Episode 230: Maybe, Maybe Not

In this week's episode, Ian discusses the recent price action from the major indices following the post election jump last week, continued strength from Bitcoin, and the outlook for Large Cap and Small Cap stocks. 

Transcript

Ian McMillan 0:27

Welcome back to the weekly trend podcast. My name is Ian McMillan. Today is November 15th, 2024. S& P currently sitting at 58. 90 and it has been an interesting week for quite a few assets out there. Dave is out of the office today. So it's just me flying solo. Got a little bit to talk about, a lot to talk about in some areas. First things first, we'll start off with stocks. Obviously we know that the initial reaction to the election results last week, very strong. We saw many areas, sectors, sub industries, especially individual stocks. Various asset classes like Bitcoin take off very quickly, even starting on election night before anything was official, official, and that carried out through really the rest of the week, last week, this week has been a little bit of a different story, Monday, strong but Thursday and Friday not great especially from a technical perspective I would say that the nasdaq 100 of all the major indices the nasdaq 100 probably The weakest response off of last week It was sitting at Year to date highs coming into the election were around twenty thousand seven hundred we'll call it And those were back in like really kind of early to mid july So kind of a sideways summer and fall for nasdaq 100 Election night came big move Got above those levels And really, after I would say last Friday, they didn't do much on Monday as much as the the broader market. And NASDAQ 100 really hadn't been a big outperformer coming into this. But a terrible reaction today. Gap down. It's continued to drift lower, down about two and a half percent on the session right now. Markets will close in probably three hours. But we are back below those July highs, around twenty thousand seven hundred and actually into the election the following election day, Wednesday, the sixth gap. This has been a pretty abysmal reaction for This index in particular and the S& P a little bit broader, not as techy as NASDAQ, but still pretty big weighting to tech. So obviously it's going to be impacted obviously. And it also I mean really was fine. We'd had a big run up right and we need to keep that in context in the back of our minds as we talk about this We haven't given everything back up yet. It was a really nice reaction But would have definitely liked to see us go a little bit more sideways Giving back a little bit more than I would have cared for the s& p actually now technically into its Wednesday november 6th gap as well So an unfortunate look across the board Dow Holding up the best, again from a technical perspective. It's only down about 90 basis points today. So still down. But holding up better than the rest. And, The Russell 2000. What category do we put the Russell 2000 in? It had been the weakest year to date. It had the strongest response after the election. Made a big relative move Now in the grand scheme of things We all know it has a lot of work to do It is also giving back a lot. Holding above 2300 Unfortunately, you know if we go back to this 2021 range, now all time highs Still remain up around 24 50 Really this range was, we'll call it 2350 to 2130. I would have really liked to see it hold the 2350 at a minimum. We've not done that. But this area is such a hot mess as we look back to the left. Maybe it was foolish to think that we were going to zip right through it. Although we certainly tried but this is actually Right, I mean, it's very similar behavior to November 2021 big move now, we didn't have an election in 2021 at least not a presidential election but a big move and Quickly failed came back down obviously We went into a bear market in 2022. So, all that said, reactions initially pretty good. Unfortunately we've given quite a bit back. So we will see where that takes us into today's close and into next week. Longer term trends, still strong, still up. Maybe some waning momentum out there. I could make a case for that. Obviously want to keep in the back of our heads as well, that we are just now embarking on the strongest 6 month period, historically. So we do have that. Kind of seasonal tailwind at our back. We will see if it matters. We were supposed to have some seasonal weakness, really August, September, October. That didn't come to fruition. So maybe it's late. We'll see. But short term, not a great week. Not a great week. So what has held up? Best sectors, I would say, continue to put communication services and financials in that category. Financials being a leader, I think is a pretty solid tailwind. Worst sectors, healthcare and staples, for sure healthcare. Staples, real estate, materials. Under we've seen gold miners get hit again this week a lot of that on the strength of the dollar It's dollar good is dollar bad. I don't know. I don't know I mean dollar had been on a went on a big run after the election so two stocks dollars down today seller stocks But we're sitting at, again, at the top of a big really a two year range. We've been here many times since November 2022 from really 100 to 107. So, are we peaking out again? I don't know. We're at the back of the top of that range. I think it's gonna take a few more weeks to kinda figure out what is going on with the dollar not necessarily always a bad thing for dollar to be strong. Dollar can go up and stocks can go up. Usually a weaker dollar, better for the Russell. Again, that's historically