Stock Market Today: September 30th - October 4th, 2024

Welcome to the trading week of September 30th!

Dow jumps 100 points to close at a record, major averages extend rally to third week: Live updates



The Dow Jones Industrial Average climbed to a fresh record on Friday as traders digested new data that pointed to further progress in lowering inflation. Wall Street also posted three straight positive weeks.

The 30-stock Dow added 137.89 points, or 0.33%, ending at 42,313.00. The blue-chip average posted a closing record and reached an all-time high during the session. The S&P 500 ticked down 0.13% to 5,738.17, while the Nasdaq Composite lost 0.39% to end at 18,119.59. A 2% decline in Nvidia weighed on the technology-heavy index.

The major averages each extended their gains to a third week, with the S&P 500 and the Dow rising about 0.6% for the period. The Nasdaq advanced nearly 1% during the week.

Traders received encouraging inflation data that could give the central bank more reason to confidently cut interest rates further. August’s personal consumption expenditures price index — the Federal Reserve’s favored measure of inflation — increased 0.1%, matching expectations from economists polled by Dow Jones. PCE increased 2.2% at an annualized pace, below the 2.3% forecast.

Policymakers and investors alike are hoping for persistent cooling in monthly inflation figures, allowing for continued easing of borrowing costs that will ease the strain on corporate and household balance sheets.

“To the extent that inflation remains under control – and we continue to trend in that direction – the Fed can focus almost entirely on the labor market, which means a rate-cutting bias,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “As the Fed cuts rates – especially in the absence of recessionary growth – it is a great tailwind for both stock and bond markets and should eventually provide some relief for those consumers that are more interest-rate sensitive.”

Wall Street is coming off a winning session, after a batch of data assured investors of the strength of the U.S. economy. Initial jobless claims fell more than expected in the latest week, indicating a strong labor market, while the final reading of second-quarter gross domestic product came in at a robust 3%.

This past week saw the following moves in the S&P:


S&P Sectors End of Week:


Major Indices End of Week:



Major Futures Markets End of Week:


Economic Calendar for the Week Ahead:


What to Watch in the Week Ahead:
(N/A.)

 

Gold & Crypto Rip As US Stocks Shrug Off Shanghai Money-Drop
FRIDAY, SEP 27, 2024 - 04:00 PM

One of these things is not like the others...



Source: Bloomberg

Chynaaah crushed it this week as Beijing unleashed the bazooka to Make China Wealthy Again after one of our best-timed calls ever...

European equities benefited more from the apparent liquidity-gasm coming from the east, but US equities were mixed on the week with Small Caps actually ending lower and Nasdaq managing only a 1% gain (well offthe 2.5% gains at the peak mid-week)...



Not exactly the kind of week the bull shad hoped for when China dropped their Headlines.

Mag7 stocks ended the week unchanged...



Source: Bloomberg

China Internet stocks soared 32% MTD, while Mag7 stocks are up just 3%...



Source: Bloomberg

'Most Shorted' stocks managed decent gains on the week (thanks to Thursday and Friday)...



Source: Bloomberg

Growth and Value were equally (mildly) impressed this week



Source: Bloomberg

Fed rate-cut expectations chopped around but were basically unchanged on the week (thanks to a dovish shift today)...



Source: Bloomberg

Treasury yields were mixed on the week and only modestly changed close-to-close on the week with the short-end outperforming (2Y -3bps, 30Y +1bps)...



Source: Bloomberg

The yield curve steepened notably to start the week, then flattened aggressively yesterday, bouncing back off unchanged on the week today...



Source: Bloomberg

The dollar weakened for the 4th straight week, closing at its lowest since Dec 2023...



Source: Bloomberg

Gold rallied for the 3rd straight week, breaking to new record highs before today's sell-off...



Source: Bloomberg

Bitcoin also rallied the 3rd straight week, breaking above $66,000 today...



Source: Bloomberg

Ethereum rallied off January lows and broke above $2700 this week...



Source: Bloomberg

Despite all the stimmies and WW3 risk, oil prices were lower on the week (of course)...



Source: Bloomberg

Finally, macro growth data is surprising to the upside, and macro inflation data is surprising to the downside...



Source: Bloomberg

Does that look like an environment that needed a 50bps rate-cut? Or that needs 75-100bps more by the end of the year?

Perhaps this is why gold and crypto is rallying hard...



Source: Bloomberg

US Sovereign risk exploding higher... did The Fed cut rates to rescue the Treasury?

