Stocks Surge Off Trump Election Victory
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One a clock on these coast. November six, then Nathan Elizabeth Young, Thomas g. Was here on the market call. IT is another fascinating day. We will get into .

all the lives with our you, I am.

Well, how is everybody else?

Something look different. Hair looked red. IT is quite a little darker than I was yesterday at this time.

That now isn't .

a little uncouth to ask .

a woman like about .

her hair time.

So I think something is uncool that stands to reason that something would be cool. So apparently what I wasn't in fact, that but I but I digress a bit then how you doing today if we take a look at the rundown. Roque k, yeah.

let's do IT you. And I already, actually, by the way, if you're listening to this or watching this right now, guy and I had a great podcast this morning on OK computer is in your favorite podcasts, ore. And we took a look at just essentially what this kind of new dynamic and new administration means for technology stacks, large capstans ma regulation, who they like, who they don't um and that was a great listen. Um and we're not going to overdo a lot of that here today, guy, are we but we separate run down we have a separate run down around soon and .

and that's thrown up there. Stocks surge. That's true of election results. Obviously some sectors more so than others. We will discuss the trump knock on effect.

And now we have a little time, a little audience, q and a dance. So let's get read in with the first time. We obviously have to look at is the S M P. Five hundred above fifty nine hundred for the first time in history, a sort of building all day long. We really haven't seen any of a pulled back, maybe saw a little bit earlier this morning, but it's basically been between fifty eight, ninety five and fifty nine and fifteen for the lines portion of the day.

Yeah, you know, one of the things that is we've been talking about a little bit is just kind of the slight outperformance, the S M P of late versus the nasdaq. And so you know the aztec had not made a new high confirming that of the S M P, I think, about a month ago or so. But we're seeing a lot of word action in a lot of different sectors are going to talk about that in the second.

So when you see this sort of move, like as guy mention, you get to gap opening. Um you know you barely seen a downtick most of the day. It's not that broad though, you know not really into some of the sectors that are in a lot of the performance because I look at my main fact set screen and I see a bunch of groups not trading particularly well. What do you make of the disbursing we're seeing and maybe of the under performance of some of these groups in the pay?

Well, one thing I just wants to cover that, that i'm looking at my screen for that just came across the wire was a thirty year auction. Looks like I drew four point six zero compared to four point six three in the presale. So actually, uh, Better results than than that what the presale suggested, which is a little bit different than what we've been seen from auction of late.

We have seen a lot of options that came in with yields higher than what was expected. So just something kind of anecdotal to mention. But when you talk about, uh, the dispersion and sectors, so i've got my sectors appear.

We've got obviously, financials are in the lead, financial industrial's, energy, the top three and then at the bottom of the pile, real estate, staples, utilities, health care. So I think if we look at this from a perspective of, all right, sicily has taken over today. I'm just gonna k about this as today.

Who knows what happens tomorrow? Who knows what happens next week, but we've got sick ality in its most traditional sense, taking over today. Small caps are ripping. These are the most traditional cyclical sectors that are taking over. We have yields that went up a lot.

So I think that makes sense in this moment that real estate would be down and then you've got all of the defensives at the bottom of the barrel, which is obviously the opposite of what cyclicals would be doing. So there are some things that we can look at as a relationship here. If you get yields up, the question that I know we've been talking about on this show and on the pod is, why are yields up and when does IT become a bad reason today?

The interpretation, because signals are leading today, the interpretation is that yields are up because the economy is strong and will get stronger if this sector makeup switches, if you see yields up and defensives up, that's when you start to get worried that the equity market has gotten uncomfortable with the rise in yields. But today, things still look stable from that perspective. And that's what I see in the sectors.

And it's pretty clear, by the way, this is my fault, dan, that I didn't mention. If it's wednesday.

then what does that make IT order ers guy down and he's the senior earns inside analyst over there. At fact set, we get a preview of his learnings insight report. We do IT on wednesday egging in your email box on fridays, but that's just what are doing that right now.

But it's I be remissions ed and mention that in my in my exceptions, I forgot to mention that we have john butters today. But you look at this session p chart and you know, again, lower left, upper right, we've created a bit of an island here on this gap higher. It's it's interesting we'll see this would be a big volume day, obviously unfashionable to see how this sn closes today.

Earlier today, I thought we give back a lion and share the gains that does not appear to be happy right now. Elizabeth just mentioned this bond ocean, which went well. And I think she's right.

