Good Life’s Investment team keeps you up-to-date with timely market insights and updates to help you navigate the investment landscape. Explore the investment landscape with a guru’s wisdom and a strategist’s insight.
Introduction and Small Caps Performance
Noah Brooks:
Welcome back to the Market Enthusiast. I’m Noah and with me obviously Chris Needs as always. I am so pumped this week. I cannot believe it. I’m one of those old-fashioned allocators and we got small caps to the moon right? Okay. Maybe not to the moon but we have it working
Chris Needs:
It feels like it though.
Noah Brooks:
We have it working like it hasn’t worked in ages right? I mean market’s up for the year S&P 500 is up 14% for the year but small caps have just taken off since that last CPI report. I think it’s been 2016 since small companies outperformed large year to date and we may not get there this year but it’s like the first real bout of outperformance that we’ve seen in any reasonable time period.
Market Trends and Economic Indicators
Chris Needs:
Prior to the CPI I think S&P 500 was up I think 16% over small caps on the year.
Noah Brooks:
Yeah.
Chris Needs:
Now that’s only 4%.
Noah Brooks:
Yeah. Year to date market’s up 14. Mid-cap’s up a little bit more than 11. Small caps up nine. Okay going back a little bit here. When I first got invested I actually had one of the traditional stockbrokers. Her name was Ann Marie. This is in the ’90s and she always used to pound the table the muscles in the Russell the muscles in the Russell. That’s what’s happened over the last month. Like I said S&P 600 up 9% year to date. It was down going into this month. So for the month of July and we’re here last week of the month fourth of the month of July small cap’s up 10.5% and that’s S&P 600. Depending on who you listen to or what news source you have they might quote the Russell 2000. That’s actually up a little bit more than the S&P 600.
Economic Data: JOLTS Report and Employment Trends
Noah Brooks:
For all the nerds out there the big difference between Russell 2000 and S&P 600 or Russell indexes and S&P indexes is that S&P you have to have positive earnings for four months to get into. It’s the one that we happen to use here at Good Life but they’re both valid indexes out there. So yeah I mean thing’s on fire since that CPI report right?
Chris Needs:
The rotation has definitely continued. No doubt about that. It’s not just small caps. I mean we were talking about the concentration in our last few podcasts being an issue and it’s actually gone to value as well. So it’s spreading out all over a lot of money coming out of large cap growth and it’s really boosting breadth and moving the market.
Noah Brooks:
Yeah there’s no question about it. So last time we were in here I think it was the 16th and the market was at an all-time high S&P 500. I think it was 56 60 something like that. We’re down about 3% since then which is nothing. But since then large growth down large value up and this month that difference is about 9%. So for the month growth is down four and value’s up five. That’s a massive outperformance or delta in… I think it’s 20 trading days so far.
Chris Needs:
Since CPI when I ran the SAT it was 12 training days. It was as of end of close last week but regional banks who we all know the struggles they’ve gone through a little bit… They were up 19% since CPI report. Home builders were up 14%. Obviously those are more value oriented stocks that are really pushing up value.
Noah Brooks:
Yeah no it’s been great to see that rotation. I said I was pumped and I really am. I mean the last time that small caps outperformed was 2016. As an allocator we recommend large mid and small caps and depending on the clients some international emerging and developed. It’s traditional asset allocation and the last year or two people have been coming up and going “Well why do we own these small caps?” I mean they still did wonderful last year up like 16% but S&P 500 was up 26% in 2022. People say “Well why do I own this stuff?” Well there’s going to be a time that that outperforms. Well when’s it going to be? Well the answer is this month people. This month it’s going to outperform. Hopefully we’ll continue to outperform.
Summer Activities and Personal Interests
Noah Brooks:
In 2016 it did outperform by 10% year to date or for the calendar year. It’s certainly possible. From a standpoint of relative value S&P 500 growth or the Russell 1000 growth it’s expensive. So people are looking at the rotation and they’re saying “Where can I find value in stocks that aren’t those top seven companies or six companies?” They’re doing in mid-caps. They’re doing in small caps. So great to see great to see. We got economic numbers to talk about.
Chris Needs:
Yeah we had JOLTS come out actually earlier today.
Noah Brooks:
Job Openings and Labor Turnover Survey.
Chris Needs:
Yeah came in a little bit warmer 8.18 million job openings versus 8 million flat expected. So nothing that’s going to turn the Fed away from the path they’re on I would say at this point. We don’t think they’re going to cut tomorrow but anything can happen. But it’s the same trends we’ve seen. Quits haven’t gone through the roof. They were at 3.3 million layoffs and discharges were at 1.5 million. Both of those are pretty much we’ll call them unchanged from previous reports. So nothing’s really blowing up at least in the economic data just slowing down we’ll say.
