Yesterday’s 1% rally for the S&P 500 was also accompanied by positive breadth (for a change) as 412 stocks in the index finished in positive territory on the day.  On a net basis, subtracting the number of decliners from the number of advancers, yesterday’s A/D reading of +322 was the strongest breadth reading since late July.  Prior to yesterday’s rally, the strongest daily breadth reading for the month of August was +214 on August 7th.  For a month where the index was already up 4% heading into the day, that’s pretty weak.

Breadth in August has been so weak in fact that Monday’s rally was only the 8th day out of 16 trading days in August where the S&P 500 had positive breadth.  There’s still another five trading days left in the month, so breadth still has plenty of room to improve, but at the current rate, this month would go down as just the 12th month since 1990 where the S&P 500 was up over 4% but saw negative daily breadth on at least half of all trading days.  The last time that happened was in July…of this year.  And before that, May.  We’ve already had two months in 2020 where the S&P 500 was up at least 4% and half of all trading days had negative breadth readings, and we’re now on pace for the third.

The chart below shows each of the prior times since 1990 where we saw similarly strong months with lackluster breadth.  Before the two prior occurrences this year, the most recent was March 2009.  Looking at the chart, that occurrence preceded a great time to be long the market.  Before that, though, returns following similar breadth divergences were mixed as there were occurrences right in the middle of the bear markets from 2007-2009 as well as 2000-2002, and before that there were six occurrences in the 18 months leading up to the March 2000 peak.  Click here to view Bespoke’s premium membership options, including the must-have Morning Lineup report.

The summer driving season is typically defined as the period between Memorial Day and Labor Day.  This year, the summer season has been a bit different due to COVID, and while many Americans who would have traveled outside the United States have opted to stay domestic, overall driving is down.  With fewer people driving to work and driving around in general, gas prices have been pushed down to extremely low levels relative to recent history.

The table below shows the historical price of the national average price for a gallon of gas based on AAA data. At the current national average of $2.19, a gallon of gas hasn’t been this cheap at this time of year since at least 2005.  While prices were up on a YTD basis every year from 2005 through 2019 by an average of 18.3%, this year the national average price is down over 15%.

The chart to the right of the table below compares gasoline prices this year (red line) to a composite of gas prices during the ‘average’ year (blue line).  So far this year, the pattern of prices is nearly the exact opposite of the average year.  While prices tend to rise through the first five months of the year, this year they trended lower, bottoming right in late April.  After a decent increase in prices from May through early June, prices have completely flat-lined in the last two months.

While it’s not uncommon for prices to remain steady throughout the summer months, the current flat-lining of prices has been nearly without precedent.  The chart below shows the rolling two-month (60 calendar days) high low range of the national average price of gasoline since early 2004.  With the current two-month range spanning $2.174 to $2.201, or 1.24%, the only other time the range was narrower was in late June/early July 2014.  Throughout the last fifteen years, there has never been a time where gas prices have been this low at this time of year or this stable. Click here to view Bespoke’s premium membership options for full access to our research and interactive tools.

If you want to see an example of where the term winners and losers couldn’t be more applicable, take a look at the performance of S&P 500 sector ETFs on a YTD basis.  The chart below is derived using performance numbers from our Daily Sector Snapshot report, which provides investors with an easy-to-read matrix of technical analysis, breadth and internal readings, and fundamental data points.  It’s the perfect way to get an aerial snapshot of both current readings and the way they’ve been trending for each of the major sectors.  This perspective also allows investors to see how sectors stack up versus each other as well as relative to themselves on a historical basis.

2020 has clearly been a case of the have and have nots.  On the haves side, Technology (XLK) and Consumer Discretionary (XLY), which is basically Amazon (AMZN) and a few other retailers, top the list.  Rounding out the top three, Communication Services (XLC) is the only other sector up over 10% and outperforming the S&P 500.  On the have-nots (or in this case, the ‘nearly halves’) side, we have Energy leading the way lower with a decline of 41%, followed by Financials (XLF) which is down 21.2%.

There was a time not long ago when Energy and Financials were considered the life-blood of a capital intensive economy, but these two sectors have been deemed irrelevant by the market in the current work-from-home world where interest rates are zero and money is practically free.  Instead, Communications, Technology, and Retailers with a strong online infrastructure are the ever-important cogs in the digital economy.  Today, it may seem that this is a secular shift in the shape of our economy, which in many respects is true.  But don’t count out the old leaders just yet.  Someday, ‘going to work’ will once again mean more than just rolling out of bed and over to your desk chair.  In that environment, people and goods will increasingly move, capital intensive infrastructure projects will be undertaken and interest rates just might move higher. Click here to view Bespoke’s premium membership options, including the must-have Daily Sector Snapshot report.

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.

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Biome Stories

‘Murder Hornets’ in the U.S.: The Rush to Stop the Asian Giant Hornet by Mike Baker (NYT)

So-called ‘murder hornets’ get a lot of hype as a threat to humans, but they are a very real threat to already-struggling pollinators like bees, which have suffered massive population loss in recent years and don’t need another competitor. [Link; soft paywall]

How the World’s Largest Garbage Dump Evolved Into a Green Oasis by Robert Sullivan (NYT)

Arthur Kill was the world’s largest garbage dump, but returning the site to nature wasn’t actually that complicated: it was covered up and left for nature to work its magic. The result is a near-paradise after just 20 years of lying fallow. [Link; soft paywall]

Economic Research

Germany is beginning a universal-basic-income trial with people getting $1,400 a month for 3 years by Adam Payne (Business Insider)

120 German volunteers will get a €1,200 monthly payment for three years, with their outcomes studied by social scientists in an effort to assess how the larger population might respond to a more universal policy of the same kind. [Link]

Market Function Purchases by the Federal Reserve by Kenneth D. Garbade and Frank M. Keane (NY Fed Liberty Street Economics)

A history of historical interventions in the US Treasury market by the Federal Reserve, showing that recent purchases to stabilize markets during the COVID shock was unprecedented in size and scope. [Link]

CRE Innovation

WWE Turning Orlando’s Amway Center Into ‘WWE ThunderDome’ for TV Production Going Forward by Just Barrasso (SI)

WWE events are now being held on a semi-permanent basis in Orlando’s Amway Center, which has been upgraded in numerous ways to adapt to the conditions of the COVID pandemic. [Link]

REI looks to sell brand new Seattle-area HQ as pandemic forces retailer to rethink remote work by Taylor Soper (GeekWire)

A brand new Bellevue, WA headquarters for REI is being abandoned thanks to a near-100% work from home policy driven by COVID; specifically, the company says that having a distributed workforce “will have immediate, positive impacts on our ability to attract and retain  a divers and highly skilled workforce”. [Link]

New York Stories

Movers in N.Y.C. Are So Busy They’re Turning People Away by Julie Satow (NYT)

Moving companies report “double the volume of customers – maybe more” this summer thanks to departures from the city for local suburbs, turnover in apartments within the city, and people moving out of the Tristate area entirely. [Link; soft paywall]

What Happened When Homeless Men Moved Into a Liberal Neighborhood by Daniel E. Slotnik (NYT)

COVID’s arrival meant homeless shelters had to reduce capacity, and as a result New York City bid up empty hotel rooms to house people formerly in crowded shelters. But in a deep Democratic stronghold, this modest form of redistribution was met with aggressive and painfully harsh resistance. [Link; soft paywall]

Lost and Found

30-year-old stash of beer and gum found in library’s mystery section by Ben Hooper (UPI)

Stashed in the mystery section of the Walla Walla, WA public library 30 years ago: five cans of beer and a packet of Godzilla Heads gum, untouched for at least three decades. [Link]

‘The mystery is over’: Researchers say they know what happened to ‘Lost Colony’ by Jeff Hampton (The Virginian-Pilot)

The so-called Lost Colony of Roanoke Island likely moved with friendly Croatoan indigenous people, with evidence suggesting that colonists intermarried with their hosts and thrived despite their status as “lost”. [Link]

Voting

The 2018 Voting Experience: Polling Place Lines by Matthew Weil, Charles Stewart III, Tim Harper, and Christopher Thomas (Bipartisan Policy Center)

In 2018 voters faced huge increases in vote times, with lower-income and non-white voters facing substantially longer waits in the first election following the removal of Voting Rights Act protections by the Supreme Court. Voters in precincts that were >90% non-white average wait times of 32.4 minutes, more than six times the 5.1 minute average wait time for voters at precincts that are >90% white. [Link]

Kids These Days

Where Has Your Tween Been During the Pandemic? On This Gaming Site by Kellen Browning (NYT)

Roblox is the most popular online world for children stuck at home during the pandemic with a massive windfall to developers that built games as part of the platform. [Link; soft paywall]

Convenience Business

With Seasonal Products Making an Early Return This Year, Consumers Weigh In on Sweet Spot for Promotions by Alyssa Meyers (Morning Consult)

An amusing poll that shows consumers generally prefer companies hold off on seasonal product promotions until the actual season they’re associated with. [Link]

Jimmy Butler’s $20 coffee hustle is the best business in the NBA bubble by James Dator (SBNation)

The NBA bubble created a unique kind of scarcity, and ballhandling entrepreneurs are stepping into the gap. Jimmy Butler is probably the most successful, running an amusingly simple coffee stand out of his room at Disney World. [Link]

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Have a great weekend!