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.
Jan 2, 2025
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“Self-education is, I firmly believe, the only kind of education there is.” – Isaac Asimov
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Happy New Year! After the terrible end of the year for equities, US stocks are on pace to start the year on the right foot. Both the S&P 500 and Nasdaq were indicating gaps up of over 1%, which would have put the S&P 500 on pace for its best opening day since 2013, but they have since pulled back a bit and are both up just under 1%. While US stocks are on pace to start positively, the same can’t be said for international markets. Chinese stocks traded down over 2% after the Manufacturing PMI reading for the world’s second-largest economy came in weaker than expected and just barely in expansionary territory. That decline was the worst opening day for Chinese stocks since 2016.
In Europe, the tone isn’t nearly as weak, but equities in the region are mixed as the STOXX 600 trades modestly lower. The Eurozone Manufacturing PMI decelerated slightly from 45.2 to 45.1. Meanwhile, concerning inflation, ECB President Lagarde commented “We have made significant progress in 2024 in bringing down inflation and hopefully 2025 is the year when we are on target.”
In the US, the only economic reports on the calendar are jobless claims at 8:30 (better than expected on both an initial and continuing basis), the final Manufacturing PMI from S&P for December at 9:45, and then Construction Spending at 10 AM. The ISM Manufacturing Index will be released tomorrow.
December wasn’t a good month for bulls, and the last several days were bad to a historic degree. The chart below shows the performance of the S&P 500 from the close before Christmas to year-end with the S&P 500 down 2.6%. As shown in the chart below, that ranks as the worst performance for the closing days of the year since at least 1952 and the 12th year during that span that it fell over 1%.
Dec 31, 2024
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“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.
Dec 30, 2024
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“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.
Dec 27, 2024
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“A bottle of wine contains more philosophy than all the books in the world.” – Louis Pasteur
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 are celebrating the last Friday of 2024 with broad-based gains after US stocks opened lower yesterday but finished around the unchanged level. In Asia, Japanese stocks rallied on reports that the BoJ was willing to be patient regarding its next rate hike. The only decliner in the region was South Korea which declined over 1% as political uncertainty continues. In Europe, stocks were closed for trading yesterday in observance of Boxing Day, and with just one day of trading before the weekend, activity is light. That hasn’t kept stocks in the region from rallying, though, and the STOXX 600 is trading nearly 0.5% higher.
The picture in the US isn’t as optimistic this morning as futures on the S&P 500, Nasdaq, and Dow are all down 0.30%. Treasury yields are higher again as the yield on the 10-year US Treasury tops 4.6%. The high for the year was just above 4.7% back in April, and if we reach that level in the days ahead, it could become problematic for stocks. Thankfully, oil prices have remained contained right near $70 per barrel while gold holds steady near $2,650 per ounce. Finally, Bitcoin has had a massive rally since the election, but for the last month now, it has moved sideways. At today’s level of around $96,700, Bitcoin is the same level now as it was on November 20th.
If a bottle of wine is full of philosophy, Americans have consumed increasingly less wisdom. Alcohol sales surged during Covid but pulled back as the economy reopened and people had to start working again. As if that wasn’t bad enough for sales, several other headwinds have lined up against the sector ranging from the growing popularity, legalization, and acceptance of cannabis, a renewed focus on health and wellness, declining popularity among younger generations, lack of affordability due to inflation, etc. Remember when it seemed like a different celebrity launched their own ‘artisanal’ tequila brand every week? You don’t hear those stories much anymore.
Given the issues facing the industry, it shouldn’t come as a surprise that companies selling booze have had a terrible year. Their weakness stands out even more relative to the overall market. As the S&P 500 closes out the year right near record highs with a YTD gain of over 25%, all six of the major public companies involved primarily in the sale of alcoholic beverages are down YTD, and three of them are right at or near 52-week lows.
Wine and other alcoholic beverages have been around for thousands of years. While recent quarters have seen sluggish sales, it’s unlikely that this will lead to the demise of the alcohol industry anytime soon. However, the factors contributing to these sales declines, don’t show any signs of ending soon. This raises the question: if Al Capone were alive today, would he even find the alcohol business as profitable as it was during Prohibition?
Dec 26, 2024
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“We’re developing a new citizenry. One that will be very selective about cereals and automobiles, but won’t be able to think.” – Rod Serling
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The bulls may have enjoyed a little too much eggnog yesterday. US equity futures are firmly lower across the board indicating declines of 0.3%. Treasury yields, gold, and crude oil are all fractionally higher while Bitcoin is under the most selling pressure with a decline of 4% as its attempt to bounce back above $100 fails for now.
The only economic report on the calendar this morning was jobless claims. Initial claims came in modestly lower than expected, but continuing claims were higher than expected and bounced back above 1.9 million.
As we noted on Tuesday, the S&P 500’s 1.10% gain was the best Christmas Eve performance for the index since 1974. The Nasdaq’s 1.35% rally was the second-best gain on the last trading day before Christmas and the third time it rallied more than 1%. As shown in the table below, in 2000 the Nasdaq rallied over 7% on the last trading day before Christmas. However, that came well after the dot-com peak when the index was in a stupid phase of volatility that the drawn-out election results only exacerbated. The only other year the Nasdaq gained more than 1% on the last trading day before Christmas was in 1991. Overall, there have been nine years that the Nasdaq rallied more than 0.75% on the last trading day before Christmas. In those years, the median rest-of-year gain from Christmas through year-end was 1.6% with positive returns five out of eight times.