Noah Brooks:
Here you go. Well it is summertime right? So I think there’s people that might want to go back to work after summer. It wouldn’t surprise me to see people or to see the job numbers maybe perk up a little bit. I think I mean personally I’m a summer guy. What am I doing at home? I’m watching the Olympics. Could it be any better for the Summer Olympics? I feel like there might be people out there that say yes depending on what you’re watching. Have you watched any of the Olympics?
Chris Needs:
I haven’t seen much yet. It’s not on purpose just getting back from vacation and things haven’t lined up right but I intend to. There’s lots of events I really want to see.
Noah Brooks:
I’m a sucker for that stuff. The men’s gymnastics the women’s track and field gymnastics I think those people are so talented and they train their hearts out. I mean the swimmers everybody knows Ledecky and some of the other names out there.
Chris Needs:
Shout out to Simone Biles. She just won her eighth gold medal. The women’s all-around team won.
Noah Brooks:
So yesterday we were watching the men’s all around and there’s this guy Fred Richard he’s on these bars and he’s up there. He’s planking himself with his arms out and you just see these muscles. It is incredible. So I know the opening ceremonies-
Chris Needs:
You can’t do 70% of that?
Noah Brooks:
I don’t know that I could. Everybody’s been out of shape about the opening ceremonies. They stunk. That’s my personal opinion. I think they were created in a time of COVID. So maybe they were expecting it to be COVID and it wasn’t great. Let’s just put it that way. The boat parade people that they had.
Chris Needs:
Slightly controversial.
Noah Brooks:
Slightly controversial but I implore people do not let that stop you from supporting our athletes. They train for years and years and years. I mean they give up everything to go there and to perform. It’s just for me it’s amazing to watch those athletes because like I said I could probably do most of it if I really tried. Okay. I don’t know that I could. It’s a great time though. I think after summer more people will start to look for a job.
Travel Industry Updates
Noah Brooks:
That’s great. Speaking of the economy and a little bit of travel stuff I subscribe to some airlines and airline industry stuff. Every week there are
Chris Needs:
That’s fair. I mean the biggest job openings piece you saw leisure I think was like 120+ jobs month over month. So a lot of people going to the beach. I know that firsthand. I swear I go to OCMD every time I say it’s the busiest it’s ever been. If you’re not out there at 5:00 AM putting your beach tent out-
Noah Brooks:
You were just there.
Chris Needs:
Yeah you’re not getting anywhere near the ocean which is crazy.
Noah Brooks:
Are you super far away from the water?
Chris Needs:
Yeah. OCMD is just too packed. If you’re anywhere near the high-rise condos there’s just not enough room. I went to Nags Head earlier this year and the closest people were like 10 15 yards away. Everybody had front row seats to the beach and that’s much better.
Noah Brooks:
Not like that in Ocean City.
Chris Needs:
No far too many people. Economy’s booming based on OCMD’s gauge. I’m telling you.
Noah Brooks:
That’s great. Speaking of the economy and a little bit of travel stuff I subscribe to some airlines and airline industry stuff. Every week there are emails that go out about what’s going on in the airline industry. So I see a lot of the top 10 airlines by earnings and what airlines have done this and that and that sort of thing. Some people might remember from last time we did a podcast episode or two ago maybe two ago three ago. We talked about some of the flight credits that you could take on Southwest. They had given everybody up to two free flight credits per year if you flew with them and we talked about that. The credits expire in 2024 and the flights have to be taken in 2024. And that was a big issue because people are like “Well what if I don’t take a flight this year?” and there’s a lot of pressure on them.
Chris Needs:
Especially since people just got them this year.
Noah Brooks:
Yeah so now Southwest is backtracking and they’re saying they are going to extend it through 2024. So if you don’t use it in 2023 it’s going to be available for 2024 and that’s kind of cool. So if anybody was worried about that the good news is you’re getting another year. So it’s good for people who take those flights and for anybody out there who hasn’t booked with Southwest before. I think a lot of people who fly with Southwest love it because you can make those free changes and get those free credits and they just extended it through 2024. So that’s kind of cool. People who listen to the podcast if they had that issue they’re covered.
Technical Glitches and Cybersecurity Issues
Noah Brooks:
Hopefully Southwest fixes their technical issues.
Chris Needs:
Right. Oh well speaking of that a quick pivot we had our email software it was down for like two hours this morning. It looks like it was not related to us specifically but a DDoS attack on some of the larger cloud services like Microsoft.
Noah Brooks:
I heard about that. Did you read any of that or did you see what happened?