 

Guess What? The Bearish Narratives Look Even Worse Now


We just got a slew of economic data revisions from the Bureau of Economic Analysis (BEA) and my first response was, Wow! A lot of this is backward-looking data, but it’s important to (re) level-set where we are, and the momentum associated with that. As my colleague Barry Gilbert said to me after these revisions, it shifts the forward-looking perspective, because we’re standing in a different place than we thought.

Let’s start here: GDP growth over the last 5 years was revised up. From the end of 2019 through 2024 Q2, real GDP growth was revised up from 9.4% to 10.7%. Here’s some perspective on that upward revision of 1.3%-point:

• Germany grew just 0.3% over the entire period (hard to call it “growth”)
• The UK grew 2.3%
• Japan grew 3.0%

One of my favorite charts is the one below, which compares Congressional Budget Office (CBO) pre-pandemic projections for growth to actual growth. Actual real GDP growth is running 2.3% above what the CBO projected back in January 2020. Remember, this is after a worldwide pandemic, 40+ year highs in inflation, and an ultra-aggressive Fed. There’s a reason why the S&P 500 has risen over 90% over this same period, and that was because economic activity drove profit growth (I wrote about this earlier this week).



There’s more: Gross Domestic Income (GDI) was also revised higher, by a lot. GDP and GDI are both measure of output. GDP measures production/sales (household consumption, investment, government spending, net exports), whereas GDI measures incomes (labor income, interest, profits, etc.). In theory, they should be the same, but they differ because the data sources are entirely different. The divergence was huge, until the revisions. Real GDI growth was revised up significantly. For the end of 2019 through 2024 Q2, it was revised up from 7% to 11%. There was a bearish narrative that GDP would be revised down to GDI (there was never a basis for that), but now GDI growth is actually outpacing GDP in the post-Covid era.



By the way, with the revision there was no “technical recession” in 2022. A technical recession is colloquially described as two consecutive quarters of negative GDP growth. However, it’s typically used for countries other than the US. That’s because in the US, a recession is officially “dated” by the National Bureau of Economic Research (NBER). The NBER recession dating committee does not use GDP (or GDI), instead focusing on six other economic indicators measuring consumption, income, employment, sales and production. The prior data showed that GDP growth was negative in Q1 and Q2 of 2022, prompting a hue and cry from the bears who were apoplectic that a recession wasn’t “called.” Never mind that most economic indicators pointed away from a recession even in mid-2022. Ryan and I spent a lot of time pushing back against the recession narrative over the last two years, whether on the Facts vs Feelings podcast, blogs, and even our Outlooks. Well, Q2 2022 GDP growth was revised up, and now we don’t have two consecutive quarters of negative GDP growth (or GDI for that matter). Another narrative bites the dust.



Here’s something that is hardly being talked about, and ought to be celebrated: over the last two years, real GDP growth has clocked in at an annualized pace of 2.9%, and over the last year it’s up 3.0%. The economy grew at an annualized pace of 2.4% over the entire 2010-2019 era, and even over the relatively stronger 2017-2019 period, it grew 2.8%.

That’s obviously backward-looking data, but as of now, the Atlanta Fed is projecting Q3 GDP growth at 3.1%, on the back of strong consumption and investment spending. The momentum continues.



Consumers Are in Better Shape Than We Thought
GDI was revised up on the back of stronger income growth for households and corporations (i.e. profits). Disposable income for households was revised higher, even as durable goods consumption was revised down. (Turns out Americans didn’t spend as much on durable goods like cars and recreational goods as we first thought.) As a result, the savings rate was revised up from 3.3% to 5.2% in Q2 2024. That’s lower than the 2019 average of 7.3%, but not that much lower. And remember that 2019 came at the end of a massive deleveraging cycle, as households were repairing their balance sheets after the financial crisis (which crushed stock and home prices).



By The Way, There’s No Manufacturing Recession
Survey data from the manufacturing sector have told us that the manufacturing sector has been in contraction for the last two years. The ISM Manufacturing PMI (a survey of purchasing managers) averaged 48.8 in Q2 2024 (any reading below 50 indicates the sector is in contraction). But with the GDP/GDI data, we also got “industry value add” data, which is actually a third way to measure output, this time aggregating output across various private sector categories, and the public sector. Turns out, real GDP grew 3.0% annualized in Q2 2024, and of that, 0.79%-points came from the manufacturing sector. That’s a quarter of the growth rate contributed by a sector that makes up just about 10% of the economy, and supposedly is in a recession. Over the last year, through Q2 2024, real manufacturing output has increased by 3.9%.



