To The Moon

• The $.SPX(.SPX)$ and $.IXIC(.IXIC)$ returned -2.05% and -3.41%, respectively, last week.

• Major market movers last week included: $SUPER MICRO COMPUTER INC(SMCI)$ (-24%), $Moderna, Inc.(MRNA)$ (-21%), $AbbVie(ABBV)$ (-17%), $Micron Technology(MU)$ (-13%), $Applied Materials(AMAT)$ (-12%), $Walt Disney(DIS)$ (+16%), $Palantir Technologies Inc.(PLTR)$ (+12%), $Tapestry Inc.(TPR)$ (+9%), $Charles Schwab(SCHW)$ (+9%), and $Tyson(TSN)$ (+7%).

• Important earnings releases include $Wal-Mart(WMT)$ on Tuesday, $NIO Inc.(NIO)$ , $Sea Ltd(SE)$ , $Palo Alto Networks(PANW)$ , $Snowflake(SNOW)$ and $NVIDIA Corp(NVDA)$ on Wednesday, and $PDD Holdings Inc(PDD)$ and $Intuit(INTU)$ on Thursday.

• Important economic events:

• 19-20 Nov: G20 meetings

• Thursday: Unemployment Claims, Existing Home Sales

• Friday: Flash Manufacturing and Services PMI

What You Need to Know Before Starting Your Week

1) Post-Trump Rally Pauses as Powell Says Fed is Not in a Hurry to Cut Rates

• “The economy is not sending any signals that we need to be in a hurry to lower rates," Powell said on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully."

• Powell's remark sent the S&P 500 1.32% lower on Friday, but traders are not expecting fewer rate cuts based on his statement.

• Traders still expect 3 rate cuts by the end of 2025, the same as they did a week ago. Thus, the Friday plunge may have been an overreaction. Investors may simply want to pause after a strong rally and reassess their portfolio allocations.

Source: CME Fedwatch, 18 Nov 2024

2) Nvidia Earnings Release on Wednesday is the Most Important Event of the Week

• Nvidia $NVIDIA Corp(NVDA)$ is set to release its earnings results after the market closes on Wednesday, with options markets implying a nearly +/-9% move on its earnings release.

• It’s a Nvidia world—other chip stocks are just living in it. Chip stocks are awaiting Nvidia’s earnings to reassess the sustainability of the recent AI momentum.

• Analysts have revised Nvidia’s price targets ahead of the earnings report this past week. In addition to the usual earnings growth, investors should also pay close attention to Days Sales of Inventory (DSI) to assess if the AI bull run has staying power.

• Chip stocks took a hit on Friday, with the VanEck Semiconductor ETF (SMH) and Nvidia falling 3.32% and 3.26%, respectively. The Friday chip stock carnage was triggered by weak earnings guidance from Applied Materials (AMAT). The tech sector also fell 3.49% last week.

3) Inflation Risk is Probably Overhyped for Now

• The US CPI, although it ticked higher in October, met market expectations.

• While some investors worry that Trump's policies could lead to higher inflation, I believe the market is currently focused on pricing in stronger economic growth and improved corporate earnings under his administration. Inflation concerns are likely to emerge later. Therefore, investors should not overly worry about inflation risks at this stage.

• Trump’s push for deregulation and corporate tax cuts is seen as positive for investors. His pro-business policies are likely to foster more mergers and acquisitions and reduce regulatory pressure, especially in the tech industry.

Conclusion:

• I reckon the rally is still intact, and the S&P 500 has further upside potential, driven by high animal spirits, share buybacks in November, positive seasonality in November and December, an upgraded price target for the S&P 500 following Trump's election win, and the "FOMO" trade.

• Trump trades may run out of steam, as much of the optimism around his sweep has already been priced in. Not all Trump trades will sustain their rally; investors should focus on long-term secular themes like AI instead.

• I remain constructive on tech-related stocks, such as the Magnificent Seven, TSMC $Taiwan Semiconductor Manufacturing(TSM)$ , Broadcom $Broadcom(AVGO)$ , Arm $ARM Holdings Ltd(ARM)$ , AMD $Advanced Micro Devices(AMD)$ , and $Oracle(ORCL)$ .

You may refer to an example of an Aggressive Equity Portfolio below.

The said Aggressive Portfolio has returned 39% year-to-date, outperforming the S&P 500’s 24.55% and the Nasdaq 100’s 22.05%.

Source: Bloomberg, 15 Nov 2024