Sally: What's the matter, big brother?
Charlie Brown: Nothing. I was just checking the mailbox.
Sally: What did you expect, a turkey card?

– A Charlie Brown Thanksgiving

Good evening, 

We hope our U.S. readers enjoyed a happy and fantastic Thanksgiving holiday. Despite a holiday-shortened trading week, 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 0.40%  or QQQ 0.80% ." 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."

Last weekend, incoming President Trump named Scott Bessent as his pick 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. 

Meanwhile, the release of PCE this week brought some good news. October core PCE came in at +0.27% MoM, slightly better than consensus of +0.28%. Yet 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 & Stationery" component, which contributed 0.04% to the core PCE number.

"Why would paper products and magazines be the 3rd largest contributor to inflation?" Lee asked rhetorically. "Does it make sense that magazines are adding +0.04% to Core PCE inflation in October?" As he 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. 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. 

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 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.

Elsewhere

NATO ships have surrounded a Chinese-registered cargo ship suspected of deliberately severing two undersea communications cables in the Baltic Sea that connected Germany to Finland and Sweden to Lithuania. Investigators quickly zeroed in on the cargo ship Yi Peng 3, claiming that on the evening of November 17, it dragged its anchor along the Baltic seabed for more than six hours, covering more than 111 miles and severing the cables along the way. One investigator told the Wall Street Journal that it was "unlikely" that the ship's captain would have failed to notice his ship dropping and dragging its anchor for hours in this manner. During this time, the ship's transponder reportedly shut down. According to anonymous intelligence sources quoted by the Wall Street Journal, Western authorities suspect Russian intelligence agencies were behind the purported sabotage.

A ransomware attack on a software vendor left Starbucks and supermarket chains all around the world struggling to oversee schedules, pay employees, and manage supply chains. The attack was ongoing, with Blue Yonder, a subsidiary of Panasonic, apparently still struggling to regain control of its systems – systems used by 3,000 customers around the world. Some U.S. grocery stores were hit just as shoppers were stocking up for the Thanksgiving holiday, leaving items like milk and chicken breast in short supply, while UK stores experienced  problems managing fresh produce supplies. Starbucks said its stores had fallen back to using pen and paper to manage employee schedules and calculate their wages. 

Neuralink, Elon Musk's brain-chip startup, announced it had received Food and Drug Administration (FDA) approval to begin testing whether its N1 implant and interface can allow a patient to control an assistive robotic arm. A quadriplegic who had the chip implanted in February was able to use it to play video games including computer chess and Mario Kart, but the threads connecting the chip to his brain later retracted. 

Macy's announced that its quarterly results would be delayed because it had discovered that an employee appears to have hidden as much as $154 million in delivery expenses since 2021. The employee has been terminated. Investigators are looking into whether the employee acted alone, and how this was able to take place  without Macy's longtime auditor, KPMG, noticing.

President Biden proposed expanding Medicare and Medicaid coverage of GLP-1 drugs like Novo Nordisk's Wegovy/Ozempic and Eli Lily's Zepbound/Mounjaro. The proposed new rule could impact 38 million Americans, allowing them to access the medications to treat obesity. Currently Medicare only covers such medications to treat diabetes or heart-disease, and states can opt out of covering them for obesity treatment. Industry experts noted that the proposal faces an uncertain future, given that Robert Kennedy Jr., President Trump's nominee to head up the Department of Health and Human Services, has generally opposed the use of such medications. 

A new study published in The Lancet HIV journal showed a sharp decline in global HIV infection rates, falling by one-fifth from 2010 to 2021. HIV-related deaths declined 40% during the same period. These declines were most pronounced in Africa, which has been arguably hit the hardest by the disease. Concerningly, in Eastern Europe and Central Asia, AIDS-related deaths have bucked the trend by rising 34% since 2010, and infection/diagnosis rates have climbed 20%.