TOPLEY’S TOP 10 May 28 2024

1 – 2. Q1 Earnings Recap

Nasdaq Dorsey Wright
AI-focused “Fab Five” lift large caps to best earnings growth in almost 2 years.
We wanted to hold off until we got Nvidia’s earnings before doing our Q1 earnings recap… and they did not disappoint (+468% YoY earnings growth for Nvidia)! 
Now, Q1 earnings season is all but done for the S&P 500 (96% reported), and it turned out pretty well for large caps (and especially mega caps).
S&P 500 earnings grew +6% YoY in Q1 (chart below, orange bar) – the strongest growth in nearly two years.

But, as we showed a month ago, earnings were top heavy. Earnings for the AI-related “Fab Five” (Amazon, Google, Meta, Microsoft, and Nvidia) grew +85% YoY, while earnings actually fell 2% YoY for the rest of the S&P 500.
3 buckets of sector earnings: AI-related, ongoing earnings recessions, and everyone else
At the sector level, the divide wasn’t quite so stark. Instead, they fell into three buckets: AI-related sectors, those still in earnings recessions, and everyone else (chart below).

  • AI-related sectors saw 25%+ YoY earnings growth: Information Technology, Communication Services, Consumer Discretionary, and Utilities (dark green bars).
  • Continued earnings recessions for Health Care, Energy, and Materials (red bars) for the same reasons (drop in Covid-related spending, 25% YoY drop in natural gas prices, and earlier manufacturing recession, respectively).
  • Everyone else saw +4% to +10% YoY earnings growth. These sectors (Financials, Industrials, Consumer Staples, and Real Estate) aren’t AI hubs, but they’re still benefitting from a strong economy (light green bars).

3. S&P 5 Straight Weeks of Gains…..Positive 23 of Past 30 Weeks

Jim Reid Deutsche Bank
After another run of 5 consecutive weekly gains, the S&P 500 is in rarefied historical territory again. For example, the index is now up for 23 of the last 30 weeks, which is a joint record since 1989. And if this week ahead is positive again, it would mark 24/31 weekly advances, which would be a joint record back to 1963.

Unsurprisingly, some of these relentless advances happen as the economy is recovering from a recession. So, in 1958 for example, the index set an all-time record of 26 positive weeks out of 30. Equities went on a serious rally as output began to rebound after the 1957-58 recession, whilst unemployment came down. It’s a similar story in 1954 and 1980, and some have made that recession argument about today’s moves since a US recession in 2023 had been the overwhelming consensus at one point. But as optimism about a soft landing has grown, equities have rallied very strongly.

Another theme is that the rallies have often occurred around periods of tax cuts. There was a very strong rally in 1964, which came around the time that President Kennedy’s proposed tax cuts came into force, having been signed by President Johnson in 1964. Another happened in 1986, ahead of the passage of the Reagan tax cuts in his second term, which substantially reduced the top rate again. A similar theme happened in 2017-18, around the passage of the Trump tax cuts. Given markets are forward-looking, it’s plausible that this anticipation is working beforehand as well as afterwards.

A more concerning theme is that a few of these happen shortly before recessions – a last hurrah for equities if you will. In fact, by March 1929, the S&P 500 had gone on a run of 23/30 gains, just like today, yet the Wall Street Crash happened six months later. Likewise in December 1989, it had been on a run of 23/30 gains, but the economy was in recession within the year. It’s the same in March 1945, where the 23/30 weekly rally ended just as a recession was beginning.

So, are markets rallying on the lack of a recession, or is this the last gasp before the next recession? Either way, the chart shows that we’re nudging up against what would be the most relentless run of gains in history.


4. Percentage of Stocks with Dividend Yields Above Treasury Yields.

Ned Davis Research


5. It’s Not Anything Close to 1999…Check P/E’s Below

Charlie Bilello

Unsustainable Values: Interesting to reflect on this piece of historical art — while the internet would a decade or so later become ubiquitous and a source of tremendous wealth and innovation, at the height of the dot com bubble it was pure hype at that stage… certainly relative to the valuations prevailing at that time.

Source:  @kakashiii111 @NewLowObserver


6. China World Leader in Battery-Electric Vehicle Sales

Barrons By Al Root

https://www.barrons.com/articles/china-ev-tesla-ford-gm-trade-tarrifs-63cd62cc?mod=past_editions


7. Record Travel Memorial Day

CRUZ ETF still below all-time highs.


