Stocks Pull Back After Initial Election Euphoria; Big Rotation In Sectors And Asset Classes

seekingalpha11-19

Stocks finished the week broadly lower, giving back more than half of the post-election gains. Small-cap stocks as well as rate-sensitive stocks took the biggest hit.The dollar’s continued ascent, ...

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Small-cap stocks as well as rate-sensitive stocks took the biggest hit.The dollar’s continued ascent, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738455-stocks-pull-back-after-initial-election-euphoria-big-rotation-sectors-asset-classes\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Stocks Pull Back After Initial Election Euphoria; Big Rotation In Sectors And Asset Classes</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nStocks Pull Back After Initial Election Euphoria; Big Rotation In Sectors And Asset Classes\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-19 03:20 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738455-stocks-pull-back-after-initial-election-euphoria-big-rotation-sectors-asset-classes><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Stocks finished the week broadly lower, giving back more than half of the post-election gains. Small-cap stocks as well as rate-sensitive stocks took the biggest hit.The dollar’s continued ascent, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738455-stocks-pull-back-after-initial-election-euphoria-big-rotation-sectors-asset-classes\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NDX","symbol_name":"纳斯达克100指数","start_time":0,"source_url":"https://seekingalpha.com/article/4738455-stocks-pull-back-after-initial-election-euphoria-big-rotation-sectors-asset-classes","article_id":"2484974968","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/492598584/image_492598584.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484974968","pubTimestamp":1731957600,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Stocks finished the week broadly lower, giving back more than half of the post-election gains. 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Small-cap stocks as well as rate-sensitive stocks took the biggest hit.The dollar’s continued ascent, along with Treasury yields moving higher, all contributed to negative investor sentiment this past week, even though inflows to stocks hit historic highs the week before.Retail sales beat expectations for the fourth straight month, with additional positive sentiment measures, including manufacturing indicators surprising to the upside as well.The Consumer Price Index (CPI) and Producer Price Index (PPI) reports were in line with expectations, but inflation continues to tick higher on a year-over-year basis.As President-elect Trump begins to name his cabinet, so does speculation that many of these individuals could surprise and/or disrupt areas of the market. Therefore, we are seeing rapid shifts in US sectors as well as global asset classes.   maciek905/iStock via Getty Images  By Donn Goodman Welcome back, readers. Glad to have you. A quick shoutout to Geoff, who did an excellent job filling in last week as I was travelling. Speaking of traveling, during my travels, I heard from one of our readers who is a savvy financial guy, who said to me, “I don’t follow people like you because you tell me what happened but because you will give me your point of view.” So. noted. The election rally runs out of steam The market got hit fairly hard on Friday, with declining stocks outpacing advancing issues by a 2-to-1 ratio on the NYSE. Volume was heavier than it had been lately, and we also had one of the largest S&P option expirations taking place. Stocks finished the week broadly lower, giving back more than half of the post-election gains. Small-cap stocks, the recent darlings, as well as rate-sensitive stocks took the biggest hit. Just a short few days ago, on Monday, the Dow, NASDAQ, and S&P all hit record new highs. But for the remainder of the week, it was all downhill. Retail sales beat expectations for the fourth straight month, with additional positive sentiment measures, including manufacturing indicators surprising to the upside as well. These numbers showed the economy is still on firm footing and helped to drive interest rates on the 10-year higher. The Consumer Price Index Retail sales beat expectations for the fourth straight month, with additional positive sentiment measures, including manufacturing indicators surprising to the upside as well. These numbers showed the economy is still on firm footing and helped to drive interest rates on the 10-year higher. The Consumer Price Index (CPI) and Producer Price Index (PPI) reports were in line with expectations, but inflation continues to tick higher on a year-over-year basis. This is something our own Mish has been suggesting would occur for months on her national TV appearances. Economic surprises As noted above, this past week saw economic numbers that showed impressive growth in the manufacturing sector. The Empire State Manufacturing Survey blew past the expected monthly readings. See below: NY manufacturing. \"This morning's Empire State Manufacturing Survey (red line) was projected to be flat at 0, up from -11.9, but the actual print came in at an impressive +31.2. If 2016 is any indication, this could be just the beginning of much stronger-than-expected survey data.\"  The US economic surprise index surprised investors:  Given the above positive numbers and “surprises” recently, Fed Chair Jerome Powell warned of a “bumpy path” regarding inflation. The dollar continued to push higher and hit a one-year high against the euro amid fears of a global tariff war as President-elect Trump is selecting people to surround him that are loyalists and appear amenable to carry out his plan, which includes heavy tariffs, tax reductions and a hard line with potentially negative global business implications. The dollar’s continued ascent, along with Treasury yields moving higher, all contributed to negative investor sentiment this past week, even though inflows to stocks hit historic highs the week before. See charts below: The past two weeks of the 10-year Treasury market are below:  The past one year for the US dollar is below:  The market has been positively affected by the outcome of the election. Positive investment sentiment from retail investors has caused huge inflows of new money into the equity (stocks and ETFs) market. See the two illustrations below: Retail flows. \"Last week saw the strongest retail investor buying flow in over 137 weeks (since 3/22). +3.2 standard deviations above the 12M average.