We hope everyone in the FS Insight community enjoyed a happy and fantastic Thanksgiving holiday. Despite the last trading week being shortened by the holiday, stocks had enough time to stage a Thanksgiving rally, as Fundstrat Head of Research Tom Lee had predicted. The S&P 500 thus closed out the month up 5% – the best month of 2024.
As Head of Technical Strategy Mark Newton noted, the recent rally has included a comeback in equal-weighted Technology (RYT) and equal-weighted Materials (RTM), contributing to an improvement in breadth. “Thus far, none of the underperformance from large-cap Technology has adversely affected ^SPX 0.69% or QQQ 1.63% .” He added, “I expect a coming trend reversal, but as of right now, prices have not broken down. At present, there won’t be much to make of any technical damage until or unless SPX-5853 is undercut.”
A week ago, incoming President Trump picked Scott Bessent to head the Treasury Department, removing a source of uncertainty from the markets. In Lee’s view, “There are plenty of reasons to view [Bessent’s nomination] as market friendly,” including Bessent’s advocacy for the equity-friendly “3-3-3” policy of cutting the budget deficit to 3% of gross domestic product by 2028, spurring GDP growth of 3% through deregulation, and producing an additional 3 million barrels of oil or its equivalent a day. “We think this reinforces the market’s perception of a ‘Trump put’ – of a White House that wants equities to perform well,” Lee said.
Looking past the Thanksgiving holiday, Lee continues to see positive supports for equities as we head into the end of 2024. As a reminder, Lee and Fundstrat’s Data Science team found that in the 31 U.S. Presidential elections since 1900, the stock market gained 61% of the time three months post-election, with a median gain of 5.5%. If we narrow this down to years in which there was no recession and markets were down heading into the election, the stock market rallied every single time (six out of six historical precedents), with median gains of 7.2%. A 7% gain from 2024 Election Day would imply the S&P 500 reaching around 6,300.
Chart of the Week
October core PCE came in last week at +0.27% MoM, slightly better than consensus of +0.28%. Yet Fundstrat’s Tom Lee sees the report as showing inflation to be even weaker (better) than the core PCE number suggests. A large part of this comes from the fact that the third-largest contributor to core PCE rising in October was the “Magazines & Stationary” component, which contributed 0.04% to the core PCE number. As Lee noted, “The monthly rise of this component, +6.23%, is 75% annualized. The subcategory ‘Newspapers and Periodicals’ is rising even faster, at +9.00% MoM or 108% annualized. Does it make sense to consider thisas sustainable? Does it make sense to view this component as having caused a structural change to the path of inflation in October?”As our Chart of the Week shows, these are the largest jumps for those components ever. If we exclude this component, Core PCE would have risen +0.22% MoM, or 2.5% annualized, in October. “This is a very good pace and tracking towards the Fed’s 2% target,” Lee told us.
Breakdown in USDJPY as well as US Treasury yields should be watched carefully, as many know the late July correction for US Equities also coincided with a sharp breakdown in USDJPY. The extent of this decline has been fairly sharp in recent days, and could allow for a larger decline down to test and break September lows. It’s difficult to say that sharp Yen gains have to lead Equities lower, but the sudden change of trend for both US Dollar and also Treasury yields is interesting, and there’s been a bit of a defensive shift to rotation in recent days. Despite its weakness, Technology is not really breaking down, though Semiconductor Index SOX has been steadily weakening and now lies at the lowest levels since early September.
The Technology weakness doesn’t immediately suggest any kind of larger breakdown, but it is important to note that the last two breakout attempts in RYT the Equal-weighted Technology ETF, both failed. Key will be 37 on the downside and until/unless that’s broken, it’s still right to consider Tech attractive on minor weakness.
This research is for the clients of FS Insight only. FSI Subscription entitles the subscriber to 1 user, research cannot be shared or redistributed. For additional information, please contact your sales representative or FS Insight at fsinsight.com.
Conflicts of Interest
This research contains the views, opinions and recommendations of FS Insight. At the time of publication of this report, FS Insight does not know of, or have reason to know of any material conflicts of interest.
General Disclosures
FS Insight is an independent research company and is not a registered investment advisor and is not acting as a broker dealer under any federal or state securities laws.
FS Insight is a member of IRC Securities’ Research Prime Services Platform. IRC Securities is a FINRA registered broker-dealer that is focused on supporting the independent research industry. Certain personnel of FS Insight (i.e. Research Analysts) are registered representatives of IRC Securities, a FINRA member firm registered as a broker-dealer with the Securities and Exchange Commission and certain state securities regulators. As registered representatives and independent contractors of IRC Securities, such personnel may receive commissions paid to or shared with IRC Securities for transactions placed by FS Insight clients directly with IRC Securities or with securities firms that may share commissions with IRC Securities in accordance with applicable SEC and FINRA requirements. IRC Securities does not distribute the research of FS Insight, which is available to select institutional clients that have engaged FS Insight.
As registered representatives of IRC Securities our analysts must follow IRC Securities’ Written Supervisory Procedures. Notable compliance policies include (1) prohibition of insider trading or the facilitation thereof, (2) maintaining client confidentiality, (3) archival of electronic communications, and (4) appropriate use of electronic communications, amongst other compliance related policies.
FS Insight does not have the same conflicts that traditional sell-side research organizations have because FS Insight (1) does not conduct any investment banking activities, and (2) does not manage any investment funds.
This communication is issued by FS Insight and/or affiliates of FS Insight. This is not a personal recommendation, nor an offer to buy or sell nor a solicitation to buy or sell any securities, investment products or other financial instruments or services. This material is distributed for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice.
The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.
Intended for recipient only and not for further distribution without the consent of FS Insight.
This research is for the clients of FS Insight only. Additional information is available upon request. Information has been obtained from sources believed to be reliable, but FS Insight does not warrant its completeness or accuracy except with respect to any disclosures relative to FS Insight and the analyst’s involvement (if any) with any of the subject companies of the research. All pricing is as of the market close for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, risk tolerance, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies. The recipient of this report must make its own independent decision regarding any securities or financial instruments mentioned herein. Except in circumstances where FS Insight expressly agrees otherwise in writing, FS Insight is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice, including within the meaning of Section 15B of the Securities Exchange Act of 1934. All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client website, fsinsight.com. Not all research content is redistributed to our clients or made available to third-party aggregators or the media. Please contact your sales representative if you would like to receive any of our research publications.
- fell from $99k to $91k
- found support near 20 day moving avg $90k
Polymarket betting markets see 74% odds of $100k in 2024. We believe odds are higher MSTR 1.79% SMLR -5.39% MARA 2.12%