8. First Drop in Home Remodeling 10 Years…9% Home Credit Lines

WSJ By Ryan Dezember  
A widely cited barometer of the remodeling market is pointing to the first annual decline in home-improvement spending since the housing bust of the late 2000s. That would follow a run up to last year’s record $481 billion, threatening a reliable source of economic growth and stock-market gains.

https://www.wsj.com/economy/housing/deck-makers-450-million-bet-on-americas-renovation-boom-69969f9c


9. Cannabis Passes Alcohol in Daily Consumption

www.zerohedge.com


10. Steady 54% of Americans Identify as Middle Class

More Republicans, fewer Democrats identify as working class and lower class
BY MEGAN BRENAN

https://news.gallup.com/poll/645281/steady-americans-identify-middle-class.aspx

TOPLEY’S TOP 10 May 24 2024

1. REITS Roll Back Over

VNQ Vanguard Real Estate ETF 4 lower highs on chart.


2. Follow-Up on Dow Theory…Transports Not Cooperating

Marketwatch-by Christine Idzelis

https://www.marketwatch.com/livecoverage/stock-market-today-dow-futures-lag-tech-gains-as-nvidia-stock-pops/?mod=home-page


3. Transports Chart-A Couple Ticks from New 2024 Lows


4. Semiconductors New Highs

SMH-Semiconductor ETF….Does Dow Theory Stil Matter?


5. China De-Dollarizing Cross Border Transactions

Zerohedge Blog The De-Dollarization of China’s Cross-Border Transactions

This analysis uses Bloomberg data on the share of China’s payments and receipts in RMB, USD, and other currencies from 2010 to 2024. 

In the first few months of 2010, settlements in local currency accounted for less than 1.0% of China’s cross-border payments, compared to approximately 83.0% in USD. 

China has since closed that gap. In March 2023, the share of the RMB in China’s settlements surpassed the USD for the first time.

Since then, the de-dollarization in Chinese international settlements has continued.  

As of March 2024, over half (52.9%) of Chinese payments were settled in RMB while 42.8% were settled in USD. This is double the share from five years previous. According to Goldman Sachs, foreigners’ increased willingness to trade assets denominated in RMB significantly contributed to de-dollarization in favor of China’s currency. Also, early last year, Brazil and Argentina announced that they would begin allowing trade settlements in RMB. 

Most Popular Currencies in Foreign Exchange (FX) Transactions

Globally, analysis from the Bank for International Settlements reveals that, in 2022, the USD remained the most-used currency for FX settlements. The euro and the Japanese yen came in second and third, respectively.

The Chinese renminbi, though accounting for a relatively small share of FX transactions, gained the most ground over the last decade. Meanwhile, the euro and the yen saw decreases in use. 
https://www.zerohedge.com/geopolitical/start-de-dollarization-chinas-move-away-usd


6. The Dollar Still Strong

https://wolfstreet.com/2024/05/22/home-sales-whacked-by-mortgage-rates-active-listings-price-reductions-jump-to-highest-in-years-but-sales-of-high-end-homes-surge


7. Ethereum Gets the ETF Approval

ETHE about to make new highs.


8. XLE Energy ETF-Chart

A few lower highs …trending down.


9. Tax Burden by State

Food for Thought: The tax burden by state:

Source: Visual Capitalist


10. While U.S. Kids are on TikTok…….In Russia at war, kids swap classroom for shooting range

By Reuters

VLADIKAVKAZ, Russia, May 24 (Reuters) – Fourteen-year-old Russian schoolboy David learned something new this month: firing accurately with a Kalashnikov is trickier than with a pistol.
With other pupils, he got to try out the weapons as part of basic military training – a feature of the school programme that was dropped in the final years of the Soviet Union but has been reintroduced since the start of Russia’s war in Ukraine.
In the southern city of Vladikavkaz this month teenage boys in camouflage uniform took turns at firing weapons and practising first aid under the eye of instructors.
“It’s easier to fire a pistol. And it’s more difficult to take aim with an assault rifle,” said David, a lanky boy with black hair and glasses.
He said the firearms practice would “make life easier” for him in the future. Military service is compulsory for young men in Russia, whose war in Ukraine is now well into its third year.
Sergei Menyailo, a retired vice-admiral who is now the leader of Russia’s North Ossetia region, referred to the conflict in remarks to the youngsters, telling them the training would help them “to fulfil your military duty within a team” if they had to fight one day.
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The education ministry issued a decree in late 2022 introducing basic military training into the school curriculum as part of a subject called “basics of life safety”. Critics see it as part of a growing militarisation of Russian society since the start of the war.
Boris Kantemirov, local head of a volunteer organisation that supports the armed forces, said the training delivered skills that any soldier would need.
https://www.reuters.com/world/europe/russia-war-kids-swap-classroom-shooting-range-2024-05-24/

TOPLEY’S TOP 10 May 23 2024

1. New Lows in Stock Volatility VIX


2. List of Countries with Semiconductor Government Funding

Dave Lutz Jones Trading
South Korea has unveiled a 26 trillion won ($19 billion) package of incentives to bolster its chip sector – The total is more than double the 10 trillion won Finance Minister Choi Sang-mok had proposed less than two weeks ago.  Shares in Samsung reversed earlier losses to gain as much as 1.4 per cent in Seoul after the announcement. Other semiconductor stocks had climbed in Asia in the wake of Nvidia’s earnings blowout. SK Hynix’s stock extended its morning gains and was up about 3 per cent after the news.