Underrated but Hugely Important: The Investment and Productivity Story
A big driver of upward revisions to GDP was investment, which more than overcame the downward revision to goods consumption over the last few years. We’ve written extensively about productivity, and how tight labor markets and investment are key to its growth, including in our 2024 outlook. Productivity gains allow for strong wage growth without excessive inflation. Turns out that’s the story of the US economy over the last year and half.

Upward GDP growth revisions imply productivity growth is likely stronger than reported. It was already strong, running at a 2.9% annualized pace over the last five quarters (compared to a 1.5% annualized pace from 2005-2019). Income growth has been really strong as well, with employee compensation running up over 6% over the past year through August. Yet, inflation has continuously eased. The core personal consumption expenditures index (PCE), which is the Fed’s preferred inflation metric, has eased from 3.8% a year ago to 2.7% as of August 2024. Over the last 3 months, it’s running at a 2.1% annualized pace, barely above the Federal Reserve’s (Fed) 2% target.



Like we’ve been saying since the beginning of the year, inflation is no longer a problem. The good news is that the Fed is recognizing this and signaled real intentionality at their September meeting to protect the labor market (by cutting 0.5%-points). A strong labor market is also key to productivity growth, boosting investment and keeping inflation benign. That will allow the Fed to continue easing interest rates, which will be a tailwind for the economy and markets.

Higher Interest Rates???
Fri, Sep 27, 2024

With all the talk leading up to last week’s rate cut, it became a forgone conclusion that interest rates would fall. People forget, however, that the Federal Reserve only has control over the short end of the yield curve, and as one moves further out on the curve, the Fed's control diminishes. At the long end of the curve, rates haven't declined; they’ve actually seen relatively large increases. The chart below shows how much 10-year yields moved in the days after the first cut of prior Fed easing cycles. In each of the bars below, we show the change in the 10-year yield from the close on the day before the first cut to where it closed seven trading days later (in the case of the current period that would equate to the period from the close on 9/17 through 9/26).

While longer-term interest rates tended to decline in the days that followed prior cuts to kick off easing cycles, the current period is one of just three when 10-year yields increased. The only other periods where yields also increased were following the cuts to kick off the 2001 and 2007 easing cycles.



To compare the change in yields in the current period to the 2001 and 2007 periods, the charts below show the 10-year yield in the six months before and after the first cut in each of the two prior cycles versus the 10-year yield over the last six months. For both periods, there are some similarities between the patterns leading up to the first cut. In each one, yields fell sharply in anticipation of the first cut (or the looming recession) and bounced when the Fed cut as investors became confident in the Fed’s ability to stave off a recession. In both cases, the bounce was short-lived, and yields quickly resumed their downward trajectory.





Given the similarities between the direction of yields, we were also curious to see if the path of the S&P 500 now had any similarities to the 2001 and 2007 periods. Starting with the period surrounding the 2001 cut, the patterns are nearly complete opposites. Whereas the S&P 500 was already plummeting after the dot-com peak in 2001, it’s at record highs now. The S&P 500’s performance in 2007 looks a bit more similar. In both cases, the S&P 500 experienced a moderate pullback in the weeks leading up to the cut and started recovering in advance of it. While the S&P 500 has already hit a new high since the Fed cut rates last week, in 2007 it took about three weeks for the index to get back to its prior highs. The new high didn’t last long, though, and within six months, the S&P 500 was near bear market territory with a decline of over 18%.





While the price charts of the S&P 500 now versus the period leading up to and after the 2007 rate cut look similar, breadth was notably weaker back then. As shown in the chart below, in 2007 (top chart), the S&P 500’s cumulative A/D line peaked in the spring, and as the S&P 500 made a new high in the summer, breadth made a lower high. Then again, October’s higher high was accompanied by a lower high in the cumulative A/D line.

For the current period, the S&P 500’s cumulative A/D line looks different than it did back then. This time, breadth has led prices to new highs, indicating a healthier underlying trend. Whether that positive breadth trend continues remains to be seen, but for now even as the S&P 500's performance in the last several weeks has been similar to its performance around the 2007 cut, there are some notable differences.





CFO Political Concerns & 40 Days Away
Thu, Sep 26, 2024

Yesterday, Duke University in partnership with the Atlanta and Richmond Federal Reserve Banks published their CFO Survey results for the third quarter. We discussed the bulk of the findings of the survey in last night's Closer, including the chart below showing what CFOs reported to be their most pressing concerns. As shown, monetary policy continues to be the most common concern among CFOs albeit that share was the lowest in a year as rate cuts have begun. Sales/Demand was the next most common response having picked up from only 8% the previous quarter to 9.6% in Q3. Meanwhile, labor quality/availability as a concern has fallen steadily down to the lowest level in at least a year at 9.5%. Conversely, the share of respondents saying health of the economy is the most pressing concern more than doubled to 8.7% of responses.