\"  US equity fund flows. \"Equities saw a big inflow this past week (to +$29.36bn, the biggest inflow in 7 weeks, from -$0.89bn) following the election results.\"  A changing administration means a possible changing investment landscape As mentioned above, there are differing opinions of what the new administration could do to affect global investment markets and the US investment sectors. As President-elect Trump begins to name his cabinet, so does speculation that many of these individuals could surprise and/or disrupt areas of the market. Therefore, we are seeing rapid shifts in US sectors as well as global asset classes. For example, speculation surrounding the appointment of Robert F. Kennedy Jr. as head of the Health & Human Services (HHS) has caused a sell-off in healthcare stocks, including but not limited to pharmaceutical company stocks and biotechnology companies. Mr. Kennedy, for years, has gained a loyal following with his condemnations of how the nation’s public health agencies were conducting business. That puts him at odds with 80,000 scientists, researchers, doctors, and other officials who currently work for the HHS. This has led to the Healthcare and Biotechnology sectors seeing a fierce sell-off this past week. See charts and more information below:   The Health Care Sector ETF (XLV) dropped -5.5% this week, marking its worst week in four years. It is now the weakest sector YTD (+5.2%) and the only negative sector quarter-to-date (-6.2%). The largest stocks in the XLV and their weightings are: Eli Lilly (LLY) 11.7%, UnitedHealth Group (UNH) 10.3%, Jonson & Johnson (JNJ) 6.9%, AbbVie (ABBV) 5.7% and Merck (MRK) 4.7%.   Healthcare puts. \"Put volumes (that is, bearish options bets) on the Health Care Select Sector SPDF ETF spiked to a more than three-year high on Thursday\" after Trump picked RFK for health secretary.\"  One of the more important sectors contained in Mish’s Economic Modern Family (you can get more information on the EMF here) is the “Big Brother Biotechnology”. See the depiction below:    Biotechnology (IBB) \"Big Brother\" - Biotech, highly speculated, assesses where money is flowing. If speculators are confident, they will park money here. So far, with the appointment of Mr. Kennedy leading HHS, biotechnology stocks and the sector have sold off hard. See graph below:    Reality is setting in. Are investors having second thoughts about the positive benefits from the new President-elect? It is far too early to tell. There will be much jockeying that goes on before the new administration, new Senate majority and as new players put their plans into action. However, reading the tea leaves is forcing many investors to look more closely for the positives and negatives of the upcoming new administration. The expectations seem to be revolving around the following potential future market policies, including:  Could inflation continue to trend higher? What might global tariffs do to business relationships and the movement of goods between the US and other countries? (China, Southeast Asia, Russia) Will other countries want to buy our Treasury debt? If not, what might that do to interest rates? How will the new administration deal with the US’s gigantic debt, debt payments and import/export with other countries? What about the new Department of Government Efficiency (DOGE) and its effectiveness? Could it eliminate significant government jobs? What happens if millions of government workers are suddenly out of work?  These questions are beginning to permeate the investor mindset. The Magnificent 7 is now selling at a 50x multiple of future earnings, and given changes in the US posture, folks are beginning to have second thoughts about investing in companies with such lofty price-to-earnings ratios. Perhaps because of these concerns (and others), we have seen the markets pull back over the past few days. We offer the following market charts to illustrate how expensive (or fairly valued) the stock market has become and why we may be seeing this pullback as questions about the future economic policies of the upcoming administration take hold. See below: SPX valuation. The index's forward P/E ratio is at its highest (22.2) since April 2021. Ten of eleven sectors are trading at multiples that exceed their 25-year averages.  However, compared to other countries around the world, the corporate earnings of the United States are head and shoulders above of the rest of the world. See chart below: US EPS vs. the rest. And finally, \"forward earnings per share (EPS) for the US MSCI stock price index is flying to new record highs, while the rest of world's forward EPS have remained relatively flat in recent years.\"  Taking a look at the various market indices over the past week.  “Amateurs think about how much money they can make. Professionals think about how much money they could lose.” - Jack Schwager A bright sector in the market Of course, there are some pockets of strength in sectors since the election. Initially, given the perception that the economy would be business-friendly to small businesses (less regulations and lower interest rates), the Russell 2000 index (small-cap stocks) blasted off. That rally (as shown above) has stopped in its tracks this week as higher interest rates, unfriendly to smaller companies, hit new post-election highs. The idea that this administration would be ultra-friendly to energy (part of the campaign speeches) has lifted most energy stocks and the sector. See below:  A major shift in two asset classes has occurred since the election  We are sure that you are aware that Elon Musk, the Chair of Tesla (TSLA) and other modern-day technological wonders, is working closely with the new President-elect and has been named to head up a new office aptly called DOGE (Department of Office Government Efficiency). We think it is no coincidence that the office was named after a digital stable coin. Mr. Musk’s companies hold meaningful digital-based investments, and he will be one of many that will try and influence the upcoming administration to allow, invest and utilize digital currencies, including Bitcoin and Ethereum. Also add to this equation the speculation that the upcoming named Treasury Secretary may be a person who has a propensity to expand the use of digital currencies within the US budget. There has also been speculation that the administration will try and integrate digital currencies into a way to fund the current and future debts. These factors and more have led to huge inflows into the crypto space, be it Bitcoins or their proxy ETFs such as BITO, BTC, IBIT, etc. The enthusiasm has been shared by Ethereum and its ETF ETHE. The big winner the past five years may be losing steam Gold has certainly been the big winner with performance over the past five years, besting the Dow Jones Industrial Average. See the chart below: Gold Has Outperformed Stocks Over the Last Five YearsGold has appreciated 80% over the last five years, 25% more than the 57% gain in the Dow Jones Industrials Average (DJIA) over this period.  Recently, gold and silver (and the miners) have been selling off. Not surprising given that interest rates and the US dollar have hit recent highs since the election. Gold and silver are especially sensitive to the strength in the dollar and are negatively affected by rising interest rates. Also, as illustrated below, apparently gold does not like the Trump administration.  Investment assets have been moving from gold to bitcoin. This thesis has picked up speed as many institutional investors who have been shortsighted not buying gold the past few years have felt more comfortable with the size and liquidity of the crypto markets. See below: Gold vs. Bitcoin fund flows. As gold funds experienced the largest outflow (-$1.6bn) in more than two years, crypto funds saw record inflow (+$6bn).    If you are not yet a believer in Bitcoin and the slew of digital currencies available for trading, perhaps it is time to get on board that train as it is leaving the station. Given that many of these blockchain technology currencies are now available through ETFs, it is rather simple to make an allocation to this alternative asset class. The good news We are not even in the early innings of the new administration, and when many policies and regulations become reality, it is anyone’s guess which sectors will be the leaders in 2025 and beyond. Clearly, with the advent of AI, technology, semiconductors, new innovations and blockchain technologies have plenty of upside. Perhaps, as we have shown in this week’s Outlook, these sectors got ahead of themselves and just needed a pause to refresh. The following charts should provide plenty of platitudes on why the new administration should reap positive rewards for investors going forward. Note that we have a red wave, made up of a Republican President, and Republican majority in both the Senate and House. According to the chart below, having a red wave sweep has helped the stock market do well in other periods this occurred in history. See chart below: Red wave. \"Since 1900 the 2-year equity return of the S&P 500 following a sweep has been positive 15 out of 19 elections. For just the Republicans, it has been 7 out of 8.\"  Thank you for reading this week’s Market Outlook. We are grateful you choose to spend a few minutes with us every week, and we look forward to connecting with you in the future. Have a good and profitable week ahead.  Risk-On  Risk gauge remains 100% positive despite the sell-off, as the initial strength after the election seems to be holding. (+) The 1-month vs. 3-month volatility retraced a bit but is still in positive territory. (+) On a longer-term basis, the color charts that measure the % of stocks above key moving averages remain positive for the small caps. (+) The dollar continued its ascent this week against the euro with markets reverting to their historical relationship. It is in overbought condition and subject to mean reversion. (+) Bitcoin exploded to new all-time highs, held its gains, and seemed unfazed by the sell-off in equities. (+) Despite the nasty sell-off on Friday, growth stocks continue to outperform value based on our Triple Play leadership indicator, and both remain in a bull phase. (+)  Neutral  A mixed picture regarding the Modern Family with a massive breakdown in biotech and an important breakdown in both price and leadership as measured by our Triple Play indicator in Biotech and Semiconductors. Meanwhile, Regional Banks (KRE) and Transports (IYT) held up well despite the late week sell-off. (=) The Nasdaq is giving a mixed read on the color charts. (=) Gold broke its longer-term trend line but is extremely oversold on both price and real motion. (=) All four major indexes sold off hard this week (-1.4% to -4.1%), which was not surprising, as we highlighted, considering how overbought they were at the close of last week. Market action will reveal if this is mean reversion or a cyclical top in the market. (=) The number of accumulation vs. distribution days is neutral across the major indexes. (=)  Risk-Off  Only Energy and Regional banks out of the 14 sectors we track were up on the week, while there were some major selloffs in Biotech (IBB) and semiconductors (SMH), both risk-on sectors. (-) DBA (Agriculture) was up 2% on the week, indicating inflationary pressure. (-) For NYSE and Nasdaq, McClellan Oscillator and up/down volume reversed its positive read with the selloff over the last couple days. Additionally, the cumulative advance/decline line for the NYSE has a potential double top in play, while they are still weaker for the Nasdaq Composite sitting on multiyear lows. (-) The two key moving averages on the New High New Low ratio flipped negative. (-) Interest rates look under pressure on all ends of the yield curve. With inflation pressures still persisting, the likelihood of another rate drop has diminished. (-) Foreign equities, both in emerging markets and more established, took it on the chin and got their ear bit off. (-) Dr. Copper also got hit this week, closing in a distribution phase. Not a good sign for the overall economy. (-) Based on our color charts and the number of stocks above key moving averages, the SPY is bearish across all time frames. (-)   Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484974968"}