speaking. I don't know if that's necessarily been the case here short term. We've had strong Russell, strong dollar. So we will see. But has definitely affected gold I would say gold prices one area that has not been hit With a stronger dollar has been bitcoin continues to hold up very well Sitting on 90 000 so had a big I think last friday we were sitting We had just broken out above 75, 000 we were sitting around 76 77 We are now sitting at 90, 000 got upwards of 93 on Wednesday and sitting in a tight range 85 90, 000 we'll see what kind of reaction it has here, but certainly one of the assets that has held up the strongest gist As far as the fixed income arena, I would continue to give A pluses and green flags from the fixed income arena. High yield spreads drift lower. I think we're back to April 2022 levels in high yield spreads. Those have really been in a nosedive. And technically speaking, when you look at junk bonds versus AGG, whether here in America or across the globe, still seeing more demand for junk bond than you are for government debt. Or really just the broad bond market in general. So with that being said, an interesting week for sure. Want to keep in mind, we mentioned this in the client letter. Mentioned this before the election, mentioned it last Friday. Initial reaction to the election, good. If your candidate won, it was great. It was great to see, I'm sure it was great to see that on, Tuesday and into Wednesday and really into this Monday Trump won. Really strong reaction from the market. Is that going to hold up? We will see. We mentioned this as a possibility. I mean, no one wants to see a sharp move higher and then give it all back. That's not fun. I mean, Wouldn't want to see that no matter who was elected president, and maybe we would have seen, maybe if Kamala had won, we would have seen the exact same reaction to the market. I don't know. We'll never know. But this is the hand we have been dealt. We've given, again, given quite a bit back. Alarm sounding yet. No one's ringing any bells. No one's going to all cash. And maybe it takes time. Maybe the market needs to figure out what to do. Are we still going to continue this unwind of mega cap and tech and growth? And we know how levered towards into that stuff that the industrial or the institutional complex is in this industry. It has been a large, mega cap growth tech story for many years. Getting out of that, likely not going to be very smooth. And that's going to affect. The S& P. We don't like to think of it as a tech index the same way we do the NASDAQ, but it's going to affect the S& P because of how big those weightings, those mega cap weightings have gotten over the past few years. And buying Russell just isn't going to offset it from a what moves the market. Yeah, the Russell is 2, 000 stocks. SP is only 500. But it is a very large aircraft carrier. That if this comes to fruition, it needs to be replaced with a lot of small boats. And that's not going to be easy. It's going to take time. That is trillions and trillions of dollars that are going to need to be Reallocated if they get reallocated and again, this is all speculation at this point. Maybe we see a big return to large cap and in that boat just keeps going and the aircraft carrier stays at sea and 2025 is a big year for tech in the Nasdaq Based on the charts, I would say that's less likely Going forward those charts can always change But will be interesting. A lot of change. I think there's a lot of change being proposed by the incoming administration. Dave and I have said time and time again, there's one thing the market really doesn't like is uncertainty. So what does all this mean for different sectors and industries? The market's got to figure that out. And that may take time and it might be uncomfortable and we might have some tough drawdowns going forward until the dust settles. And again the point here being that was always a possibility. It's always a possibility that your elected official of choice wins and the market, over the long term doesn't like it. And vice versa, they're, the person that you didn't vote for, you're upset because, initially the market seemed to like it and you say, oh gosh, does that mean if the person I voted for had gotten elected, the market wouldn't have liked it and We all want to see our 401ks go up. I don't think there's anyone in America that doesn't want to see that. So we will see going forward, next week going to be super, super important. If we buck some bullish seasonal trends then yeah, we will need to think about that going into 2025. But no major damage done. With that being said, I think it is important to recognize the sponsor of this podcast, the Adaptive Select ETF. The NYSE under ticker ADPV, helps investors access two of the most prevalent factors in markets, momentum and relative strength. Through a proprietary identification method, the Adaptive Select ETF attempts to own the strongest 25 large cap stocks. For When the market is in an uptrend and since not all market environments are the same, Adaptive Select seeks to prevent extended declines by moving to short term T bills or cash in long term market downtrends. Investors can find out more, including how to invest in ADPV by visiting ADPVETF. com or by calling 1 800 338 TRAFFIC. 8 0 5 investing involves risk including possible loss of principal distributed by quasar Distributors LLC Thank you so much for tuning in this week Tried to keep it short and sweet but had some interesting developments that we will want to keep an eye on And we will do just that have a great weekend everyone