And this is a quick discussion. She's right to bring up the fact with the market is interpretation of high yields is right now, I think it's the interpretation of the economy, which has been somewhat know on solid footing. It's going to get even stronger and that suggest that fields shouldn't fact be higher or in the stronger economy.

I think there's a part of that, that's going on. I think the markets and to come the realization that you know these debts and the more spending from probably from this administration is good suggestion that yields should be higher for the wrong reasons. But you know again, that's what makes markets stand.

Yeah and again, you know, when I think about the yield ld move and you guys have been all over this man, you know I personally didn't kind of really see IT in my career. When I see the fed going on a rate cutting cycle, I think that yields should be moving in line is know depending what they're look in that to two, the ten, the thirty, whatever. Um in the face of the yield, the rate cutting cycle, this move has just been crazy.

I mean, to the penny that three point six, you know kind of lined up with september eighteenth when the fed cut fifty. And so this this is one of the things that kind of kept me a little bit of sites. I have not been particularly um about the economy over the last few months.

I mean, I see a lot of things that are kind of keeping IT uh, hanging in there. But how does this shake out a little bit? Because I go back to late twenty one, right, when the fed was basically doing the exact opposite, they signal that they're going to be rising rates to come, that inflation.

And I think everything that got in and then lounging tion assets got killed, right? A lot of speculative evaluation up. And then I think about what guy just said about what we're going to see in the next few four years didn't matter who won. It's gonna a lot of deficit spending, right? And so do you have this debate whether you inflated out of IT know whether you keep rates high to kind of avoid inflation reigniting and that sort thing like help us make some sense about this because you can say that if the ten year goes back to five percent, shouldn't that way on equity valuations?

Uh, the short answer to that is yes. And well, i'm talking i'm going to give the team a minute to pull up a tweet that I put out yesterday was about ten years yellow and a range of ten year yell in a non recessionary environment. So one thing that we have to think about with deficits, and a few weeks ago I wrote about deficits because of this very reason.

This is obviously before we knew the election results basically IT IT. Doesn't matter who won yesterday, the deficit was going to stay high, if not get bigger. So when you think about that and just thinking about a deficit, even in the form of a company, you've got revenues and you've got costs.

If revenues are not rising and cost stay the same, the deficit still stays wide under either candidate. IT was still going to be a problem. So we have not gotten ourselves out of that.

And the fact that the deficit is high and is going to continue to rise is something that will probably continue to pressure yields higher. The other thing that we also have to remember is that the three biggest buyers of treasuries are not buying as much as they used to. China has started to buy gold.

The fed has stopped buying because they're doing qt or at least stopped buying as as much. And japan is trying to support its own currency. So they're certainly not onna do anything that support hours.

So we don't have as much of demand in the system, which keeps yields elevated. okay. This tweet that I put out yesterday, this was when the ten year was at four thirty two to hang with me for a second year because this is a little bit complicated.

But basically, if the takeaway is that we are not going to have a recession, if this is what we would call a soft landing or a no landing scenario, the range of the ten year yield is suggested to be summer between three point nine and four point four percent. okay? We're right now trading at four point for once or above that range by a tick, even if we were inside IT were at the very top end of that range.

So right now, this would suggest that treasuries are oversold actually. Now does that mean that they can can get more oversold? No, of course, they can get more oversold, but there is a point here where I think they become a buy again.

And IT might be the point where they start to pressure equity. And the equity market doesn't like IT, but this is something to keep in mind. And this is one of those inconsistently in the market where if we're saying, okay, clicks are rallying, right? Yields are up because the economy is good, but that also means that we're not onna have a recession. The fed says that they're neutral raters, two point nine percent. If that stays steady, then actually yields are too high at this point.

All fair, I think great points. And we're going to learn a lot more tomorrow from some of the commentary is yet is tomorrow, wednesday. So when juran pal speaks, that will be fascinating in light of what's happened.

But made a really quite patel teacher. And i've been somewhat steadfast with this. I've been right. I've been wrong. I've been right.

But I think T, L, T, is going to trade down to those levels we saw in october of last year, and that's about eighty three. And change would suggest in we probably get back to around five percent or so and to tell your bond. So we'll see how that plays out.

We'll see what the marketplace reaction is. I will tell you that I thought the market would react far worse in the face of something like this. I've been wrong, but I think it's just a matter time before the yield starts to scare some people.

Yeah and again, this goes back to just all the uncertainty um and we know what that feels like. We've lived through you a trumpet administration before and you know when I think about some of the comments that he's made of late about the federal reserve and the feed share power and how this sort like White house or the executive should have some influence in industry policy and we we know some of the behavior.

