Jan 13, 2025
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“There is no compression algorithm for experience.” – Andy Jassy
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Global equities stumbled into the weekend on Friday, and they’re bumbling out of the gate to kick off the week. While Japan was closed, other Asian markets started off the week on a down note with the Hang Seng falling 1%, while India South Korea, and Australia all also saw at least 1% declines. Europe was open during much of Friday’s US sell-off, so it didn’t have as much to ‘catch up’ from this morning, but the STOXX 600 is still down close to 1% which is right in line with where US futures are trading this morning. The culprit behind the global weakness has primarily been interest rates as yields have been increasing worldwide. Add to that the relentless run in the dollar, and now oil prices moving up towards $80 per barrel, and it isn’t a good recipe for higher stock prices.
Large-cap tech was notably weak on Friday as it was the first day since September 11th, that the Nasdaq 100 ETF (QQQ) opened and traded the entire session below its 50-day moving average. It’s been less than a month, but QQQ has established a relatively well-defined trend of lower highs and lower lows.
Jan 10, 2025
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“It’s equal can not be seen on this earth.” – Anthony Lucas
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
These words describe the image of oil soaring into the sky from beneath the clay Texas surface at the first major oil discovery in US history. It occurred 124 years ago today when Anthony Lucas and his partners struck black gold, starting the US oil industry. Lucas and company tried and failed for years to find oil underneath the Texas, but January 10th, 1901, was the day their dreams were finally realized.
Like the dog that catches the car, right after finally finding success, the question quickly became “Now what?” Once oil started flowing and launched the pipe they were drilling with 100s of feet in the air, they realized they had nowhere to put it or no way to stop it from flowing. First, they tried a 2.5-foot-high wall around the perimeter of the well, but it overflowed within 24 hours. They built a second wall at a wider circumference, but that quickly became overwhelmed too. A third wall covered 50 acres, but it wasn’t long before that was overflowing too. Talk about a good problem to have! Eventually, they got things under control and so began the modern-day US oil industry.
The chart below shows how US crude oil production started to take off after 1901. According to the Department of Energy, in 1900, the US produced 63 million barrels of crude oil annually. Within 10 years, production tripled. Another 10 years later, it more than doubled again and kept rising from there until peaking in 1970. Production was nearly cut in half from 1970 through 2008 as analysts started to fear the world was running out of oil and prices shot well into the triple-digits. Then, proving the adage, that the cure for higher prices is higher prices, the shale boom arrived, and production since then has rebounded to a historic degree. So much for running out of oil.
Even as the US oil industry exploded in the early 1900s, exports were practically non-existent until more than 100 years after Lucas’ first discovery. Beginning in the 2010s, though, exports surged like nothing ever seen before and now total a record 4+ million barrels per day.
When it comes to recent crude oil performance, prices were weak for most of the second half of 2024 after prices peaked in the high 80s during the spring. Over the next six months, WTI sank into the mid-60s where it started to stabilize. Since early December, though, prices have started to rebound with a rally this morning taking it above $75 per barrel and back above its 50-day moving average for the first time since October. While one level of resistance has been cleared, another remains at the downtrend line in the high $70s. If those levels get taken out, markets will find it increasingly difficult to prevent concerns over inflation from getting louder.
For the next couple of hours, though, December’s non-farm payrolls will be the market’s main area of focus, and the much higher-than-headline forecast has yields surging and equity futures plunging. At 4.78%, the 10-year yield is now at its highest level since November 2023.
Jan 8, 2025
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“When things go wrong, don’t go with them.” – Elvis Presley
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
We had the wrong kind of “turnaround Tuesday” yesterday. Equities opened positively and then sold off throughout the trading day as the better-than-expected ISM Services and higher-than-expected Prices Paid component pushed yields higher and stock prices lower. That weakness flowed into Asia overnight and Europe this morning where equities have been trading lower. The picture for today looks dicey again as yields continue to move higher. The 10-year yield is firmly above 4.7% and, in the UK, the 10-year yield has moved to its highest level since October 2008! There was just a brief respite in the selling of bonds as comments from Fed Governor Waller hit the tape where he said he supports rate cuts in 2025 provided the economy and inflation play out as expected, but it lasted less than a few minutes before yields were back near their highs of the day.
The ADP Employment report came in weaker than expected as total payrolls increased 122K versus forecasts for an increase of 136K. While weaker than expected, it was still a steady number and has helped to alleviate some of the pressure in bonds and stocks. Jobless claims also just hit the tape, and initial claims fell to 201K which was below forecasts while continuing claims came in higher than expected. Given the holidays, though, some of these claims numbers could be distorted.
Nowhere was yesterday’s negative reversal more pronounced than in Nvidia (NVDA). The stock opened at record highs and looked like it was going to breakout of its six-month trading range after Monday night’s keynote speech from CEO Jensen Huang. It quickly reversed lower throughout the session, though, and finished down by over 6% on the day and over 8% from its intraday high. As shown in the chart below, yesterday was the sixth time in the last year that NVDA hit an all-time high intraday but then sold off at least 4% during the trading day. While the first three are almost hard to notice given they occurred during steady uptrends for the stock, the last two marked short-term tops. While NVDA managed to stay above its 50-day moving average in yesterday’s decline, it closed closer to that level than any of the other prior reversals.
