Five interesting things that Hodges Capital research analysts discovered this week...
#1 TIS THE SEASON: The S&P 500 fell for the third month in a row for the first time since March 2020. The last time it was down for four consecutive months was in 2011. However, this weakness isn't far off from seasonal norms. On average, equities tend to plateau from July through October, with the second half of that period typically showing declines before beginning a year-end rally. Based on the average daily performance of the S&P 500 from 1928-2022, October 27th tends to represent the local (near four-month) average low point for the index. Coincidentally, this year that date marked the end of a run of 8 declines out of 9 sessions for the S&P before starting a rally this week. (Deutsche Bank)
#2 VIVA LAS VEGAS: According to recent management commentary, visitation to Las Vegas is up nearly 8% year-to-date (YTD), convention and meeting business has increased by 30%, average daily room rates have risen by more than 10% across the market, airport traffic has reached all-time highs on a trailing twelve-month (TTM) basis, total employment in southern Nevada has grown by nearly 5% over the past year, and the development pipeline remains robust with $6 billion in projects currently under construction.
#3 NOT SUBPRIME TIME: According to Bloomberg, the share of subprime auto borrowers who are 60+ days past due on their loans rose to 6.11% in September. That's the highest percentage of subprime delinquencies since this data started being tracked 30 years ago.
#4 FAMILY AFFAIR: Family offices were pioneered by the families of J.P. Morgan and John D. Rockefeller in the 19th century but remained a cottage industry for decades until after the 2008 recession when a new generation of family offices started to emerge. A UBS Securities report examined 121 of the world's largest single-family offices and found that 31% had been established between 2000 and 2010, while 38% were created from 2010 to 2020. Recent data shows that there are between 3,500 and 5,000 family offices globally with one or more employees, $100 million or more in investible assets, and some form of outside investment activity, according to a report from FINTRX, a family office research platform. Of those, 66% are located in North America, and 42% manage more than $1 billion in assets. Texas ranks third among states for the most family offices, following New York and California. Among cities, Dallas is third, trailing behind New York and Chicago. (Dallas Morning News)
#5 CHECKPOINT VIEW: As we cross the halfway point through earnings season, with roughly 59% of the market having reported, we can make the following observations. Earnings beats (7.7%) are running well above the average (4.9%) for a third straight quarter. The beats have been driven by solid margin beats, which have continued to recover from their lows last year, while sales beats have continued to moderate from their post-pandemic highs to near-average levels. Year-on-year EPS growth for the S&P 500 is on track to turn positive after three quarters of negative growth, thanks to broad-based growth outside the commodity and defensive sectors. Sequentially, seasonally adjusted earnings are tracking growth of 3.3% in Q3, following similar solid growth in the prior two quarters. The S&P 500's bottom-up analyst consensus for Q4 2023 has been cut by a more than typical -1.9% since the start of the earnings season. A significant portion of the cut so far has only offset the substantial upgrades in the latter part of the previous earnings season. (Deutsche Bank)
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