There are not always the same reasons reported quarter to quarter, and Q3 featured a new and timely reason: Political Climate/Election. Any political tensions in the US aside, this reason did rank low, accounting for only 3.8% of responses which is roughly equal with the share reporting non-labor costs and regulation as the biggest problems.



In addition to adding politics to the most pressing concern question, the survey featured a couple of election-specific special questions. In response to the question "Has uncertainty related to the upcoming U.S. Presidential and Congressional elections led your firm to do any of the following to your investment plans?", roughly two-thirds of firms reported that there has been no change. In other words, a vast majority of firms are pressing ahead with investment plans regardless of the election outcome. As we discussed in our Investing and Politics slides (which is worth checking out given the upcoming election), most of the time, politics is less impactful on business than we may initially think.

With that said, we would be remiss to not mention there are another 36.7% that reported they would either cancel, postpone, delay, or scale down investment plans on account of the election (note: respondents could select more than one option; percentages do not sum to 100). The survey additionally asked what CFO's most important policy topic is for the election. Predictably, regulatory policy ranked as the highest followed by monetary policy. Fiscal policy and taxes were the next two issues to also account for more than half of responses.



Checking in on the election, today marks 40 days until Americans take to the polls. Using data from ElectionBettingOdds.com which shows aggregate betting market odds for the outcome of the election, Harris is narrowly favored with a 51.5% chance to Trump's 47.5% chance. Whereas over the summer the election was looking like it could be a landslide for Trump with his odds closing in on a 70% chance of winning, since Biden dropped out with Harris as the replacement, Democrats have seen their odds improve considerably. Over the past couple of months, there has been a decent amount of back and forth in betting markets' favoritism and in the past several days those odds are again narrowing. As shown in the second chart below, the odds at 40 days until the election are now the narrowest yet for the comparable point in time versus the 2016 and 2020 elections. While the race is close currently, we would note that on the day before Election Day in 2016 and 2020, the odds widened out massively with Democrats heavily favored each time. Ultimately, those odds proved right once (2020) and wrong once (2016). That means while betting markets can be a gauge on what will happen in November, the findings are far from a sure thing.





Octoberphobia Intensifies in Election Years



Election year Octobers rank dead last for DJIA, S&P (since 1950) and NASDAQ (Since 1971). Uncertainty ahead of Election Day can intensify Octoberphobia into a self-fulfilling prophecy, which can produce heightened volatility and market setbacks October is infamous for.

Over the last twenty-one years (2003-2023), the full month of October has been a fairly solid month for the market, ranking #4 for DJIA, S&P 500 and NASDAQ, #5 for Russell 1000 and # 6 for Russell 2000. All have logged average gains ranging from 0.8% by Russell 2000 to 1.5% by NASDAQ. But these gains have been accompanied by volatile trading, most notably during the early days of the month.

October has historically opened softly with modest average gains on its first trading day. On the second day, all but Russell 2000 have been weak followed by a rebound on the third trading day before additional weakness pulled the market lower through the seventh or eighth trading day. At which point, the market has historically found support and begun to rally through mid-month and beyond.

In election years since 1950, October has been weak from the start with some strength around mid-month followed by a second wave of weakness before rallying to the finish with a loss. Steep declines in October 2008 do influence the pattern, but weakness persists even when 2008 is excluded.

The New Record High for Markets Is Not a “Sugar High”


Last week was all about the Federal Reserve (Fed) jump-starting the rate cut cycle with a 0.5%-point cut. But amidst all the commentary around that, it’s easy to forget about what ultimately drives equities: profits.

Note that what the Fed did was important even from this perspective. A Fed that is looking to cap the unemployment rate at around 4.4% is also trying to put a floor on the economy. And the economy is where profits come from. After all, one person’s spending is another person’s income or business’s revenue and profits. And spending is driven by incomes, which is why the labor market is the ballgame.

The good news is that profit expectations continue to rise. Expected earnings per share for the S&P 500 over the next 12 months is now at $266, about 10% higher than it was at the end of last year.



I’ve pointed out in past blogs that we can break apart the price return of a stock (or index) into two components: earnings growth and valuation multiple growth (forward P/E). Note: I use forward expectations here because markets look ahead.

