The election is behind us, and the US market has rallied on President-elect Donald Trump’s victory. However, the Trump rally is beginning to fade a bit as we go into December, and the reality sets in that many difficult decisions affecting the economy and the markets will have to be made.
President-elect Donald Trump has made numerous cabinet selections which, for the most part, have been well received. Therefore, the post-Trump election rally, which has faded a little bit, has for the most part remained intact.
Consumer Strength
Markets remain near all-time highs as they digest the impact of the proposed changes to the US markets. We now enter the holiday season, where all eyes are on Black Friday and Cyber Monday sales results. Everything depends on the strength of the consumer this holiday season. Consumer debt is potentially a big problem as people have been living on credit for a number of years since the pandemic due to high prices and general inflation. Even though inflation is under control, prices are still about 40 to 60% higher than they were five years ago.
The $SPY chart above illustrates the S&P 100, which is showing relative strength compared to the $QQQ, which is our next chart example below. The CCI Index is deeply over bought and might be reversing soon, yet the SPY remains near all-time highs.
The $QQQ which is representative of the NASDAQ 100, the leading tech heavy index is showing signs of weakness. First, is the Crossover of the Major moving Averages and second is the shallowness of the CCI when compared to the $SPY.
The Magnificent Seven
Big Tech companies have done exceedingly well in maintaining their earnings growth. Apple ($AAPL) is at all-time highs, whereas Google ($GOOG) is under some pressure due to the threat of being broken up by the U.S. Fair Trade and Commerce departments.
Of course, there is Nvidia ($NVDA), which is still near its all-time highs but starting to show some signs that even with great earnings, it might be a good time to take some profits as the stock has performed exceedingly well over the last few years.
Meta ($META) has also performed exceedingly well as they have benefited from the AI boom and, of course, have some consumer-related products like Meta Quest. Meta’s VR goggles were slow to catch on but have now become very mainstream and might be a big holiday gift hit.
Netflix ($NFLX) seems to have beaten out the Hollywood studios by staying relevant and creating good content. Also, big events like the recent Mike Tyson-Jake Paul fight really added steam to Netflix’s stock price. Netflix has done exceedingly well in getting new subscribers thanks to special events and special programs.
Finally, to round off the last two stocks of the magnificent seven, we have Microsoft ($MSFT) and Tesla ($TSLA). Microsoft is near all-time highs and has done well in being relevant in the AI space as well as the cloud computing space. Microsoft stock is showing some signs of weakness but has overall held up very well considering some recent challenges. Tesla, on the other hand, has benefited from Elon Musk’s very public and open support for President-elect Donald Trump.
The magnificent seven don’t represent the entire market, but they do make up the majority of the market’s capitalization. If these stocks start to show signs of faltering, the entire market indexes will also start to falter, as the magnificent seven now make up a large percentage of the major indices’ market capitalization.
On that note, we’d like to wish everybody a wonderful Thanksgiving and a very happy holiday season from all of us here at DAS Trader.
