Stocks began the week on Monday in a more upbeat mood, with buyers re-emerging to scoop up some of the discounted Tech/AI names following the previous week’s gloom, although the early momentum slowly dissipated as the session wore on and the day ended with only minimal gains. Energy stocks jumped as Trump decided that a fracking company CEO was a good idea to become the next head of the Department of Energy.

Things turned sour again on Tuesday morning following a really ugly session in Europe as tensions surrounding the Russia/Ukraine war were ramped up by apparently U.S.-sanctioned Ukrainian long-range missile attacks inside Russia, swiftly followed by an apparent re-write of Russia’s nuclear protocols and these concerns spilled into U.S. markets.

Indeed, the post-election bump seemed on the brink of disintegration at one point as stocks fell hard at the open and so-called “safe haven” assets like Treasury bonds, the U.S. Dollar and gold pushed notably higher. As the day went on though, stock traders seemed to become more sanguine, the early geopolitical panic subsided and prices moved back into the green and remained there until the close.

Wednesday was always going to feel like a waiting game, with superstar Nvidia reporting after the close that day, although some horrendous earnings and forward outlook from Target caught Wall Street’s attention at the open and it crashed the stock more than 20%. The indexes fell, in line with this miserable news from a major retailer and stayed rather depressed all day in advance of the main event of Nvidia’s earnings after the bell.

The chipmaker released a broadly-positive set of results but the revenue forecast fell short of some of the admittedly sky-high expectations, which arguably showed that its dizzying AI-fueled growth run might possibly be reaching its limits.

Dip-buyers quickly bought up the knee-jerk initial sharp fall in Nvidia’s after-market price and by the time the real market opened on Thursday morning, the stock was largely unchanged. Another very healthy Weekly Jobless Claims number provided a much-needed injection of hope into the December rate-cutting case and stocks drifted north to finish the day higher with Small Caps and the financial sector particularly shining.

The market chopped quietly sideways for a while on Friday, before finally shifting a little higher again on still-intact interest rate cut hopes with Small Caps and financial stocks continuing to lead the charge and tech names once again struggling to keep up.

At around 6000, the S&P 500 is currently priced for perfection and perfection means: Goldilocks growth, an ongoing Fed interest rate cutting cycle, falling inflation and pro-growth policies that aren't derailed or unduly delayed by political turmoil, drama or incompetence.

While the ultimate policy direction could well be positive for stocks (pro-growth) the path to get to that destination is likely to be a bumpy one given Trump’s inclination towards chaos and that’s something to keep in mind as we look ahead to next year. It’s pretty safe to say that 2025 will be a more volatile year than 2024 as markets will have to digest headlines associated with:

* unorthodox policies from the incoming administration,

* potential higher volatility in Treasury yields and the U.S. Dollar,

* trade and tariff threats,

* familiar unknowns from 2024 such as the strength of the economy, pace and size of Fed rate cuts, inflation and growing geopolitical uncertainty.

Put in plain English, the Trump administration and Republican government will have a pro-growth, low-regulation focus, but as 2016-2020 and recent post-election events have shown us, that can come with policy and rhetorical surprises and uncertainty and while the result of it all could still easily be higher stock prices, it’s unlikely to be as smooth a ride as 2024.

Higher volatility doesn’t necessarily mean a bear market and the technical setup for stocks in 2025 is still mostly positive. However, headline-driven volatility will rise and being able to determine what negative news stories are just flare-ups that will likely simply cause a mild and/or ultra-short term temporary pullback and what unfavorable news constitutes a real threat to the stock market rally will not be easy.

I’ll do my best to help.

OTHER NEWS ..

RIP the surveys - please! .. Sharp-eyed readers and listeners will have noticed that I almost never allude to consumer sentiment surveys in my main report, from which many analysts draw far-reaching conclusions about the state of the economy.

That is because they are utterly worthless nonsense. Many are still conducted by landline phone or snail mail paper, so are immediately compromised by selection bias. The response rate is pathetic and is subject to the extreme recency bias of the respondents (did they have a good/bad morning before they respond to the mailed survey in the afternoon?).

But the real reason that these surveys are absolute rubbish and should be completely ignored is that they are often nothing more than amateurish political opinion polling. That was on full display last week by the first post-election Expectations Index, which measures how consumers feel about the future as part of the Consumer Sentiment Survey from the University of Michigan, for some unknown reason the respected big daddy of all economic surveys.

Optimism jumped nearly 28 percentage points for Republican households from the previous survey right before the election and plunged almost 18 among Democratic ones. Say no more. What a useless data source upon which to base any kind of conclusion impacting what to do with your money.

?????? .. Concerns are growing on Wall Street about the quality and lack of political and diplomatic experience of some of Trump’s frankly bizarre cabinet picks and what they could mean for the fortunes of certain sectors and companies in the coming years. Trump has also proposed waiving any FBI or any other kind of background checks for his nominees.

On Tuesday, his selection of TV talk show host Dr. Oz to run Medicare/Medicaid was considered unlikely to soothe the worries of a severely distressed healthcare sector still reeling from the president-elect’s decision to give a shot in the arm to anti-vaxxers and tap Kennedy to head up Health and Human Services.

The Oz pick was swiftly followed by that of his old buddy Vince’s wife, former wrestling executive Linda McMahon, sued recently for enabling the sexual exploitation of children, to head up the Department of Education. Also last week, Trump loyalist Howard Lutnick, CEO of Cantor Fitzgerald, was chosen as Commerce Secretary with responsibility for managing policy on tariffs and international trade, Chris Wright, CEO of fracking company Liberty Energy was nominated to lead the Department of Energy and some ex-NFL footballer, Scott Turner, was named to run the Department of Housing and Urban Development.

Serious assault and sex trafficking allegations eventually forced Matt Gaetz off the ticket for Attorney General on Thursday but similar sexual assault accusations hang over another TV host, Pete Hegseth, the woefully inexperienced pick for Secretary of Defense, which could impact the fortunes of a number of defense and military contracting companies.

As the week’s trading closed, Wall Street was still on the edge of its seat bracing for what it viewed as the absolutely critical choice for Treasury Secretary with oversight of the world’s largest bond market, tax collection and economic sanctions. In the end, Scott Bessent, who was a largely unsuccessful macro hedge fund manager but who campaigned vigorously for Trump, got the nod after Friday’s closing bell.

ARTICLE OF THE WEEK ..

Sometimes what you should NOT believe about investing is even more important than what you should.

THIS WEEK’S UPCOMING CALENDAR ..

Some major retailer earnings and the Federal Reserve's preferred inflation measure will be the highlights of this holiday-shortened week. U.S. stock and bond markets will be closed on Thursday for Thanksgiving, before a half day of trading on Friday.

Still a few more earnings reports, many of them retailers, to come this week from Macy’s, Best Buy, Dick’s Sporting Goods, Bath & Body Works, Nordstrom, Dell, Hewlett Packard, Zoom Video Communications, Crowdstrike and Workday.

Wednesday will see the latest release the Personal Consumption Expenditures (PCE) price index measure of inflation, upon which the Fed relies heavily to determine its interest rate policy. The consensus estimate calls for a 2.3% year-over-year increase.

The minutes from the early November Fed interest rate-setting meeting will be published on Tuesday afternoon.

LAST WEEK BY THE NUMBERS ..

Last week’s market color courtesy of finviz.com

Last week’s best performing U.S. sector: Materials (two biggest holdings: Linde, Sherwin-Williams) - up 3.0% for the week.

Last week’s worst performing U.S. sector: Communications Services (two biggest holdings: Alphabet/Google, ...

Injection Of Hope.

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