Last week, traders made profits from the Trump trade. This week they reversed their positions. I expect further upside into the Thanksgiving holiday.

 

The market's performance was even more impressive considering the disappointing earnings from the number one AI player, Nvidia. The semiconductor giant reported stellar third-quarter earnings this week, but they were just not good enough to keep the stock's upside price momentum going.

 

Company management said supply chain issues reduced the growth rate in sales to the slowest in seven quarters. All that means, in my opinion, is that revenue will be boosted down the road when the bottlenecks are resolved. But in this market, no one is willing to wait around for that. The damage to the stock price was minor.

 

However, Alphabet did tumble more than 6 percent after the Department of Justice (DOJ) moved to break up its vast technological empire. The DOJ asked a judge to force Google to sell off its Chrome browser. Short-term traders dumped the stock.

 

To me, the chances that anything will come of this action anytime soon is just about zero. There is even a question of whether the incoming administration will pursue the case at all. Yet, it continues to sell off. This is the world of short-term equity markets that we live in. Long-term investors can profit from some of these trader temper tantrums.

 

The biggest story in financial markets this week has been the steady climb in Bitcoin and everything crypto. Last week I mentioned that Bitcoin should see $100,000 in short order. Early Friday morning it topped $99,452. Bitcoin has turned out to be the Trump Trade.

 

A prominent crypto lawyer is evaluating potential candidates to succeed Gary Gensler as Chair of the U.S. Securities and Exchange Commission. This added fuel to the fires that have lighted up all things crypto. Gensler, who has been the main impediment to the further development of the cryptocurrency market,  announced he will be resigning on January 20th even though his tenure runs through 2026,

 

 Two of the strongest candidates, Brian Brooks and Paul Atkins, are leading crypto advocates. Appointing the right candidate could convince many more economic actors that the time has come to get involved in this area.

 

Gold has also reversed from a near 10 percent pullback since the election results although other metals have not fared as well. The Biden Administration's pivot in allowing Ukraine to use US missiles in Russia has caused a surge in geopolitical risk and a rush into gold as a safe-haven asset. Russian President Vladimir Putin has long said that using long-range, Army Tactical Missiles (AT-ACMS) would represent the crossing of a red line.

 

Traders have also begun to have second thoughts about the chances for further interest rate cuts by the Fed. The odds are no better than 50/50 at this point that the Fed will cut rates again in their December meeting. Worries that inflation may worsen under the new administration have convinced the bond market and possibly some members of the Federal Open Market Committee that holding off for the moment on rate cuts may be the wise move.

 

I have been warning readers that I expect the Consumer Price Index to show further gains in inflation this quarter. That turned out to be true in the last month, and I suspect we will see the same again in the next report.

 

 Momentum, rotation, and volatility; there was something for everyone over the last few days. I expect that to continue. Technology is no longer the only game in town and this week's top gainers — energy, crypto, gold, industrials, and financials — are proof in the pudding.

 

Markets are stretched but have been in that condition for a while now. Thanksgiving week is usually a good time for equities, so we could see stocks grind higher until the beginning of December. At that point, a pull-back wouldn't surprise me. Happy Thanksgiving to one and all.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.