Jan 7, 2025
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“The most contrarian thing of all is not to oppose the crowd but to think for yourself.” – Peter Thiel
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Below is a quick look at the performance of stocks so far in 2025 based on how they performed in 2024 using our decile analysis. We broke the Russell 1,000 into deciles (10 groups of 100 stocks each) based on 2024 total returns and then calculated the average YTD performance over the first three trading days of 2025 for the stocks in each decile. Interestingly, both the best performing stocks and worst performing stocks in 2024 have done well so far in 2025, while the stocks in the middle of the performance distribution in 2024 have lagged. As shown below, the decile of 2024’s best performing stocks are already up another 3.88% on average in 2025, while the decile of 2024’s worst performing stocks are up the second-most of any decile with an average 2025 gain of 2.7%.
Jan 6, 2025
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“.– …. .- – / …. .- – …. / –. — -.. / .– .-. — ..- –. …. – -.-.–” – Samuel Morse
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
How many times have you looked at your cell phone already today? It’s probably the first thing you did today. Whether you looked up scores, stock quotes, messages, or even got some work done, the fact that you are reading this right now all traces back to a meeting in Morristown, NJ 187 years ago where Samuel Morse demonstrated his idea of sending electrical impulses over a wire that could then be translated into text, or as he called it, the Telegraph. While that meeting in 1838 was the first telegraph demonstration, the first official telegram wouldn’t come for another six years in May 1844 when Morse sent a message from Washington, DC to Baltimore. Even though he was the first person to ever send a message over wires which ultimately led to the mass proliferation of content, if he were alive today looking at all that the telegraph has spawned, Morse would probably be at a loss for words. His thoughts would probably echo the message he sent in that first telegram, “What hath God wrought!”
Friday’s 1.26% rally was the best day for the S&P 500 since 11/6, the day after November’s election. It was also the third 1%+ daily gain in that span. The other two days were a 1.10% gain on Christmas Eve and a 1.09% gain on 12/20. While there continues to be a near constant focus on the Fed, we think it’s notable that two of the three best days since the election have come when Congress passed the continuing resolution to keep the government open and last Friday when Mike Johnson was re-elected speaker on the first vote.
While Friday’s gains sent the bulls home in an optimistic mood, it wasn’t perfect. After briefly trading back above its 50-DMA, the market pulled back in the afternoon and finished slightly below that level. It was the fourth day in a row that the S&P 500 made a run towards its 50-DMA, but also the fourth day in a row that it finished off its intraday highs. As we start the trading week, the S&P 500 is poised once again to trade back above that level, so now all it needs to do is hold it. Until then, the burden of proof is on the bulls.
Jan 3, 2025
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“I wouldn’t sell the Yankees for anything. Owning the Yankees is like owning the Mona Lisa. You don’t sell it.” – George Steinbrenner
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures are trading higher this morning, but based on the last few days of trading that hasn’t meant much as the S&P 500 has had trouble holding on to early gains. Since Christmas, the S&P 500 has traded down for five straight trading days. Losing streaks of five or more trading days straddling the new year are extremely uncommon. The only other time that the S&P 500 has had a five or more day losing streak that started in one year and went on to the next was in 2014/2015 when it also traded down five days in a row from 12/31/14 through 1/6/15. Two big events today that could determine whether the losing streak continues are the ISM Manufacturing report at 10 AM and the House Speaker vote. While the speaker vote is not necessarily a crucial event, if Johnson can get voted in, it could suggest that the GOP will act in a more unified front in the legislative season ahead.
Yesterday was a relatively volatile day for the S&P 500. The ETF that tracks the index (SPY) traded up about 0.90% early in the session before trading down as much as 0.95% later in the session and ultimately before finishing with a marginal decline of 0.22%. It was a noisy day with little to show for the bulls or bears by the end of the day!
As far as regular investments go, equities have provided among the best returns to investors over the long term. Let’s look at how the S&P 500 has performed during the last 51 years. Had you invested $10,000,000 in the S&P 500 at the start of 1973, you’d have $2.15 billion including dividends. Talk about the power of compounding!
Against at least one asset class, though, equity returns have been pedestrian. That asset class is professional sports and more specifically, the New York Yankees. 52 years ago today, an investor group led by George Steinbrenner bought the Yankees from CBS for $10 million. According to Forbes, the New York Yankees are currently worth $7.55 billion. By all accounts, $10 million turning to over $2 billion in just over 50 years is great, just not when you compare it to the Yankees. While we don’t have annual team values, when you overlay a point-to-point change in the valuation of the Yankees on the S&P 500, the move for equities doesn’t look quite as impressive.
Does this mean equities are a bad investment? Hardly. The increase in the value of professional sports teams over the last 50 years has been a unique situation that an average investor would have never had access to. Equities, meanwhile, are one of the most accessible and liquid investments available. Also, no matter how good the results of any investment turn out, the grass is always greener somewhere else. After all, while Steinbrenner and his heirs have had an annualized gain of just under 14% from their investment in the Yankees, since its IPO in the early 1980s, Apple (AAPL) has had a total annualized return of closer to 20%, and forget about Bitcoin! That’s why investors are always chasing shiny objects.