3. The Size of AI Market

Capital Group

Separating AI hype from investment opportunity | Capital Group


4. NVDA 10 for 1 Split….Does Market Return to Stock Splits?


5. American Consumer is Spending at Record Rates


6. Months Supply of Existing Homes

Wolf Street

https://wolfstreet.com/2024/05/22/home-sales-whacked-by-mortgage-rates-active-listings-price-reductions-jump-to-highest-in-years-but-sales-of-high-end-homes-surge


7. Fast Food Inflation

From Zach Goldberg Jefferies


8. Surging Golf Membership Costs

Jack Ablin Cresset
As equity markets hit new highs, country club costs are surging and meme stocks are on the rise again.  Since the end of 2018, the cost of playing golf at public and private golf courses has surged more than 40 per cent, nearly twice the rate of inflation overall.

https://cressetcapital.com/about/team/jack-ablin


9. Top 10 Countries by GDP

Nasdaq Dorsey Wright

https://www.nasdaq.com/solutions/nasdaq-dorsey-wright


10. Think for Yourself

Psychology Today Steven A Hassan PhD

https://www.psychologytoday.com/us/blog/freedom-of-mind/202405/a-few-words-for-graduates

TOPLEY’S TOP 10 May 22 2024

1. Ethereum +52% in 5 Days


2. Gold/Oil and Inflation

Barrons
On Friday, May Comex gold settled at a record $2412.20 an ounce, up 32.8% from October. WTI crude, meanwhile, trades around $80 a barrel, up from around $70 a year ago, although off from its short-lived pop over $90 after Hamas’ Oct. 7 attack on Israel. (For more on the bullish outlook for energy, see “12 Stocks to Play Growing Energy Demand.”)

Looking at what has happened to gold and oil, “the inflation outlook in the coming year is for a large increase,” Ranson concludes from his model.


3. Gold Priced in Yen

Bespoke Investment Group

https://www.bespokepremium.com/interactive/posts/think-big-blog/the-closer-tech-new-highs-fedspeak-build-conference-5-20-24


4. Silver Breaks Out of 5 Year


5. Silver Market Shortages

Commodities: The global silver market is on course for the fourth straight year of shortages.

Source: @markets   Read full article


6. Two Wars but Oil Volatility Measure Hitting New Lows

Dave Lutz Jones Trading
Oil’s implied volatility near lows last seen in 2019 according to one measure, despite ongoing drone strikes on Russian oil refineries and another Houthi attack against a tanker in the Red Sea area over the weekend.


7. Ratio Emerging Markets to U.S.

@Charlie Bilello With China rally, this becomes chart to watch


8. GenAI Demand for Energy

Marketwatch
“Demand for electricity was almost flat for two decades. We are now beginning to see this trend reverse — driven by large customers such as industrial manufacturers, data processors and others who require significant amounts of power,” Fowke said as he spoke before the committee.

He told the panel that a large manufacturing facility just a few years ago might have required the same amount of power as 100,000 homes, but now it’s common for a single data center to need up three times, or even 15 times, that amount of juice.

https://www.marketwatch.com/story/ai-could-demand-a-shocking-amount-of-electricity-check-out-this-chart-e91e306d?mod=home-page


9. College Sports S-Show

Morningbrew

https://www.morningbrew.com/daily


10. Psychologist Adam Grant Says Your Overall Success at Work Comes Down to 3 Familiar Words

The always-brilliant Adam Grant offers a different spin on success and work-life balance.
BY MARCEL SCHWANTES, INC. CONTRIBUTING EDITOR AND FOUNDER, LEADERSHIP FROM THE CORE @MARCELSCHWANTES
 
Adam Grant
Some people subscribe to the idea that work-life balance is critical for achieving success. Wharton organizational psychologist Adam Grant has a different take. He once called work-life balance “mostly a myth” and stressed something else as the key to success. We can boil Grant’s advice down to three words:

Work more hours.  

Let’s put that in the right context. In a previous video posted on the Mic Facebook page, Grant tells viewers, “It’s not to say you have to be a workaholic in order to be successful, although the evidence is strong that one of the ways that people become successful is they just work more hours. Or they work with more intense focus than their peers.”