Chris Needs:
It was DDoS so Distributed Denial of Service attack on Microsoft Cloud which hosts a lot of those programs and just took it out for two hours.
Noah Brooks:
That’s crazy.
Chris Needs:
We rely on that software pretty heavily too.
Noah Brooks:
Yeah that’s wild.
Chris Needs:
Yeah but everything seems to be back up and running now.
Noah Brooks:
I know a lot of people rely on Microsoft Cloud. They really had their security called into question with the CrowdStrike incident back in May.
Chris Needs:
Oh that’s right. Yeah. I heard about that one.
Noah Brooks:
A lot of people were affected. There was some kind of malware.
Chris Needs:
That’s right.
Noah Brooks:
It’s surprising how little it impacted things. At the time, people were worried but I don’t think the fallout was as big as it could have been.
Chris Needs:
Yeah but that’s why we have backups and disaster recovery.
Federal Reserve and Interest Rates
Chris Needs:
Speaking of disaster recovery do you think the Fed will do something dramatic tomorrow?
Noah Brooks:
I don’t think so. I think they’re going to hold steady. I think they are done raising rates at least for now. We’re in a really good place economically where things are just moving along.
Chris Needs:
Yeah the bond market has settled down too which is a good sign.
Noah Brooks:
It’s definitely a good sign. I mean we still have high rates but nothing like the panic we saw earlier this year.
Housing Market and GDP Growth
Noah Brooks:
Speaking of high rates we just got housing starts numbers last week. They’re still running hot. Affordability is definitely becoming a bigger issue though.
Chris Needs:
Yeah it’s not going away anytime soon. And with GDP growth still strong I don’t see the Fed making any changes to their policy for now.
Natural Disasters and Current Events
Noah Brooks:
It’s interesting how all these factors tie together. Like the wildfires in California we saw last month. Apparently, some of them were caused by outdated infrastructure.
Chris Needs:
Yeah I read about that too. It’s a big problem out there and just another reminder of how interconnected everything is.
Conclusion
Noah Brooks:
Well on that note, I think we’ll wrap it up here. Thanks for joining us on another episode of Market Enthusiast. We’ll see you next time with more insights on the economy and markets.
Chris Needs:
Always a pleasure. See you next time!
Disclaimer
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a decision. Economic forecast set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Good Life’s Investment team keeps you up-to-date with timely market insights and updates to help you navigate the investment landscape. Explore the investment landscape with a guru’s wisdom and a strategist’s insight.
Table of Contents
Introduction and Small Caps Performance
Noah Brooks:
Welcome back to the Market Enthusiast. I’m Noah and with me obviously Chris Needs as always. I am so pumped this week. I cannot believe it. I’m one of those old-fashioned allocators and we got small caps to the moon right? Okay. Maybe not to the moon but we have it working
Chris Needs:
It feels like it though.
Noah Brooks:
We have it working like it hasn’t worked in ages right? I mean market’s up for the year S&P 500 is up 14% for the year but small caps have just taken off since that last CPI report. I think it’s been 2016 since small companies outperformed large year to date and we may not get there this year but it’s like the first real bout of outperformance that we’ve seen in any reasonable time period.
Market Trends and Economic Indicators
Chris Needs:
Prior to the CPI I think S&P 500 was up I think 16% over small caps on the year.
Noah Brooks:
Yeah.
Chris Needs:
Now that’s only 4%.
Noah Brooks:
Yeah. Year to date market’s up 14. Mid-cap’s up a little bit more than 11. Small caps up nine. Okay going back a little bit here. When I first got invested I actually had one of the traditional stockbrokers. Her name was Ann Marie. This is in the ’90s and she always used to pound the table the muscles in the Russell the muscles in the Russell. That’s what’s happened over the last month. Like I said S&P 600 up 9% year to date. It was down going into this month. So for the month of July and we’re here last week of the month fourth of the month of July small cap’s up 10.5% and that’s S&P 600. Depending on who you listen to or what news source you have they might quote the Russell 2000. That’s actually up a little bit more than the S&P 600.
Economic Data: JOLTS Report and Employment Trends
Noah Brooks:
For all the nerds out there the big difference between Russell 2000 and S&P 600 or Russell indexes and S&P indexes is that S&P you have to have positive earnings for four months to get into. It’s the one that we happen to use here at Good Life but they’re both valid indexes out there. So yeah I mean thing’s on fire since that CPI report right?
Chris Needs:
The rotation has definitely continued. No doubt about that. It’s not just small caps. I mean we were talking about the concentration in our last few podcasts being an issue and it’s actually gone to value as well. So it’s spreading out all over a lot of money coming out of large cap growth and it’s really boosting breadth and moving the market.