As of September 23, the S&P 500 price index was up 19.9% year to date, of which

• Earnings growth contributed +10.3%-points
• Multiple growth contributed +9.6%-points

As you can see in the chart below, the volatility in the S&P 500 has come from multiples swinging wildly back and forth. Meanwhile, earnings expectations have moved steadily higher. Right now, profit growth makes up just over half the S&P 500’s year-to-date return. Contrast to two months ago, when valuations contributed the majority of the return.



A More Important Story: Margin Expansion
“Operating leverage” allows firms to expand margins as sales grow (even modestly). And corporate America now has a lot more operating leverage thanks to a lot of cost cutting in 2022, especially variable costs. 2022 was a year of low productivity, as firms felt the blowback of over-hiring and over-spending in 2020-2021. Sales grew but margins fell. So corporate America pulled back. However, getting more conservative bore fruit in 2023. Sales grew amid strong nominal GDP growth, and margins expanded. That’s a result of more operating leverage. This also showed up in rising economy-wide productivity, which has continued into 2024 and is positive for earnings/margins going forward as the economy continues to grow. S&P 500 margins are now at a new high of 13.4%.



Diving back into attribution of S&P 500 returns, we can separate earnings growth into sales growth and margin expansion. I’m going to include dividends as well, to get to “total return.” Looking back at the prior record high for the S&P 500 on July 16, it was up 19.7% year to date back then, of which the contributions broke down as

• Sales growth: +3.8 %-points (pp)
• Margin expansion: +4.2 pp
• Multiple growth: +10.8 pp
• Dividends: +0.9 pp

Fast forward to this week, and the S&P 500 was up 21.1% year to date as of September 23. Here’s how the components added to that total return:

• Sales growth: + 4.8 pp
• Margin expansion: +5.5 pp
• Multiple growth: +9.6 pp
• Dividends: +1.2 pp

My colleague, Carson’s Chief Market Strategist Ryan Detrick, was on CNBC last week talking about how the Fed going with a big cut was actually positive for markets (so far that’s borne out). However, the anchor wondered if these were “sugar highs.” I’m not sure you can call these new record highs sugar highs, especially since they’ve come on the back of sales growth and even more so, margin expansion. In other words, strong fundamentals in the corporate sector are driving returns more than just positive sentiment. (They’re obviously correlated, but sentiment can swing wildly as we saw last month.)

Even the Last 5 Years Haven’t Been a “Bubble”
New record highs for equity indices always raises concerns, and we typically see questions or comments in the form “Is this it?”, or “Should we reduce exposure?”, or “Things look stretched!”. Ryan’s done some great work showing that new highs lead to more new highs, as momentum begets momentum.

But let’s broaden out the horizon. From the end of 2019 through September 23, 2024 (a quarter shy of 5 years), the S&P 500 is up 90%. Here’s how the various components contributed to that massive total return:

• Sales growth: +41 pp
• Margin expansion: +16 pp
• Multiple growth: +19 pp
• Dividends: +14 pp

The big takeaway is that 71%-points of the total return came from “fundamentals,” i.e. profit growth (sales + margin expansion) and dividends. Another lesson is that you shouldn’t ignore dividends — its contribution is almost as strong as multiple growth.

Now, as you can see in the chart below, in individual years we can see wild swings, especially if valuations pull far ahead (like 2020) or revert back (2022). But ultimately over the long run, it’s usually earnings growth that drives returns (and dividends). As our friend Sam Ro (who writes the Tker substack), says, earnings are the most important driver of stock prices. And earnings for US companies have been going up for a very long time, which explains why stocks have gone up. The main pullbacks in profits have occurred during recessions.



(Source: Deutsche Bank)

The good news is that we’re not in the middle of a recession now, nor is one imminent. And it looks like the Fed has cut the risk of one occurring over the next 6-12 months as well by signaling its intention to backstop the labor market. That’s a tailwind for profit growth, and markets.

October is Worst Month in Election Years



“Octoberphobia” has been used to describe the phenomenon of major market drops occurring during the month. Market calamities can become a self-fulfilling prophecy, so stay on the lookout. October can evoke fear on Wall Street as memories are stirred of crashes in 1929, 1987, the 554-point DJIA drop on October 27, 1997, back-to-back massacres in 1978 and 1979, Friday the 13th in 1989 and the 733-point DJIA drop on October 15, 2008. During the week ending October 10, 2008, DJIA lost 1,874.19 points (18.2%), the worst weekly decline, in percentage terms, in our database going back to 1901. March 2020 now holds the dubious honor of producing the largest and third largest DJIA weekly point declines.