Grant adds, “But I don’t think that means you can’t have a life. The idea that work-life balance means ‘I show up at 10 a.m. and I’m done by 3 p.m.’ is ridiculous. The successful people I know don’t tend to have very balanced days. They will have a whole day where all they do is work. But then the next day, all they do is spend time with their families.”

Work With More Intense Focus

Grant has a good point, and I have seen a big difference in my own productivity when I work with intense focus, but definitely short of crossing the line into workaholism. That’s not healthy and leads to burnout. So, what’s the key? How do you get that same intense focus to maximize your day and get a ton of stuff done? The best way to do it is to achieve a state of flow.

Flow is a state of mind where time flies by and productivity increases. It’s like hitting that sweet spot where everything just clicks. This mental state was studied by psychologist Mihaly Csikszentmihalyi, in which we benefit from peak experience and performance, enjoying what we’re doing and performing at our best. It’s being “in the zone” where we are entirely focused, free from distractions, and able to learn, grow, and improve.

Here’s how you can tap into it:

Clear Goals: Start by setting clear, achievable goals for what you want to accomplish. When you know what you’re aiming for, it’s easier to stay focused and engaged.

Challenge Yourself: Find tasks that are just challenging enough to keep you engaged but not so difficult that they overwhelm you. Flow happens when you’re stretched just the right amount.

Eliminate Distractions: Minimize interruptions and distractions as much as possible. Turn off notifications, close unnecessary tabs, and create a quiet workspace where you can concentrate.

Focus on the Task at Hand: Dive deep into what you’re doing. Forget about everything else for a while and immerse yourself completely in the task.

Stay Present: Don’t worry about the past or the future. Focus on the present moment and give your full attention to what you’re doing right now.

Take Breaks: Even though you’re in the zone, remember to take short breaks to rest and recharge. This can help prevent burnout and keep your energy levels up.

Once you find your flow, you’ll be amazed at how much more productive and fulfilled you feel. And to Grant’s point, the next day, you’ll feel like you can take the afternoon off to take the kids to the park or enjoy a bike ride on the beach. This is what having a healthy, productive life looks like. You work your butt off first, and then take time to reward yourself later. It’s what Grant meant when he said, “They will have a whole day where all they do is work. But then the next day, all they do is spend time with their families.”

https://www.inc.com/marcel-schwantes/adam-grant-explains-success-comes-down-to-three-words.html?utm_medium=social&utm_campaign=freeform&utm_source=linkedin

TOPLEY’S TOP 10 May 20 2024

1. Summary of Biden’s China Tariffs

Barrons By Reshma Kapadia

https://www.barrons.com/articles/china-tariffs-biden-trade-war-inflation-trump-e262d3cf?mod=past_editions


2. Shorts Interest in Chinese Markets at Highs

@Callum Thomas (Weekly S&P500 #ChartStorm)


3. China Market Outperforming World in 2024

RBA Investments Matthew Poterba, CFA

https://www.rbadvisors.com/insights/chinas-stealth-rally/


4. Emerging Markets ETF

Breaks above 200-week moving average after failing 3x in 2022-2023


5. FXI China Large Cap ETF

FXI about to break above red downtrend line going back to beginning of 2021

www.stockcharts.com


6. The Slowdown of Smartphone Shipments

Barrons Adam Clark

https://www.barrons.com/articles/ai-smartphones-google-android-apple-iphone-9d5399d3?mod=past_editions


7. Chipotle vs. McDonalds….CMG +38% vs. MCD -8% 2024

CMG vs. MCD Chart


8. Used Cars Deepest Drawdown Ever

Michael Batnick

https://www.theirrelevantinvestor.com


9. World’s Wealthiest Cities

From Barry Ritholtz The Big Picture Blog https://ritholtz.com/2024/05/weekend-reads-615/

World’s Wealthiest Cities Report 2024

Source: Henley & Partners


10. Farnam Street Blog Sunday

FS

“Knowing virtues is like having a map; adopting them is actually taking the journey.” 

 The highest form of leverage is reputation.


Insights

“Without courage we cannot practice any other virtue with consistency. We can’t be kind, true, merciful, generous, or honest.” 

— Maya Angelou 

** 

“The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already.” 

— Tolstoy 

*** 

“People spend too much time on the last 24 hours and not enough time on the last 6,000 years.” 

— Will Durant 


Tiny Thoughts

The highest form of leverage is reputation. 

** 

Imagine what you could accomplish if you weren’t focused on being right all the time. 

*** 

Reasoning in public forces discipline of thought. 

It’s like doing math on the chalkboard in front of the class. Every step must be clear and correct, or someone will point out the mistake. There’s no room for fuzzy thinking or skipped steps. 

If your reasoning is correct, you have nothing to fear. If it’s wrong, you have everything to learn.

https://fs.blog