🎙️ A Sub Above

Donald Trump’s pick of Scott Bessent for Treasury Secretary drove stocks higher and helped lift a big rally in Treasurys on Monday. The S&P 500 is sitting just below its record.

Investors are counting on Bessent, a long-time investor, to reduce risks around tariffs and the budget deficit.

“Markets are interpreting Trump’s pick as positive for the economy, as he could try to steer policies towards the more growth-oriented matters as opposed to more controversial measures,” one analyst noted.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• It’s been a boring year for stocks…really?

• The rise of Jersey Mike’s to $8 billion chain

This, and more, in just 5 minutes to read.

Chart of the Day

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In The News

🤔 Wait, Has It Been a Boring Year for Stocks?

It’s quiet, almost too quiet. There have been plenty of stories and high-flying stocks this year, yet 2024 is on track to be the lowest-volatility year since before the pandemic. 

• We have stocks like Nvidia up 185% year-to-date, the S&P 500 at (or near) record highs, and MicroStrategy outperforming bitcoin with a nearly 500% gain.
  

• And we had a presidential election and, soon, a new administration — as well as all kinds of geopolitical dynamics — but stock market volatility remains surprisingly low. The counterintuitive stability is driven by divergent stock movements within the S&P 500. Consider:

Correlation impact: Ultra-low correlations between stocks mean individual securities move independently, dampening market volatility. Nvidia and other superstar stocks have dominated, though whole sectors (like consumer staples) have been crushed thanks to Donald Trump’s tariff plans. 

Sector vulnerability: Policy changes could disproportionately affect specific sectors, creating localized market shifts — like the recent surge in financial stocks — without broad market turbulence.

Economic signaling: Low volatility might indicate market confidence or suggest investors underestimate potential systemic risks.

Why it matters:

The low volatility is another reason many elite investors caution against following day-to-day market headlines, many of which can make it seem that volatility (and doom and gloom) is imminent. Despite all of the noise, markets have been surprisingly boring, calm, and normal lately.

• One analyst suggests the low volatility could persist because of anticipated substantial policy changes that might impact individual sectors more than the overall market.
  

• Of note: While the S&P 500 remains calm, volatility has returned to foreign exchange and bond markets.

The key takeaway: 2024's market is characterized by tranquility. For the most part, stocks keep marching higher. 

As Bloomberg reports: “Everything’s moving in different directions, which counterintuitively means less movement in the headline index. In this case, the whole is lesser than the sum of its parts. And that strange state of affairs could continue into the new year, with the potential for the incoming Trump administration to impact whole industries.”

Read more

More Headlines

😬 Macy's says employee hid up to $154 million in expenses, delays Q3 earnings

🎞 ‘Wicked’ soars with $114 million opening, ‘Gladiator’ snares $55.5 million

🚨 SEC says it obtained a record $8.2 billion in financial remedies in 2024

🍌 Investor pays $6 million for a banana — and plans to eat it

👏 Warren Buffett lines up successors to potentially donate $150 billion fortune

🏠 Owning a home has rarely been this much more expensive than renting

🥪 The Extraordinary Jersey Mike’s Story: A Sub Above

Peter Cancro's story began in 1971 at 17, working at Mike's Subs in Point Pleasant Beach, New Jersey. When owners decided to sell in 1975, his mother suggested he buy the shop—an idea Cancro initially found laughable. After all, he'd been accepted to the University of North Carolina to study law and play football.

But with $125,000 he borrowed from his youth football coach and local banker, Cancro purchased the shop. (Roughly $750,000 in today’s dollars.)  “It was something I really wanted to do,” Cancro, now 67, told Forbes. “At that age, you don’t think you can fail.”

• Over time, he transformed it from a single location to a nationwide franchise, embodying his philosophy: "We're not a chain. We're the mom-and-pop shop in every town."

A huge return: Blackstone acquired Jersey Mike's a week ago in an $8 billion deal. Cancro will remain CEO and retain a 10% stake, continuing his lifelong passion for the business. But it caps an incredible run for the sandwich shop, essentially turning $125,000 into $8 billion, a roughly 6,399,900% return on initial investment. 

Healthy growth: In 2023, the company brought in $3.3 billion in sales and has had an average annual sales growth of about 20% since 2019.

• Blackstone’s portfolio of franchisors includes Hilton Hotels and Tropical Smoothie Café. As Blackstone CEO Steve Schwarzman quipped, partners "like to eat."

Key milestones for Jersey Mike’s:

1987: Started franchising

1991: Nearly went bankrupt — he struggled to pay bills and had to fire his corporate staff, including his brother

2015: First appearance as a top 50 fast-food chain

2023: $3.3 billion in U.S. sales across 2,680 locations

Why it matters:

There are thousands of Jersey Mike’s locations run by franchisees nationwide. To open one, you need between $200,000 and $1.3 million. Locations make about $1.2 million in annual sales. 

Secret sauce: Inspired by Domino's founder Tom Monaghan's autobiography, Cancro maintained a simple formula: fresh-sliced meats, generous portions, and community engagement. During challenges like the 2007-08 downturn and pandemic, he invested about $150 million in store upgrades.

Since then, it’s been up and to the right for Jersey Mike’s, which Cancro says is still in high-growth mode. 

“We believe we are still in the early innings of Jersey Mike’s growth story,” he said. 

Read more

Quick Poll

On Friday, we asked: As Thanksgiving approaches, what are you most grateful for as an investor?

— Many investors are grateful for an improved finanical situation thanks to rising asset prices. “Thankful that 2023 and 2024 were can't miss even for knuckleheads like me,” one wrote.

— Said another: "Realising early what compounding is. A purchase of 1,000 shares in a company for $6,000 33 years ago has just gone past the $1 million mark with dividends reinvested. Paid for sitting on your hands, as Charlie Munger said.”

— Other answers included gratitude for “my health” and “emerging markets.”

See you next time!

That's it for today on We Study Markets!

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