Remember when um you know pal started I think he was in seventeen right in the eighteen started raising interest strates. You know the effort was to Normalized them. Got you made this point on many occasions as soon as the stock market sold off.

Thank you for twenty eighteen. About twenty percent, I think, determined that used to use as Brown by the federal reserve to take a pause. And so in in light of all that, you have a fed that's already cutting and he gets further pressure with the fear of being bounced, right? Like that's the other thing. And um you know what what does that mean if you have further pressure to lower interest rates at the time where maybe the economies come along? At least that's what the stock market is saying right now that the economy is set to reflect off of a two point eight percent GDP.

Yeah and so in a couple of things, I don't know what the mechanism is to um for the fed chair to be removed. I didn't take that day in in policy in college, but there are obviously as a mechanism for that, quite Frankly, behind the scene. I'm sure that you can force people out of positions.

But with that said, that goes back to a eliza th, which is same before let's stop an I wm chart. And you got to go back all the way back in november of twenty twenty one, I believe to see the last time the Russell through the lens of the I W M was this high. So we're getting towards levels that we last at three years ago.

I think that high then was about two forty two or there about some we're checking up to IT. It's going to be really interesting to see if today is some sort of blow off top and we create this bit of a double top or if this thing continues to accelerate. I mean, I think that's one of the things absolutely have to watch over the next couple weeks.

So with this with cap index, we've talked about the small cap index so many times might take us bent on this. This is what keeps me up at night because this is the one thing that has not confirmed the move that everybody has been talking about, and you needed to confirm the move in. What I mean by that is if you've got cynically leading, you've got an economy that isn't gonna under recession.

You've got basically optimism over the idea that maybe we're more mid cycle than we are late cycle. Small caps need to confirm that in the way that they do IT is by bypassing surpassing their previous high. And they've made, I think, seven attempts at this now and failed every time.

So IT will be absolutely one of the most crucial things to watch if they get above that previous high and if the momentum keeps going, that is really but we're not there yet. But this is the closest we've gotten, and guy is right to point that out. The closest we've gotten. The thing that makes me nervous about IT, though there is a big gap up on the end of this chart. If we have to reverberate back down and fill IT, we may have our eighth failed attempt.

Yeah, I guess i'm in a slightly different camp, especially when you think about just all the moving parts, says a relates to where we are in the economy, what's been working, how the the markets brought now, at least in the equity markets. And I think that we're all the sudden in a very different spot than we were over the last three, four years that maybe the leadership does change a little bit.

You looking at the bank said, let's just pull up some of these sectors and no Mandate, a little table of some of the activity today. I mean, men, when you look at the X, L, F. And again, we know burch is a big part of that.

But when you look at some of the performance in some of those names there, you say are IT, is this the leadership of industrial? I'm looking at this cat tractor is trading up you know, nine percent or something like that seems a little crazy in the energy guy. You know, you see some of these drills of fifty two week lows at the slumber, jay, in the light R, S, L B.

And you know then on the flip side, like, you know, you tell me what why are some these retailers guide trading so badly? Is that a terrible situation? Is like just a lot of I I just think all the sudden things get a lot more complicated. You know you hear people talk about the equity markets, you know not just a model if and I feel like we're getting that right now, we use the term dispersion before, maybe that's the thing that continues to be a driver of equity markets and and actually just really for investors giving them the opportunity to kind of pick and choose winners and losers.

What makes sense on this chart to me? I mean, you know the market is what IT is. Financials make sense in terms of what the market is, the perception of the market.

Obviously, you tell these on the other end of that spectrum, kes sense given the move in yields, real estate. The reasons let's just talk about that all makes sense. But consumer staples, I don't know that's a bit of an outlier to me. And the flip side of the coin, energy country intuitively, and we've talked about this a number of times, no energy under the trump administration might not be the teNancy that the market seems to think is, quite Frankly, lot of these energy stocks have done Better under this current administration than they didn't a prior. So there's still a lot of things sort of weed out here then yeah.

no doubt I meis here. Any of those sectors is kind of sticking out to you where you think some of the Price action today will be like it's just a bit of a new era, if you will.

Like let's just like maybe may I can pop the B, K, X for which kind of takes out the the burger half way like you see a group like this deregulation, less capital requirements um maybe capital markets activity picks up m and a you know all that sort of up we get IT this group was art trading really well. You know gp morning coming in the day was up thirty four percent of the year. Now you put like that sort of market game.

How many times as guys said, listen, I like this space, but the valuations are a bit you chAllenge here. