From the desk of Willie Delwiche.

The S&P 500 just experienced its longest stretch without a 1% daily swing since Thanksgiving week 2021. But moving from volatility to calm is just part of the needed rotation. It will be difficult for bulls to stay optimistic if the market is not able to rotate from weakness to strength.   

From the desk of Willie Delwiche.

Long-term yields are moving lower while short-term yields continue to rise. The spread between 10-year and 3-month Treasury yields is the most negative it has been in over a decade. It has been four decades since the spread between 10-year and 2-year yields has been as negative as it is now.   

From the desk of Willie Delwiche.

The number of issues that traded on the NASDAQ in any given week just prior to COVID was somewhere around 3500. Last week 5500 issues traded on the NASDAQ.   

From the desk of Willie Delwiche.

Household equity exposure is ten percentage points below its November 2021 peak. Even with that decline, it is only now approaching its long-term average. Bond exposure remains below its long-term average and cash exposure in October moved above its long-term average for the first time since COVID. 

From the desk of Willie Delwiche.

The S&P 500 this month and last undercut its June low but it is now back above that key level. The same can be said from a sentiment perspective. The NAAIM Exposure index and the Bull-Bear spreads for Investors Intelligence and AAII in recent weeks dipped below their Q2 lows but have since recovered.

From the desk of Willie Delwiche.

Mortgage rates are soaring and housing market conditions are deteriorating. Sentiment is sour in both the financial markets and the economy.

The Numbers: Expectations for home selling conditions are at a level that have been seen leading up to, through, and in the wake of the financial crisis. This isn’t an isolated report and its both sides of the market. Data from the University of Michigan shows that the fewest survey respondents since the early 1980’s see this as a good time to buy a house (and that was prior to the most recent spike in mortgage rates).

From the desk of Willie Delwiche.

Young investors were swept away in the 2021 speculative bubble and came into 2022 with lofty expectations.

The Numbers: The University of Michigan Survey of Consumers shows that a record 70% of investors in the 18-34 age group came into 2022 expecting that stocks would rise over the course of the year. For the 35-54 age group it was 61% and for those 55+ it was 59%. As of August, all three groups were below 50%, with expectations among younger investors getting more in line with those who have been through more market cycles.  

From the desk of Willie Delwiche.

Investor surveys indicate widespread pessimism but asset allocation data (and ETF flows) paint a different picture. 

The Numbers: September saw the 5th and 6th times in history that the AAII weekly sentiment survey showed bears above 60%. When bears have growled in the past, exposure to stocks was in the 40s and exposure to cash was only slightly lower. Now, equity exposure is still in the 60s (and above the long-term average) and cash exposure is in the 20s.

From the desk of Willie Delwiche.

The Fed unleashed a speculative bubble when it cut rates in the second half of 2019. Apple (AAPL), the largest company in the US, led the market higher during the boom and has been resilient as other areas have gone bust. 

The Numbers: Both AAPL and the equal-weight S&P 500 (RSP) are down 20% this year. But while RSP has pulled back to its lowest level since early 2021, Apple is still 14% above its June low. Longer-term, RSP is now only 20% above its mid-2019 level, while AAPL still has a 200% gain over the past 3+ years.  

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.