2024 Week 33

1. The Monday Morning Panic That Wasn't

Last week's financial markets started with a bang but ended with a whimper. Here's what you need to know:

• The S&P 500 plunged 4% early Monday but closed the week down just 0.04%.
• The Volatility Index ($VIX) saw its largest peak-to-close move ever on Monday, dropping 41%.
• Over the next four trading days, the $VIX declined 47% - its largest 4-day decline on record.

Key Takeaway:?Despite initial panic, markets showed remarkable resilience.

2. Sentiment Swing: Bulls Become Less Bullish

• The Investors Intelligence Index saw its percentage of bulls drop from 64.2% to 46.9% in just two weeks.
• This 17% drop is the largest sentiment swing since the October 1987 crash.

Key Takeaway:?Investor optimism has cooled significantly in a short time.

3. Is Warren Buffett Getting Bearish?

Berkshire Hathaway's Q2 earnings update raised eyebrows:

• Cash pile hit a new all-time high of $277 billion.
• Sold nearly half of its Apple position.
• Now holding 25% of assets in cash, highest since 2004.

Possible reasons:

1. Locking in gains before potential tax increases.
2. Valuation concerns, especially with Apple.

Key Takeaway:?The "Oracle of Omaha" seems to be playing it safe.

4. High Yield Bonds: Not Pricing in Recession Yet

• Credit spreads widened to 393 bps, still far from recession levels (typically over 1,000 bps).
• Interestingly, 62% of respondents in a recent poll expect a recession within 6 months.

Key Takeaway:?Bond markets aren't as pessimistic as some investors.

5. Rising Credit Card Delinquencies: A Warning Sign?

• Credit card debt hit a record $1.14 trillion in Q2, up 10.8% year-over-year.
• 11% of credit card balances are now 90+ days delinquent, highest since 2012.

Key Takeaway:?Consumer financial health may be deteriorating.

6. Commercial Real Estate: Trouble Brewing

• Q2 saw $20.55 billion in commercial property foreclosures, highest since 2015.
• Office property loan delinquencies have surged to over 8%, highest since 2013.

Key Takeaway:?The sector faces significant challenges from higher rates and changing work patterns.

7. Fed Rate Cut Looking Likely

• September rate cut seems probable; market split between 25 or 50 bps.
• Gas prices down 10% year-over-year.
• Inflation expectations at lowest levels since December 2020.

Key Takeaway:?Economic data supports potential rate cuts.

8. Quick Hits: Interesting Stats

• Apple's 10-year stock buybacks: $646 billion
• US Personal Savings Rate: Down to 3.4% (30-year average: 5.8%)
• Amazon AWS 12-month revenue: $99 billion
• California utility bill crisis: $2.1 billion in unpaid bills
• Semiconductor Index: 23% drawdown from July peak

Next week, we'll be closely watching the Fed's Jackson Hole symposium and Q2 earnings reports from major retailers. Stay tuned!