1. Seasonality During Election Year
From Dave Lutz Jones Trading AlamanacTrader notes November-January is the top 3-month period for DJIA and S&P 500 in all years and election years. In all years since 1950 DJIA is up 4.3% on average, up 71.6% of the time. S&P averages 4.4%, up 73.0% of the time. In election years, DJIA is up on average 4.3%, up 72.2% of the time while S&P is up on average 4.0%, up 72.2% of the time.
2. Bond Market Sell Off Good for Stocks?
MarketEar Blog
https://themarketear.com/newsfeed
3. Best Election Year Run Since 1924
Bespoke Investors While yesterday ended up being the worst Halloween trading day since 2011, the S&P 500 still ended the month with a year-to-date gain of 19.6%. That’s good enough for 2024 to be the best Election Year through October since 1936!
https://www.bespokepremium.com/interactive/posts/think-big-blog/bespokes-morning-lineup-11-1-24
4. Estee Lauder 7-Year 26% CAGR Wiped Out
Koylin shows, Estée Lauder has an incredible 10Y chart. The first seven years had a 26% CAGR, followed by three years of a (-44%) CAGR, and now the 10-year total return is close to dropping below 0%.-Zach Goldberg Jefferies
5. Mutual Fund Cash Levels at Historical Low Levels
From the Daily Chartbook Blog
6. Summary of 10-Year Yield Action
Nasdaq Dorsey Wright -10-year yields comprised of inflation expectations and real rates
You can think of it as the sum of:
+ 10-year inflation expectations (what markets think annual inflation will average over the next 10 years)
+ 10-year real rate (a proxy for expected real economic growth)
And the +60bps increase in the 10-year Treasury yield (chart below, black line) is driven by both the inflation (orange line) and real (green line) components.
Inflation expectations increasing on stronger economy, geopolitical tensions, and government spending
10-year inflation expectations are up +20bps (orange line) to 2.3%. There are a few reasons why:
+ Rising geopolitical tensions, which could increase energy inflation
+ With analysts projecting both Presidential candidates will increase government spending (especially in red wave/blue wave outcomes), expectations are rising that increased government demand will boost inflation
+ A stronger economy (next section) sees increased demand, adding to inflation
Real rates rising on a stronger economy and Fed rate cuts reducing recession odds
10-year real rates are up +40bps (green line) to 1.95%. Again, for multiple reasons:
+ The Fed’s pivot to rate cuts reduced the risk of recession, meaning higher average economic growth over the next 10 years
+ Stronger-than-expected economic data over the last couple months (+254k jobs in September, Services PMI up to 17-month high, better consumer spending, etc) further reduced recession odds
+ Expectations of increased government spending (previous section) will add to economic growth
https://www.nasdaq.com/solutions/nasdaq-dorsey-wright
7. Sticker Shock on New Car Prices
Bloomberg By Keith Naughton –Sticker shock is increasingly scaring off many would-be buyers. A recent survey by automotive researcher Edmunds.com found that almost half of American car shoppers expect to pay $35,000 or less for a new car. That makes sense because the average trade-in is six years old, which means those buyers last purchased a new car back when the average price was in the mid-30s. When they return to the showroom and discover they’ll have to pay almost $50,000, they’re walking away. The Edmunds survey found that 73% of consumers are holding off on buying a new car because of the cost.
8. Job Openings Slowing Down
9. Private Equity Shifts to Operational Efficiency of Portfolio Companies
Pitchbook Madeline Shi
The PE industry is placing a greater emphasis on enhancing the value of portfolio companies by improving their operations—or at least, that’s the message many GPs are trying to convey to their LPs, industry participants tell me.
The concept of value creation has taken on new importance as high interest rates and a tepid exit environment have forced many firms to reinvent the strategies they use to generate returns.
“Many of them in the past were doing great by just doing ‘buy low, sell high,’ having the right strategy for portfolio companies, placing the right management and using financial leverage,” said Romain
Bégramian, a managing partner at Paris-based advisory firm GP-Score. “But now they’re eager to improve operational value creation, or at least they are saying that to their investors.”
The strategy was spotlighted on Apollo‘s investor day in October, when the private equity titan lauded its ability to capture excess return in its PE investments through operational improvements at portfolio companies. That came in stark contrast to the broader PE industry’s strategy for the last decade which, by and large, leaned most often on multiple expansion and topline growth for returns.
David Sambur, the co-head of equity at Apollo, quipped: “What is the purpose of investing in private equity if it’s just levered beta on steroids?”
As I reported this week in “Mid-market deals fare best in boosting profitability,” the ability to grow margins tends to set the best PE investments apart.
A difficult market for selling assets has also prompted GPs to pay more attention to operational matters—crafting ways to improve cash flow, widen margins and formulate detailed plans for long-term strategic growth.
But improving portfolio companies this way is no small feat. It is an intricate undertaking that impacts various aspects of a company, including its operations, technology and people.
Operational value creation could involve any number of projects, such as optimizing a legacy IT system or reducing surplus raw materials accumulated during the COVID-19 pandemic. It could mean an exciting endeavor to implement cutting-edge technology—AI, for example—or involve making a tough decision to cut long-tenured employees.
https://pitchbook.com/news/articles/pe-playbook-zeroes-in-on-value-creation?utm_medium=newsletter&utm_source=weekend_pitch&utm_campaign=PE_news&utm_content=feature&utm_term&sourceType=NEWSLETTER
10. Farnam Street Thoughts
Tiny Thoughts
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Attention isn’t free. It’s the most valuable thing you spend.
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Flashy gets attention. Boring gets results.
While most chase the views, the greats obsess over the basics.
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Don’t curse the obstacle; find a way around it.
Elite special forces don’t complain about defenses—they adapt their tactics or create new ones. When a primary route is compromised, they don’t waste time lamenting. They quickly shift to another approach. Elite athletes don’t complain about defenses—they find the gap or create one.
Face the obstacle. Find the gap. Or make one.
Insights
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Agatha Christie on love:
“It is a curious thought, but it is only when you see people looking ridiculous that you realize just how much you love them.”
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Alexander Graham Bell on looking for the opportunity:
“When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the ones which open for us.”
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Sam Altman on avoiding regrets:
“If you think you’re going to regret not doing something, you should probably do it. Regret is the worst, and most people regret far more things they didn’t do than things they did do.”
https://fs.blog/
