentage points) down to 33.6%.

Bearish sentiment saw a similarly small move this week rising by 1.25 percentage points, moving back above 30% for the first time since mid-October.  While the percentage of investors reporting as bearish is well off of the recent low of 23.93% put in place earlier this month, it is also at the lower end of the past several months’ range and just slightly lower than the historical average of 30.36%.

Neutral sentiment saw a roughly equivalent move to bullish sentiment falling 0.63 percentage points.  For most of 2019, neutral sentiment has been consistently elevated relative to the past few years with the move this week leaving the reading in the middle of its recent range. As we discussed last week, neutral sentiment has been above its historical average for a pretty long time, and this week’s reading was the 16th straight making it the longest streak of above-average readings since 2017.  While above its historical average, as with bullish and bearish sentiment, it is still within a normal range (within one standard deviation of the average).

Unlike the S&P 500 and other major equity indices that have ripped higher this November, sentiment has remained rather subdued. As shown in the chart below, typically when the S&P 500 has reached record highs sentiment across the board has leaned more bullish than it currently is.  Since the AAII survey began in 1987, bullish sentiment has averaged 40.9% when the S&P 500 closed at a record high. That is a 6.7 percentage point difference from where things currently stand.  Even in regards to the current bull market beginning in 2009, all-time highs have typically seen bullish sentiment more elevated. Likewise, bearish and neutral sentiment is higher than the average for other all-time highs both since 1987 and in the current bull market.  Despite this, there have been plenty of other record highs where sentiment has been even more subdued.  Out of all the record S&P 500 highs since the survey began, the current reading on bullish sentiment is only in the 20th percentile.  So while it is low, it could also be much lower.

While AAII’s survey did not see any major changes this week, another investor sentiment survey from Investors Intelligence was perhaps more notable.  That survey’s reading on bullish sentiment has been consistently grinding higher over the past quarter with increases in all but two weeks.  Rising again this week to 58.1%, bullish sentiment by this measure is the highest since October of last year when it was 61.8%.

The Investors Intelligence survey also gauges investor expectations for a correction.  That reading fell again this week marking the tenth decline out of the past twelve weeks. While not a new low, this indicator is also sitting around levels that have not been observed since October of last year. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Latin American Equities Go Their Own Way (Lower)

The rally in equities over the last several days hasn’t just been confined to the US.  As shown in the snapshot below of regional global ETFs from our Trend Analyzer, with the exception of the Latin America 40 ETF (ILF), every ETF has had a positive return over the last five trading days, and most are up over 1%. It’s definitely nice to see equities trade broadly higher, but with those gains, they are pretty much all trading at (or close to) overbought levels.  The only one that isn’t is also the only one that is down over the last week (ILF).

ILF is also the only ETF that is below its 50-day moving average and the only one up less than 5% YTD.  In looking at the performance of the ETF’s components, it hasn’t just been a handful of names dragging LatAm down.  YTD, nearly half of the ETF’s stocks are in the red, including its two largest components (Itau and Vale) which both have 9% weightings and are down close to 10%.  Sign up for Bespoke’s “2020” special and get our upcoming Bespoke Report 2020 Market Outlook and Investor Toolkit.

The Closer – Data Feast Week, Take 2 – 11/27/19

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Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, we go through the day’s releases beginning with a recap of GDP. Next, we delve into manufacturing data with the release of durable goods and the Chicago PMI. We recap personal income and spending figures before finishing with an updated look at our Beige Book Index and weekly EIA data..

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

Stocks To Be The Most Thankful For

Below is a list of the 25 best performing stocks in the S&P 500 so far in 2019.  Advanced Micro Devices (AMD) tops the list with a gain of more than 100%.  While no other S&P 500 stocks have yet to double this year, another semi name, Lam Research (LRCX) has come close with a gain of 99%.  Xerox (XRX), MarketAxess (MKTX), and Target (TGT) have also all risen more than 90%.

Apple (AAPL) is the 19th best performing stock in the list above.  But because of its trillion+ dollar market cap, Apple’s (AAPL) 69% gain has a much bigger impact on the overall stock market than all of the other stocks that have seen a bigger price move this year.  In fact, of the S&P 500’s 25% price gain this year, Apple has accounted for 2.24 of those percentage points (or roughly 9%).

Instead of looking at simple year-to-date price change, below is a list of the stocks that investors should be most thankful for this year because of their contribution to the S&P’s gains.  Right behind Apple (AAPL) in first is the other trillion+ dollar company — Microsoft (MSFT) — which has accounted for 1.7 percentage points of the S&P’s 25% gain.  After AAPL and MSFT are Facebook (FB), Alphabet (GOOGL), and Amazon (AMZN).  Together these five mega-caps account for 25% of the S&P’s move higher this year.  While this group of companies has been vilified in 2019 for a number of things, they’re certainly still delivering for the stock market in a big way.  See Bespoke’s most actionable investment ideas with a two-week free trial to Bespoke Premium.

S&P 500 Industry Group Breadth Running Strong

The S&P 500 may be hitting record highs at a pace of more than once every other day, but would you believe that there are still Industry Groups trading below their 50-day moving averages?  The chart below shows the rolling percentage of Industry Groups trading above their 50-DMAs over the last several years, and the current reading stands at 91.7%.  Over the last five years there have been numerous periods where a higher percentage (and even 100%) of Industry Groups traded above their 50-DMAs, and the most recent was back in July.

So which are the two outlier groups that are still below their 50-DMAs?  Well, when everyone seems to be taking an offensive posture in the market, it’s only natural that defensive sectors would be lagging, and two of the most defensive-oriented sectors in this yield-hungry world we live in are Utilities and Real Estate.  Even these two groups, though, are only about 1% below their 50-DMAs, so all it will take is one or two good days for these groups to get them back over the hump.  On the upside, Health Care Equipment & Services is the furthest above its 50-DMA at 7.72%.

The S&P 500 as a whole is currently just over 4% above its 50-DMA.  What’s interesting to note here, though, is that just 9 of the 24 Industry Groups are further above their 50-DMAs while 15 are not above their 50-DMAs by as much as the S&P 500.  In terms of YTD returns, the S&P 500 is currently sitting on a gain of more than 25% YTD.  Leading the way higher this year, Tech Hardware (Apple) has rallied just under 48%, while Semis are up just over 40%. Behind these two leaders, four other Industry Groups are up over 30% YTD.  While there is no downside on a YTD basis, Energy has been the biggest laggard and is just barely hanging on to a YTD gain.  If Energy can’t hang onto a YTD gain in a year where the S&P 500 gains more than 25%, Energy investors may need to wear paper bags over their heads.  Sign up for Bespoke’s “2020” special and get our upcoming Bespoke Report 2020 Market Outlook and Investor Toolkit.

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