However, October has been a turnaround month—a “bear killer” if you will, turning the tide in thirteen post-WWII bear markets: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002, 2011 (S&P 500 declined 19.4%), and 2022. Only 1960 was an election year. While not in an official bear market this year, the market has recently endured bouts of seasonal weakness this year in early August and at the beginning of September. Despite the current Fed-rate-cut fueled rally, another round of weakness ahead of Election Day cannot be ruled out entirely.



Election-year Octobers rank dead last for DJIA, S&P 500 (since 1952), NASDAQ (since 1972) and Russell 1000. For Russell 2000 (since 1980) election year Octobers rank #11, March is worst. Eliminating gruesome 2008 from the calculation provides a little relief, as rankings improve at most two steps (DJIA). Should a meaningful decline materialize in October it may be an excellent buying opportunity, especially for any depressed technology and small-cap shares.

Six Things to Know About Rate Cuts


“Be yourself. No one can say you’re doing it wrong.” -Charlie Brown

The big story last week was the Federal Reserve Bank (Fed) cutting interest rates for the first time since March 2020. Sonu Varghese, VP Global Macro Strategist, discussed some of the reasons stocks soared after the Fed cut rates, but today I’ll look more at how stocks and various asset classes do after cuts.

Here are six things to know about rate cuts.

Why Are They Cutting?
First things first, why are they cutting? If they were cutting due to a panic (think March 2020) or due to a recession (like in 2001 or 2007), potential trouble could indeed be lurking. But as we’ve been discussing all year, we do not see a recession coming and with inflation back to manageable levels, there was simply no reason to have interest rates up over 5%. This is what we call a normalization cut, which historically has led to continued higher prices.

Here’s a table we put together earlier this year that shows a year after the first cut in a cycle, stocks were higher a year later eight out of 10 times and up a solid 8.0% on average. Yes, 2001 and 2007 are in there, which you’ve probably heard about many times the past week if you’ve watched financial media at all. But we think now is more like the normalization cuts we saw in 1984, 1989, 1995, and even 2019, all of which saw continued gains a year later.



Historically, What Do Sectors Do After the First Cut?
Using data from BofA’s US Equity and Quant Strategy team we see that healthcare has tended to lag a year after the first cut, while areas like tech, materials, and real estate have led.



What About Various Asset Classes?
Nice chart from Bloomberg here that shows what various other asset classes do historically after the first cut.



Yes, Cuts Near All-Time Highs Are Common
Are rate cuts near all-time highs (ATH) normal? It turns out they are and the last time we saw this was in 2019. We found 20 times the Fed cut interest rates within 2% of new all-time highs and wouldn’t you know it, a year later stocks were higher all 20 times. There’s an old saying not to fight the Fed and this is what they mean.



The S&P 500 jumped 1.7% on Thursday after the rate cut, so this might be early, but it is most definitely off to a nice start. Matching the 13.9% gain on average a year later would be something we think most investors would be quite happy with right now.

Here’s a nice chart showing all the data.



Big Gains Going Into a Cut Is Quite Bullish
The S&P 500 gained more than 25% the 12 months prior to last week’s cut. One might think that big gains like that could mean some mean reversion, but that isn’t the case. Our friends at Bespoke Investment Group did this great study that showed that if the S&P 500 added more than 25% the 12 months before a first cut, it historically added nearly another 20% the next 12 months and has been higher 10 out of 10 times.



Small Caps Tend to Outperform Once the Cutting Starts
Here’s another great one the team at BofA, this time showing that small caps tend to do quite well relative to large caps that first year after the first rate cut. We’ve been overweight small and midcaps most of this year and one reason we’ve been in that camp was we expected rate cuts to be a tailwind for these areas. Similar to Lucy pulling away the football on Charlie Brown, we’ve seen small cap outperformance for stretches many times, only to have the football pulled away. Well, with cuts now here and more on the way, we think ol’ Charlie Brown is about to kick the longest field goal of his life.



Record Highs for Gold and Gold Positioning
Tue, Sep 24, 2024

As we do at the start of each week, in Monday's Closer we recapped the latest positioning data from the CFTC's Commitments of Traders report. In essence, this data highlights whether traders are in aggregate positioned long or short in various futures contracts. In the charts below, we show the historical net percentage of open interest net long (short) for gold and silver futures. Higher positive readings indicate that positioning is net long (more longs than shorts), while negative readings indicate that positioning is net short (more shorts than longs).

Last week's data saw a number of big moves in commodity futures, but some of the most notable were in the precious metal space. For starters, silver rose to 41.5% net long. That makes for the most optimistic positioning since April 2017. As gold continues to trade at record highs, traders have gotten extremely long at 57.7%, which is a record high in this series dating back to 1986!



