Hey Folks, big holiday week coming up with Thursday a full day off and Friday markets closing at 1 PM ET. Get my take on how the markets are stacking up for the last month of the trading year.
MARKET SOUND-BITES:
Markets finished the week higher, recovering some of the previous week’s losses. Gains for the week were broad-based, with small-cap indexes outperforming large-caps and an equal-weighted S&P 500 outpacing its cap-weighted counterpart. Bitcoin continued its postelection rally and notched its third consecutive week with a gain exceeding 10%. The S&P is trading over 22 PE which is 31% over the average PE multiple from 2015 to 2019. And back on this day the 10 Year Rate was in the 2-3% range vs the current rate of 4.4%. There is also a lot of ample liquidity which helps inflate valuations. A perfect example is MicroStrategy’s brilliant move of issuing $3 billion of 5-Year convertible notes paying 0% interest but are convertible into its stock at $672 a share (55% over current price).
With a light economic calendar, much of the focus was on Nvidia’s Q3 earnings release on Wednesday. Nvidia ended the week little changed as investors appeared to be generally satisfied with the results, although the company’s guidance for the fourth quarter was lighter than some analysts expected.
Much of the macroeconomic focus remained on the Federal Reserve’s final meeting of the year in December as investors look for clues around the pace of interest rate cuts. U.S. Treasuries posted positive returns heading into Friday with short-term yields increased from the prior week, while long-term yields decreased.
Business activity in the euro area contracted unexpectedly in November, underlining the uncertain economic outlook with the Eurozone Composite PMI Output Index unexpectedly fell to 48.1—a 10-month low—from 50 in October, as the manufacturing sector sank deeper into recession and the services sector started to struggle after two months of marginal growth. Weak PMI data appeared to bolster expectations that the ECB could ease monetary policy further in December. With higher-than-expected inflation in the UK it reinforced expectations that the BoE is likely to keep policy steady for the rest of the year. Markets have already scaled back their expectations from three rate cuts to two in 2025 With higher than expected.
With the timing of the Bank of Japan’s (BoJ) next interest rate hike (likely in December or January) still finely balanced, the yield on the 10-year Japanese government bond (JGB) approached 1.1%, nearing a 13-year high. Consumer inflation held above the BoJ’s 2% target in October—although the headline consumer price index fell to 2.3% year on year, this was in line with expectations given the return of electricity and gas subsidies.
Chinese equities declined as a light economic calendar and concerns about the incoming Trump administration curbed risk appetites. Beijing has unveiled a slew of stimulus measures since late September to boost the ailing housing sector and revive consumer demand. Officials have signaled even further easing measures in the near term, including potentially cutting the reserve requirement ratio for domestic banks.
Enjoy this week’s market round-up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
