Tiger Weekly Insights:2024/11/25—2024/12/01

I. Performance and Valuation of Global Equity Indices

Data Source: Bloomberg, compiled by Tiger Brokers

II. Key Market Themes

i. October PCE Inflation in the U.S. Meets Expectations, Economy Strengthens – Can December Deliver a Rate Cut?

• Recently, the October PCE inflation data for the U.S. was released. Nominal PCE and core PCE rose by 0.20% and 0.27% month-over-month, respectively, both in line with market expectations. Notably, inflation in the services sector continued to rise with an accelerating pace, while durable goods experienced a continued month-over-month decline. Overall, while inflation has ticked up, it remains within expectations.

• At the same time, personal income and personal spending of U.S. residents increased by 0.6% and 0.4% month-over-month, respectively, significantly exceeding market forecasts. This presents an interesting scenario: on the one hand, inflation shows a slight uptick but remains manageable; on the other hand, income and consumption continue to soar, demonstrating robust economic and employment conditions. As we analyzed previously, the market is now caught between fears of a sudden economic downturn and concerns about the economy overheating.

• In the coming week, key indicators such as PMI, non-farm payrolls, and consumer confidence will be released, while speeches from key officials like Waller and Powell are also anticipated. We believe the Federal Reserve is more concerned about weakening employment at this stage. Expectations of inflationary pressure may influence the long-term neutral rate and the number of future rate cuts but are unlikely to alter the Fed’s stance on cutting rates in December. That said, attention should be paid to next week’s economic data and the tone of officials' remarks.

Data Source: Bloomberg, compiled by Tiger Brokers

ii. Goldman Sachs 2025 Outlook: Will MEGA7 Continue to Rise? Does AI Hold Opportunities? What Other Market Prospects Exist?

• Recently, Goldman Sachs $高盛(GS)$ released its 2025 outlook for U.S. equities. Interestingly, the report's title directly references the name of Trump’s bestselling book The Art of the Deal, and it frequently quotes passages from the book, emphasizing their relevance to investment strategies. This underscores the significant influence Trump’s presidency has had on Wall Street and capital markets.

• Regarding tech giants, Goldman’s models suggest that both MEGA7 and SP493 are currently fairly valued. By 2025, MEGA7 is expected to continue outperforming SP493, although the performance gap is projected to narrow to about 7%. Additionally, Goldman believes Trump’s policies could disadvantage international corporations with high overseas revenue shares, while S&P 400 mid-cap stocks, which focus on U.S.-based operations and are more attractively valued, present a compelling opportunity.

Data Source: Goldman Sachs Global Investment Research

Data Source: Goldman Sachs Global Investment Research

• As for AI, Goldman maintains its optimistic stance, particularly on companies with potential to commercialize AI for revenue generation. However, capturing this opportunity is challenging: first, profitable business models are not stable, and current profitability does not guarantee success after future AI model iterations; second, most profitable AI applications are in niche vertical markets, meaning these firms are often small-scale or unlisted, posing significant uncertainties.

• Moreover, Goldman anticipates Trump’s presidency will relax financial regulations, potentially reviving antitrust cases that were previously stalled or rejected, providing a significant boost to the mergers and acquisitions sector. Additionally, a Trump presidency combined with a rate-cutting environment next year makes Goldman optimistic about medium-to-large companies whose primary clientele consists of small and medium-sized businesses.

Data Source: Goldman Sachs Global Investment Research

Data Source: Goldman Sachs Global Investment Research

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