As shown above, last week's record high in gold positioning isn't the first of the year. So far in 2024, there have been five weeks with record highs. As shown below, that is the largest number of record highs since 2009 when there were six.



Again, the new high in gold positioning comes as gold itself is trading at record highs. In the chart below, we show the price of gold during the history of the Commitments of Traders data and plot each time that positioning was also at a record high. Of these occurrences since 2000, gold has usually been trending higher when gold long positioning reaches a record. That was also the case in the 1980s, albeit that was early on in the CFTC data's history, and as such, back then the net long readings were significantly lower than they are now. The 1990s were a bit different as the strong reads on positioning came at a time when gold was sitting in a downtrend.



The Fed's Quarterly Review of Household Wealth
Tue, Sep 24, 2024

The conventional wisdom in investing suggests that individuals should reduce their exposure to equities as they age. This strategy is based on the principle that younger investors have a longer time horizon and can afford to take on more risk, while older investors, nearing or in retirement, should focus on preserving capital and minimizing risk. However, the chart below depicting equity and mutual fund shares as a percentage of financial assets by age groups reveals a notable deviation from this traditional approach. Surprisingly, it is the oldest cohort of investors—those aged 70 and above—who maintain the highest levels of equity and mutual fund exposure, with the trend intensifying over time. This data comes from the most recent quarterly Distributional Financial Accounts report from the Fed analyzing household wealth.

The discrepancy in equity market exposure for older and younger age groups can largely be attributed to the dramatic rise in the stock market over the past few decades, which has significantly boosted the wealth of older investors. However, it also underscores a broader trend: younger generations are notably underrepresented in equity markets. This is likely due to a combination of lower net worth, fewer savings, and perhaps even a more cautious approach to investing. Nevertheless, younger investors, with their longer investment horizon, should ideally have a higher proportion of their financial assets in equities to capitalize on potential long-term growth. We would note, though, that the <40 age group now has a slightly higher share of equity market exposure than the 40-54 age band, and the reading for sub-40 investors has skyrocketed since COVID while the 40-54 age group has merely trended sideways over the last ten years.



In a similar vein, you might expect older investors to have more cash in the form of deposits and money market funds than younger age groups, but it's actually the sub-40 group that currently has the highest percentage of cash at 20.2% of financial assets. Back in the 90s, older investors carried much higher cash levels than younger investors, but that trend reversed in the years following the Financial Crisis. The sub-40 group has held the highest cash levels of any age cohort for 12+ years now. All things equal, we view it as bullish for the long-term health of the market that younger investors currently have lower equity exposure and higher cash levels. It suggests there's plenty of money out there ready to "Get Invested!" at some point.



Opposites On Top
Mon, Sep 23, 2024

Before last week, when the S&P 500 last made a record high in July, breadth was incredibly narrow as only two sectors - Technology and Communication Services (driven mostly by 'tech-like' stocks) - had outperformed the S&P 500 on a YTD basis. In the latest leg of the rally, breadth has broadened, and as of last Friday, the number of sectors outperforming the S&P 500 has doubled from two to four. While Technology and Communication Services remain on the outperformer list, Utilities and Financials have also joined. Utilities is not only a new entry on the outperformer list but it has also moved to second overall trailing only Technology (27.4% vs 25.6%).



The chart below compares the paths that Technology and Utilities have taken on a YTD basis along with the performance of the S&P 500. While the two sectors have similar returns, they have mostly achieved those gains at alternating points in the year. In the first two months of 2024, Technology came out of the gate strong while Utilities started the year with modest declines. As March rolled around, Tech's momentum stalled while Utilities picked up. In early summer, we saw a similar trend to the start of the year play out until early July when the two sectors' roles started to reverse again.



The opposite paths of the two sectors stick out much more when we look at their relative strength versus the S&P 500 this year. For each sector, a rising line indicates outperformance versus the S&P 500 while a falling line indicates underperformance. For almost all of this year, the two series have been mirror images of each other. So even as they sit at number one and two in terms of YTD performance their paths couldn't have been much more different. What makes the different paths even more notable is that, as last week's deal between Microsoft (MSFT) and Constellation (CEG) illustrates, both sectors have been riding the same wave to the top of the sector leaderboard.

 

Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2024-



S&P sectors for the past week-

 

Here are the current major indices pullback/correction levels from 52WK highs as of week ending 9.27.24-


Here is also the pullback/correction levels from current prices


Here are the current major indices rally levels from 52WK lows as of week ending 9.27.24-

 

​

Here are the upcoming IPO's for this week-

 

Stock Market Analysis Video for September 27th, 2024
Video from AlphaTrends Brian Shannon


ShadowTrader Video Weekly 9/29/24
Video from ShadowTrader Peter Reznicek
(VIDEO NOT YET POSTED.)