Noah Brooks:
Yeah there’s no question about it. So last time we were in here I think it was the 16th and the market was at an all-time high S&P 500. I think it was 56 60 something like that. We’re down about 3% since then which is nothing. But since then large growth down large value up and this month that difference is about 9%. So for the month growth is down four and value’s up five. That’s a massive outperformance or delta in… I think it’s 20 trading days so far.
Chris Needs:
Since CPI when I ran the SAT it was 12 training days. It was as of end of close last week but regional banks who we all know the struggles they’ve gone through a little bit… They were up 19% since CPI report. Home builders were up 14%. Obviously those are more value oriented stocks that are really pushing up value.
Noah Brooks:
Yeah no it’s been great to see that rotation. I said I was pumped and I really am. I mean the last time that small caps outperformed was 2016. As an allocator we recommend large mid and small caps and depending on the clients some international emerging and developed. It’s traditional asset allocation and the last year or two people have been coming up and going “Well why do we own these small caps?” I mean they still did wonderful last year up like 16% but S&P 500 was up 26% in 2022. People say “Well why do I own this stuff?” Well there’s going to be a time that that outperforms. Well when’s it going to be? Well the answer is this month people. This month it’s going to outperform. Hopefully we’ll continue to outperform.
Summer Activities and Personal Interests
Noah Brooks:
In 2016 it did outperform by 10% year to date or for the calendar year. It’s certainly possible. From a standpoint of relative value S&P 500 growth or the Russell 1000 growth it’s expensive. So people are looking at the rotation and they’re saying “Where can I find value in stocks that aren’t those top seven companies or six companies?” They’re doing in mid-caps. They’re doing in small caps. So great to see great to see. We got economic numbers to talk about.
Chris Needs:
Yeah we had JOLTS come out actually earlier today.
Noah Brooks:
Job Openings and Labor Turnover Survey.
Chris Needs:
Yeah came in a little bit warmer 8.18 million job openings versus 8 million flat expected. So nothing that’s going to turn the Fed away from the path they’re on I would say at this point. We don’t think they’re going to cut tomorrow but anything can happen. But it’s the same trends we’ve seen. Quits haven’t gone through the roof. They were at 3.3 million layoffs and discharges were at 1.5 million. Both of those are pretty much we’ll call them unchanged from previous reports. So nothing’s really blowing up at least in the economic data just slowing down we’ll say.
Noah Brooks:
Here you go. Well it is summertime right? So I think there’s people that might want to go back to work after summer. It wouldn’t surprise me to see people or to see the job numbers maybe perk up a little bit. I think I mean personally I’m a summer guy. What am I doing at home? I’m watching the Olympics. Could it be any better for the Summer Olympics? I feel like there might be people out there that say yes depending on what you’re watching. Have you watched any of the Olympics?
Chris Needs:
I haven’t seen much yet. It’s not on purpose just getting back from vacation and things haven’t lined up right but I intend to. There’s lots of events I really want to see.
Noah Brooks:
I’m a sucker for that stuff. The men’s gymnastics the women’s track and field gymnastics I think those people are so talented and they train their hearts out. I mean the swimmers everybody knows Ledecky and some of the other names out there.
Chris Needs:
Shout out to Simone Biles. She just won her eighth gold medal. The women’s all-around team won.
Noah Brooks:
So yesterday we were watching the men’s all around and there’s this guy Fred Richard he’s on these bars and he’s up there. He’s planking himself with his arms out and you just see these muscles. It is incredible. So I know the opening ceremonies-
Chris Needs:
You can’t do 70% of that?
Noah Brooks:
I don’t know that I could. Everybody’s been out of shape about the opening ceremonies. They stunk. That’s my personal opinion. I think they were created in a time of COVID. So maybe they were expecting it to be COVID and it wasn’t great. Let’s just put it that way. The boat parade people that they had.
Chris Needs:
Slightly controversial.
Noah Brooks:
Slightly controversial but I implore people do not let that stop you from supporting our athletes. They train for years and years and years. I mean they give up everything to go there and to perform. It’s just for me it’s amazing to watch those athletes because like I said I could probably do most of it if I really tried. Okay. I don’t know that I could. It’s a great time though. I think after summer more people will start to look for a job.
Travel Industry Updates
Noah Brooks:
That’s great. Speaking of the economy and a little bit of travel stuff I subscribe to some airlines and airline industry stuff. Every week there are
Chris Needs:
That’s fair. I mean the biggest job openings piece you saw leisure I think was like 120+ jobs month over month. So a lot of people going to the beach. I know that firsthand. I swear I go to OCMD every time I say it’s the busiest it’s ever been. If you’re not out there at 5:00 AM putting your beach tent out-
Noah Brooks:
You were just there.
