Weekly Wrap: Post-Election Rally Stalls- Week Ending November 15

Market Movers

• 6K. The S&P 500 briefly broke through the 6,000 level earlier this week, the 51^st all-time high this year. Gains were reversed, however, after Federal Reserve Chairman Jerome Powell said the central bank would take its time in deciding how quickly to lower interest rates. The initial honeymoon phase of President-elect Donald Trump’s agenda started to fade, with major indexes pulling back. They ended the week down 2.07%, while the Nasdaq composite and Dow Jones fell 3.39% and 1.28% week-to-date, respectively. The US dollar hit a one-year high, with the DXY Dollar index at 107.06, while the VIX index pulled back to July lows at 13.6 versus 22 early last week. Friday is the largest November option expiry in history, with a total of $2.9 trillion expiring.

• Pharma woes. Shares of major pharmaceutical companies fell 5.05% after Trump nominated vaccine skeptic Robert F. Kennedy Jr. to run the Department of Health and Human Services. 

• Crypto capital. Bitcoin notched all-time highs of $93,462 mid-week before settling down at $89,802 by the end of the week. Post-election, Bitcoin rallied over 32%, prompted by anticipation that the Trump administration will be favorable for the digital asset market. 

Macro

• Dual dilemma. Fed Chair Powell said the US economy’s “remarkably good” performance gives the central bank room to lower rates gradually and it does not need to “hurry to lower rates.” Ten-year US treasury yields ended the week at 4.44%, and there is greater risk the Fed could slow the pace of cuts sooner. The markets have pared back expectations of a December rate cut to below 60%, down from 80% earlier this week. US data on the balance showed inflation remained firm, with the consumer price index at 0.3% for the third consecutive month, while the producer price index rose 2.4% annually. The labor market continued to show strength, with unemployment claims falling to their lowest level since May, and retail sales were higher than estimates. 

• 2.0. Trump’s victory boosted the Russell 2000 index, up 4.05% post-election, which has been driven by investor optimism in domestic businesses and the announcement of the new Department of Government Efficiency, which would aim to reduce bureaucracy and spending. Financials were also a large beneficiary of the equity rally post-election, with an index measuring the financial sector rising 1.067% week-to-date. For the rest of the world, some markets struggled, as Trump’s policies and fiscal plans fuel a stronger dollar, raising inflation concerns, and focus on potential tariffs. Economists forecast that both China and Europe may need to deploy greater fiscal and monetary stimulus to offset the economic impact of a second Trump presidency. 

Micro

• AI preeminence. Two Taiwanese hardware partners for a major semiconductor company are forecasting the boom in AI server demand to continue into next year after beating quarterly profit estimates. Predictions expect cloud products to make up 50% of the company’s total server business in 2025. An AI ETF is down 2.866% week-to-date. 

• Deal crumbles. Two fashion companies scrapped their $8.5 billion plan to merge due to antitrust regulators’ objections that it would harm competition in the market for accessible luxury handbags. A luxury goods ETF is down 1.838% week-to-date.

• Antitrust anxiety. An internet media company was hit with a €800 million fine by European Union regulators for tying classified ads for the company’s digital marketplace to its social network, imposing unfair trading conditions on rival second-hand goods platforms. A US judge also ruled that the FTC’s antitrust lawsuit against the company can continue to trial on Wednesday. An internet ETF is down 1.164% week-to-date.

Checklist for the next week

• Major economic events in the US include: Initial Jobless Claims; U Mich Sentiment; Global Manufacturing PMI; MBA Mortgage Applications; Housing Starts; Existing Home Sales

• Major economic events around the world include: UK CPI; Eurozone CPI; Canada CPI; Australia Westpac Leading Index; Hong Kong Unemployment Rate; France Manufacturing PMI