 

StockBoarders! Come join us on our stock market competitions for this upcoming trading week ahead!-

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StonkForums Q4 2024 Quarterly Stock Picking Contest & SPX Sentiment Poll <-- click there to cast your quarterly market direction vote and stock picks for Q4 of this year 2024!

StonkForums October 2024 Stock Picking Contest & SPX Sentiment Poll <-- click there to cast your monthly market direction vote and stock picks for October of this year 2024!

StonkForums Weekly Stock Picking Contest & SPX Sentiment Poll (9/30-10/4) <-- click there to cast your weekly market direction vote and stock picks for this coming week ahead!

Daily SPX Sentiment Poll for Monday (9/30) <-- click there to cast your daily market direction vote for this coming Monday ahead!

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It would be pretty sweet to see some of you join us and participate on these!

I hope you all have a fantastic weekend ahead!

 

​

Here are the most anticipated Earnings Releases for this upcoming trading week ahead.

***Check mark next to the stock symbols denotes confirmed earnings release date & time***

Monday 9.30.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES!

(NONE.)

Monday 9.30.24 After Market Close:

Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Tuesday 10.1.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Tuesday 10.1.24 After Market Close:

Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Wednesday 10.2.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Wednesday 10.2.24 After Market Close:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Thursday 10.3.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Thursday 10.3.24 After Market Close:

Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Friday 10.4.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Friday 10.4.24 After Market Close:

Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES!

(NONE.)

 

And finally here is the most anticipated earnings calendar for this upcoming trading week ahead-
($CCL $NKE $PAYX $LEVI $LW $MKC $AYI $STZ $UNFI $CAT $RGP $RPM $ANGO $APOG)


If you guys want to view the full earnings post please see this thread here-

• Most Anticipated Earnings Releases for the week beginning September 30th, 2024 <-- click there to view!

 

Top of the morning StockBoarders! Happy Monday to all of you and welcome to the final trading day of the month and quarter and a frrrrrrrrrrrresh start. Here is a quick check on those futures as we are under an hour away from the US cash market open.

GLTA on this Monday, September the 30th, 2024!

 

Morning Lineup - 9/30/24 - China's Unbelievable Rally
Mon, Sep 30, 2024

US equity futures are modestly in the red to kick off the week. That follows a poor start to the week for European markets as well. In Asia, most major benchmarks were also lower to start the week with one big exception. Chinese stocks have continued their gangbusters rally ahead of the week-long holiday where markets will be closed until October 8th, and it appears as though a rush to cover shorts ahead of that closure sparked a frenzy in that country's stock market.

Look at the chart below because you may not see one like it again, at least for the stock market of the world’s second-largest economy. As we noted on Friday, China’s Shanghai CSI 300 went from a 52-week low to a 52-week high in less than two weeks, and as unbelievable as that rally was, it followed through on that run with a gain of over 8% to kick off the week. Again, charts like this may not be impressive for an individual small-cap stock, but the CSI 300 has a market cap of over $7 trillion.



Last night’s gain in the CSI 300 was the largest in more than 15 years, and there have only been three other days since China entered the WTO that the index had a larger one-day gain.



As mentioned above, last night’s rally capped off what had already been an impressive run for the CSI 300, and the index has now traded higher for nine straight trading days. That’s tied for the second-longest streak of daily gains on record trailing only the 12 gain in December 2014.



This next chart could be the most unbelievable of them all. The CSI 300 has surged just over 25% in the last five trading days. No other five trading day period since 2002 even comes close.



What’s most ironic about the last five days of gains is how much Chinese stocks still are in the hole. From the post-COVID high in February 2021, the CSI 300 remains in a drawdown of over 30%, and the index is still down modestly relative to where it was two years ago and essentially unchanged over the last five years.

 

Here is a final look at today's market and futures maps, as well as how each sector performed individually at the close on Monday, September 30th, 2024.

 

Top of the morning StockBoarders! Happy Tuesday to all of you and welcome to the first trading day of the October and Q4 and a frrrrrrrrrrrresh start. Here is a quick check on those futures as we are over an hour away from the US cash market open.

GLTA on this Tuesday, October the 1st, 2024!

 

Good Tuesday morning StockBoarders!

Here is this morning's pre-market news thread for those of you wanting to get a quick read before today's open-
<-- click there to read!

Hope everyone has a great new trading month and quarter ahead!

 

Here are this morning's gappers up & down: