Daily Stock Market Articles

Week before Thanksgiving DJIA Up 20 of 31, But Down 6 of last 7

DJIA has a fair track record over the last 31 years, rising 20 times the week before Thanksgiving with an average gain of 0.44% in all years. But the other major U.S. stock market benchmarks are not as strong and there has been more weakness the past seven years. Since 2017, DJIA has advanced just once during the week before Thanksgiving.

Over the last 31 years, S&P 500 and NASDAQ have the same record, up 18 times, with similar average gains of 0.20% and 0.23% respectively. Russell 2000 has been the weakest, up 16 times with an average gain of 0.08%. Last year, the week before Thanksgiving, enjoyed solid across-the-board gains as the market recovered from a correction.

Should weakness materialize next week, it may be a solid set up for the Thanksgiving trade of buying into weakness the week before Thanksgiving and selling into strength around the holiday and/or during typical November end-of-month strength.

 

Homebuilders Present vs. the Future
Mon, Nov 18, 2024

This morning the National Association of Home Builders published their latest update on home builder sentiment. The headline index rose to 46 versus an expected decline from 43 to 42. That three-point jump marks the largest one-month uptick since March but only leaves it in the middle of its range from the past couple of years.



Of the sub-indices, future sales stood out the most. The index surged 7 points month over month to reach the most elevated reading since April 2022. That is just above the historical median and suggests homebuilders are optimistic in spite of weaker readings in traffic and present sale indices.



As noted, present sales and traffic were not as rosy as future sales. As shown below, present sales were higher in November rising 2 points month-over-month to 49. However, that is only in the 29th percentile of historical readings, and more recently that is well within the range of readings from the past couple of years.



With present and future sales moving in the opposite direction, a massive divergence has formed between the two. As shown below, for most of the survey's history, future sales have tended to be higher than present sales for sustained periods albeit with some exceptions like the first couple of years of the pandemic. The last time present sales were stronger than future sales (negative readings in the chart below) was just five months ago, but there has been a massive turnaround since then. With November's reading, the spread is at the highest level (meaning sentiment towards future sales is stronger than present sales) since December 2006. Late 1991 was the only other time in which there was as wide of a divergence between the two.



Not only has there been a divergence between present and future sales, but the report also showed some divergence in sentiment based on geography. As shown below, homebuilder sentiment has perked up in the Northeast and the Midwest. Conversely, sentiment was lower month over month and closer to the low ends of recent ranges in the South and West.



As for homebuilder stocks, the long-term uptrend remains in place albeit the chart isn't as constructive as it once was. In late October, the iShares US Home Construction ETF (ITB) fell back below its 50-DMA for the first time since late spring and early summer when there was a successful test of support at the longer-term 200-DMA. While there hasn't been any sort of similar drawdown to support this go around, one week ago there was a failed attempt to move back above the 50-DMA. That leaves the group in no-man's-land sandwiched between the two moving averages.

 

Feast On Small Caps Thanksgiving to Santa Claus Rally Trade

Thanksgiving kicks off a run of solid bullish seasonal patterns. November-January is the year’s best consecutive 3-month span (2025 STA p 149). Then there’s the January Effect (2025 STA p 112 & 114) of small caps outperforming large caps in January, which begins in mid-December.

And of course, the “Santa Claus Rally,” (2025 STA p 118) invented and named by Yale Hirsch in 1972 in the Almanac. Often confused with any Q4 rally, it is defined as the short, sweet rally that covers the last 5 trading days of the year and the first two trading days of the New Year. Yale also coined the phrase: “If Santa Claus should fail to call, bears may come to Broad and Wall.”

We have combined these seasonal occurrences into a single trade: Buy the Tuesday before Thanksgiving and hold until the 2nd trading day of the New Year. Since 1950, S&P 500 has been up 79.73% of the time from the Tuesday before Thanksgiving to the 2nd trading day of the year with an average gain of 2.58%. Russell 2000 is up 77.78% of the time since 1979, average gain 3.34%.

 

Health Care Weightloss
Tue, Nov 19, 2024

We discussed the hard fall in Health Care sector stocks in today's Chart of the Day. While the drop has resulted in extreme underperformance versus the S&P 500, it has also resulted in the sector's weight in the S&P 500 falling dramatically. At the end of 2022, the sector's weight rose almost to 16%. At that time, it was the second-largest sector behind Tech, and relative to its history, it was one of the largest weights on record. The past couple of years have seen a dramatic weight loss that is now teetering on moving to a single-digit weighting. At 10.36%, the Health Care sector currently has its lowest weight since September 2000. Additionally, the 1.67 percentage point loss in weight over the past three months is one of the biggest declines on record.



Back at the recent highs in late 2022, Health Care was the second largest sector in the S&P 500. Today, it is only the fourth largest sector which is the lowest ranking it has had in more than a decade (2012). Of course, that smaller weight means that the Health Care sector won't have the same pull on the broader market that has been typical over the past couple of decades.

 

Why We Aren’t Permabulls


“Oh, those Carson guys are just permabulls.” Institutional CIO who has been dead wrong for years

Are we permabulls? We get this question sometimes and it is a great question. (A permabull is someone who remains bullish on markets no matter what is happening.)

On the surface we know that stocks usually go up, so maybe we should always lean bullishly? When it comes to my investments and retirement accounts, I do take this approach. I don’t care what the headlines are, I’m still going to put money into my 401k every two weeks. Then we look at a chart like this and it makes you think it might pay to have a glass half full approach to life.



It is no secret that the Carson Investment Research team took the road less travelled two years ago and went on record that a new bull market was starting and there wouldn’t be a recession. This call was absolutely hated by so many. I’ll never understand why, but most were hoping for a recession and bear market and for us to be one of the very few places to go against the herd of institutional investors (who all think the same) wasn’t well received.

We were mocked on social media, laughed at in public forums for saying 2023 was going to be a good year, shunned from going on TV for being ‘reckless’, and more. Here’s the thing. Yes, in bull markets with the current backdrop we are bulls. When we start to see signs of technical deterioration, stress in the credit markets, and signs the economy is indeed breaking down, we will change our tune. We’ve been overweight equities since December 2022 and we remain there today.

So no, we aren’t permabulls. But we are completely dedicated to helping clients reach their financial goals, even if that means going against what’s fashionable. And we definitely were not running around for two years telling people to be overweight bonds relative to stocks like so many of the big institutional shops have been.

Why do we remain bullish here and now? For starters, this bull market is actually quite young, at just over two years old. As you can see here, the average bull market lasts more than five years, suggesting this bull market might indeed last a lot longer than the bearish CIO would think.



Did you hear we had an election recently? Yeah, you probably heard, but what you might not have heard was that years one and two of a president who was re-elected tend to do quite well and better than under a new president. In fact, the four years under President Biden played out quite well to script. Year one does well, then year two (the midterm year) is weak, followed by a strong final two years. No, we don’t say you should invest simply on the presidential cycle, but we sure wouldn’t ignore it either.



What drives long-term stock gains? It is earnings and when you have an economy that continues to surprise to the upside, you tend to have solid earnings. For more of our thoughts on why the economy continues to look pretty good, be sure to read what Sonu Varghese, VP Global Macro Strategist, wrote in The Economic Outlook Looks Pretty Good – Part 1 and Part 2.

Turning to forward 12-month S&P 500 earnings we once again see new highs, all the way up to $268, up from $225 in early 2023. There is no holy grail when it comes to investing, but when we saw earnings estimates making hew highs, we took it as a big reason to be overweight equities and still do.



It doesn’t stop there though, as profit margins continue to trend higher and are at their highest levels this cycle. Profit margins expanding and earnings hitting all-time highs are great dual tailwinds for higher stock prices.



The S&P 500 is looking at potential back-to-back years with a gain of over 20% for the first time since the late 1990s, so we need to be aware it’ll likely be tough to see that impressive feat for a third year in a row. Then again, here’s a tweet I did on consecutive 20% years. If investors have 99 problems, up 20% two years in a row shouldn’t be one of them.



We continue to think low double-digit returns next year is possible (so better than your average year), but one thing to be aware of is the third year of a new bull market tends to be a catch-your-breath year. This makes sense, as years one and two of a new bull market are very strong, so some consolidation would be perfectly normal. The good news is once a bull market gets to year four, the returns once again are very strong.



When I started at Carson back in July 2022, I wanted to be part of one of the most honest and trustworthy research shops out there. We won’t always be right, but we sure won’t always be wrong is how I like to say it. The calls that our team has made the past few years have been about as good as anyone else out there. We are honored to help so many of our Partners grow and to shed some light on what it really happening, without following the crowd and saying the same thing as everyone else.

