Hey everyone,
I hope you had a great week, here’s a quick recap of last week’s plan:
- Leaning neutral, positioned neutral
Equities were once again positive, with the S&P 500 (+0.9%) and Nasdaq 100 (+0.3%).
The “Trump Trade” May Not Be Obvious
The Nasdaq 100 has been underperforming the S&P 500 for the past 6 weeks. Druckenmiller claimed investors were pricing in a Trump victory, noting how bank stocks, crypto, and transports have recently outperformed.
But does this mean Trump would be bad for tech? Given how well tech performed during his last Presidency, my guess is no.
In fact, during his last Presidency, the “Trump trade” of energy, financials, and transports underperformed the S&P 500 by 44%.
Back to tech, I mentioned last week that seasonality should be improving for semiconductors. If they do turn back around, that could turn tech up with them.
Market Trends – China Falling Back to Earth
While the seasonal headwinds have not affected US equities yet, China is consolidating after going stratospheric in late September.
China’s large cap index $FXI has fallen 15% since their early October highs.
The investor buying seems real, but I’m still worried that China hasn’t addressed the longer term problems for their economy. Without sweeping changes to property rights, why would entrepreneurs start a company in China when Singapore and the United States are available?
Of course the country is trading very cheap, and when the CCP sets a goal, they will do whatever it takes to achieve it. In this case, they are setting a goal of improving the economy, which should help companies exposed there.
This is something I’m keeping an eye on, but until I see substantial policy changes, am treating any positions as pure speculation.
Futures – Neutral Equities
I have been wrong about that negative seasonality so far. While the broader equity markets are advancing, opportunities like semiconductors are interesting once this seasonality improves.
As I’ve written over the past several weeks, I’m still not seeing enough evidence for a new bull market, and will be looking for another drop before initiating any longs.