Chris Needs:
Yeah you’re not getting anywhere near the ocean which is crazy.
Noah Brooks:
Are you super far away from the water?
Chris Needs:
Yeah. OCMD is just too packed. If you’re anywhere near the high-rise condos there’s just not enough room. I went to Nags Head earlier this year and the closest people were like 10 15 yards away. Everybody had front row seats to the beach and that’s much better.
Noah Brooks:
Not like that in Ocean City.
Chris Needs:
No far too many people. Economy’s booming based on OCMD’s gauge. I’m telling you.
Noah Brooks:
That’s great. Speaking of the economy and a little bit of travel stuff I subscribe to some airlines and airline industry stuff. Every week there are emails that go out about what’s going on in the airline industry. So I see a lot of the top 10 airlines by earnings and what airlines have done this and that and that sort of thing. Some people might remember from last time we did a podcast episode or two ago maybe two ago three ago. We talked about some of the flight credits that you could take on Southwest. They had given everybody up to two free flight credits per year if you flew with them and we talked about that. The credits expire in 2024 and the flights have to be taken in 2024. And that was a big issue because people are like “Well what if I don’t take a flight this year?” and there’s a lot of pressure on them.
Chris Needs:
Especially since people just got them this year.
Noah Brooks:
Yeah so now Southwest is backtracking and they’re saying they are going to extend it through 2024. So if you don’t use it in 2023 it’s going to be available for 2024 and that’s kind of cool. So if anybody was worried about that the good news is you’re getting another year. So it’s good for people who take those flights and for anybody out there who hasn’t booked with Southwest before. I think a lot of people who fly with Southwest love it because you can make those free changes and get those free credits and they just extended it through 2024. So that’s kind of cool. People who listen to the podcast if they had that issue they’re covered.
Technical Glitches and Cybersecurity Issues
Noah Brooks:
Hopefully Southwest fixes their technical issues.
Chris Needs:
Right. Oh well speaking of that a quick pivot we had our email software it was down for like two hours this morning. It looks like it was not related to us specifically but a DDoS attack on some of the larger cloud services like Microsoft.
Noah Brooks:
I heard about that. Did you read any of that or did you see what happened?
Chris Needs:
It was DDoS so Distributed Denial of Service attack on Microsoft Cloud which hosts a lot of those programs and just took it out for two hours.
Noah Brooks:
That’s crazy.
Chris Needs:
We rely on that software pretty heavily too.
Noah Brooks:
Yeah that’s wild.
Chris Needs:
Yeah but everything seems to be back up and running now.
Noah Brooks:
I know a lot of people rely on Microsoft Cloud. They really had their security called into question with the CrowdStrike incident back in May.
Chris Needs:
Oh that’s right. Yeah. I heard about that one.
Noah Brooks:
A lot of people were affected. There was some kind of malware.
Chris Needs:
That’s right.
Noah Brooks:
It’s surprising how little it impacted things. At the time, people were worried but I don’t think the fallout was as big as it could have been.
Chris Needs:
Yeah but that’s why we have backups and disaster recovery.
Federal Reserve and Interest Rates
Chris Needs:
Speaking of disaster recovery do you think the Fed will do something dramatic tomorrow?
Noah Brooks:
I don’t think so. I think they’re going to hold steady. I think they are done raising rates at least for now. We’re in a really good place economically where things are just moving along.
Chris Needs:
Yeah the bond market has settled down too which is a good sign.
Noah Brooks:
It’s definitely a good sign. I mean we still have high rates but nothing like the panic we saw earlier this year.
Housing Market and GDP Growth
Noah Brooks:
Speaking of high rates we just got housing starts numbers last week. They’re still running hot. Affordability is definitely becoming a bigger issue though.
Chris Needs:
Yeah it’s not going away anytime soon. And with GDP growth still strong I don’t see the Fed making any changes to their policy for now.
Natural Disasters and Current Events
Noah Brooks:
It’s interesting how all these factors tie together. Like the wildfires in California we saw last month. Apparently, some of them were caused by outdated infrastructure.
Chris Needs:
Yeah I read about that too. It’s a big problem out there and just another reminder of how interconnected everything is.
Conclusion
Noah Brooks:
Well on that note, I think we’ll wrap it up here. Thanks for joining us on another episode of Market Enthusiast. We’ll see you next time with more insights on the economy and markets.
Chris Needs:
Always a pleasure. See you next time!
Disclaimer
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a decision. Economic forecast set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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