No we aren’t ‘just permabulls’ around here and trust me, we will change our tune when the data tells us to. Where am I a true permabull? I’m a permabull in believing that if you treat people the right way, work hard, stay humble, and surround yourself with good people that good things will happen.

 

Asset Class/Key ETF Performance Since Election Day 2024
Fri, Nov 22, 2024

We're just under three weeks past Election Day 2024 and below is an updated look at the performance of various asset classes since then using our key ETF matrix.



While it may feel like the stock market has gone gangbusters since the close on 11/5, the S&P 500 ETF (SPY) is up just over 3%, while the mega-cap Tech-heavy Nasdaq 100 (QQQ) is up even less at 2.5%.

Both growth and value ETFs are up similar amounts, while currency ETFs like FXB, FXE, and FXY are all down more than 2% as the dollar has rallied.

Looking at sectors, Financials (XLF) is up the most with a gain of 8.3% followed closely by Energy (XLE) at +8.04%. Consumer Discretionary (XLY) ranks as the third best sector since 11/5 with a gain of 7.5%. On the downside, Health Care (XLV) is solidly in the red with a drop of 2.4%, and while it's not one of the eleven major sectors, the semis ETF (SMH) is also down 1.7%.

It has been quite the bloodbath in international stocks since Trump's victory on 11/5. Five of the major country ETFs are down more than 6%: China (MCHI), Hong Kong (EWH), France (EWQ), Italy (EWI), and Spain (EWP). Israel (EIS) is one of the few country ETFs that has gained along with Australia (EWA) and Canada (EWC).

We've seen some divergence between commodity ETFs since Election Day. The agriculture ETF (DBA) and natural gas (UNG) are both up solidly, but gold (GLD), silver (SLV), and oil (USO) are all in the red.

 

Tesla (TSLA) on Top Since Trump's Election Victory
Fri, Nov 22, 2024

Earlier we provided a snapshot of asset class performance since Election Day using our key ETF matrix. Diving a little deeper, below is a look at the change in market cap across S&P 1500 sectors since Trump's victory on 11/5. As shown, the Financials sector has thus far been the biggest beneficiary with a collective increase in market cap of $608.4 billion across all of its stocks. Technology ranks second with an increase of $434.9 billion, followed by Consumer Discretionary at $335 billion. On the flip side, two sectors have seen a decline in market cap since Trump won. Real Estate is down very marginally at $2.3 billion, while Health Care has seen its market cap drop by a much more significant $167.9 billion.



Below is a look at the individual stocks that have seen the biggest jump in market cap since Election Day. Is it any surprise that Elon Musk's Tesla (TSLA) has seen by far the biggest jump at $283 billion? Behind Tesla is NVIDIA (NVDA) and Apple (AAPL) with respective gains of $160 billion and $77 billion, however, their share prices are up less than 3%. These two names are simply so big that the smallest moves now result in massive swings in market cap. Rounding out the top five are JP Morgan (JPM) with an increase of $66 billion and Berkshire Hathaway (BRK/B) at $58 billion.

In addition to these five big winners, other notables on the list include names like Netflix (NFLX), Walmart (WMT), Disney (DIS), Blackstone (BX), Costco (COST), Charles Schwab (SCHW), and Interactive Brokers (IBKR).



Below is a list of the biggest winners by percentage change since Election Day. The two best performers remain the two private prison stocks -- GEO Group (GEO) and CoreCivic (CXW). Other interesting names on the list of biggest post-Election winners include United Fire (UFCS), Grocery Outlet (GO) and Hertz (HTZ).

 

Chinese Stocks in Free Fall
Fri, Nov 22, 2024

In the US, equities have staged a solid rally this month with most of the move occurring after the election. Elsewhere in the world, equities haven't exactly shared in the gains. Chinese stocks, using the iShares MSCI China ETF (MCHI) as a proxy, surged throughout September and into early October as stimulus measures were announced. After a massive 42.7% gain from the end of August through the closing high on October 7th, MCHI reversed lower and was down 14.5% by Election Day. Headed into the election, MCHI actually stabilized somewhat, but post election it has taken another leg lower as it is now down 9% since then and 22.2% since the October high. As shown below, the ETF is also now in no-man's-land trading smack in the middle of its 200 and 50-DMAs with gaps to fill from the September post-stimulus run up.



Although MCHI is pulling back, it is at least still higher than it was prior to stimulus announcements back in September. The same cannot be said for some of the country's most prominent stocks. As shown below, Baidu (BIDU) and Alibaba (BABA) have now both round-tripped over the past couple of months. That also leaves them at interesting standpoints from a technical perspective. Starting with BIDU, the stock has been in a steady downtrend throughout the past year and this recent turn lower leaves it testing support at 52-week lows. For BABA, the long term trend is a bit more friendly with a series of higher lows throughout the year. However, BABA has also been on a ruthless stretch of declines including a daily loss in six of the last seven sessions. Whereas BIDU is testing support at 52-week lows, BABA is testing support at its 200-DMA.

 

Russell 2000 on Verge of Breaking Out

It has been over three years since the Russell 2000 last closed at an all-time high. This sad streak could be coming to an end soon. Seasonally speaking, small caps are set up for their annual yearend rally into Q1, often referred to as the “January Effect,” where small caps outperform large caps in January. As we point out on pages 112 and 114 of the Almanac, most of the “January Effect’s” small cap outperformance takes place in the last half of December as tax-loss selling abates.

As you can see in the accompanying chart, the Russell 2000 has been tracking the pattern fairly well since August and it looks like the small fry may finally be on the verge of breaking out to new all-time highs. Small caps leapt higher in early November, then retreated a bit and are now surging higher now. This trend aligns well with the annual pattern above. But as illustrated in the chart, small caps can exhibit some choppy trading from late-October through mid-December and patience has generally been rewarded with opportunities presenting through mid-December.

 

Thankful Investors -- Last 5 Years
Mon, Nov 25, 2024

It's a holiday-shortened Thanksgiving week, so over the next few days we plan on writing about some of the stocks that investors can be most thankful for. In this post we're highlighting the 25 best performing stocks in the S&P 1500 on a total return basis over the last five years. In the table below we rank them from 1st to 25th and show how much a $1,000 investment in each stock five years ago (on 11/25/19) would be worth today. Below the table we provide a one sentence blurb generated by AI that describes what each company does.

At the top of the list above even NVIDIA (NVDA) is Alpha Metallurgical (AMR), which mines and produces coal for steel production and power generation! A $1,000 investment in AMR five years ago would be worth more than $34,000 today!

NVDA ranks second, turning $1,000 five years ago into more than $25,000 today, followed by energy drink maker Celsius (CELH), MARA Holdings (MARA), and GameStop (GME). Other notables on the list of big winners over the last five years include Tesla (TSLA) at #7, Super Micro (SMCI) at #8, Abercrombie & Fitch (ANF) at #12, and Axon Enterprise (AXON) at #14. You'll also probably recognize companies like Arista Networks (ANET), elf Beauty (ELF), Sprouts Farmers Market (SFM), Vistra (VST), Deckers Outdoor (DECK), Builders FirstSource (BLDR), and Eli Lilly (LLY).



For a quick description of each company listed above, we asked AI to give us its best one-sentence blurb:

• Abercrombie & Fitch (ANF): A global specialty retailer focused on casual apparel and accessories for young adults and kids, known for its trendy fashion and lifestyle branding.
  
• Alpha Metallurgical Resources (AMR): A leading producer of metallurgical coal, used primarily in steel production, with operations focused on mining and processing high-quality coal.
  
• Antero Resources (AR): An independent energy company specializing in the exploration and production of natural gas, natural gas liquids (NGLs), and oil in the Appalachian Basin.
  
• Arista Networks (ANET): Provides cloud networking solutions, including switches, routers, and software, for data centers and enterprise networking environments.
  
• Axon Enterprise (AXON): Known for its Taser devices, body-worn cameras, and cloud-based evidence management software, serving public safety and law enforcement agencies.
  
• Builders FirstSource (BLDR): Supplies building materials, manufactured components, and construction services to professional homebuilders and remodelers in the U.S.
  
• Celsius Holdings (CELH): A beverage company offering fitness-oriented energy drinks and health-focused functional beverages for active consumers.
  
• Comfort Systems USA (FIX): Provides mechanical services such as heating, ventilation, air conditioning (HVAC), and electrical contracting to commercial and industrial customers.
  
• CONSOL Energy (CEIX): A coal and energy company producing high-quality bituminous coal for electricity generation and industrial applications.
  
• Deckers Outdoor Corporation (DECK): Designs and markets footwear and accessories under brands like UGG, Teva, and HOKA ONE ONE, targeting performance and lifestyle consumers.
  
• e.l.f. Beauty (ELF): A cosmetics company specializing in affordable, high-quality makeup and skincare products available globally.
  
• Eli Lilly (LLY): A leading pharmaceutical company developing innovative medicines in areas such as diabetes, oncology, immunology, and neuroscience.
  
• GameStop (GME): A retailer of video games, consumer electronics, and collectibles, with a focus on digital gaming and e-commerce.
  
• Marathon Digital Holdings (MARA): A digital asset technology company focused on cryptocurrency mining, particularly Bitcoin, leveraging blockchain technology.
  
• Mr. Cooper Group (COOP): A mortgage servicer and lender offering home loan solutions, refinancing, and servicing for homeowners and buyers.
  
• NVIDIA (NVDA): A technology company best known for its graphics processing units (GPUs) used in gaming, AI, data centers, and autonomous vehicles.
  
• Powell Industries (POWL): Manufactures electrical equipment and systems for the management and distribution of electricity in industrial and utility markets.
  
• Quanta Services (PWR): Provides infrastructure services to the energy and communications sectors, including construction and maintenance of electric power and telecom systems.
  
• Range Resources (RRC): An independent oil and natural gas company focused on exploration and production in the Appalachian Basin, particularly natural gas.
  
• SiTime Corporation (SITM): Designs and manufactures precision timing devices, including silicon MEMS-based oscillators, used in electronics.
  
• Sprouts Farmers Market (SFM): A grocery retailer emphasizing fresh, natural, and organic products, catering to health-conscious consumers.
  
• Super Micro Computer (SMCI): Develops high-performance, energy-efficient server and storage solutions for data centers, enterprise IT, and cloud computing.
  
• Tesla, Inc. (TSLA): A global leader in electric vehicles, renewable energy products, and battery technology, with a mission to accelerate the world's transition to sustainable energy.
  
• Texas Pacific Land Corporation (TPL): Manages land and mineral rights in Texas, generating revenue from oil and gas royalties, leases, and easements.
  
• Vistra Corp. (VST): An energy company offering electricity generation, retail services, and renewable power solutions across the U.S. through its integrated platform.

 

What Happens After Back-To-Back 20% Gains?


“Don’t look for it, Taylor. You may not like what you find.” -Dr. Zaius to Taylor (Charleton Heston) at end of Planet of the Apes

Many bears are back at it, claiming that because stocks are looking at back-to-back 20% gains then 2025 must be doomed. Unfortunately, all we have to do is look at the data to see they once again could be on the wrong end of this amazing bull market.

Just as Dr. Zaius tried to warn Taylor in The Planet of the Apes that he may not like what he finds, the bears might be disappointed to find that strong returns after back-to-back 20% years is perfectly normal.

Using total returns (since 1950) we found eight other times stocks gained 20% two years in a row and the next year was higher six times and up a solid 12.3% on average. Now what really stood out to me about the data below is the mid- to late-1990s saw an incredible record five years in a row of 20% or more gains. We didn’t have social media back then, but I could only imagine how mad that would have made the bears.



2024 of course isn’t over yet, but it is pretty incredible that as strong as last year was, this year is up more right now. For more of our overall views, as we laid out in Why We Aren’t Permabulls, we think continued gains in 2025 are likely, as the overall economy remains pretty solid, which we discussed in The Economic Outlook Looks Pretty Good – Part 1 and Part 2.

The bottom line is up 20% two years in a row actually suggests the potential for better than average returns in 2025, something we are on record is expecting next year. I will keep this one fairly quick, as this week we are putting the final touches on our Outlook 2025, which we will release in January.

We wish everyone out there a happy Thanksgiving. Enjoy some downtime with family and friends! Thanks for reading.

 

Six and Six
Tue, Nov 26, 2024

Both the S&P 500 and Russell 2000 came into the day riding 6-day winning streaks, and based on where both indices are trading at mid-day, the S&P 500 looks poised to extend that streak while the streak looks like it’s going to end for small caps. The current six-day streak for the two indices is the first time that both indices have simultaneously been up six days in a row since February 2021. Since 2000, there have only been 16 other streaks, so while they aren’t particularly rare, they aren’t too common either.

In the charts below of the S&P 500 and the Russell 2000, the red dots show each time the two indices were up six days in a row at the same time. Looking at the various occurrences, there were several from 2013 to 2014 and then from late 2016 through 2017, and in most cases, they occurred within longer-term uptrends. The only notable exception was in June 2007.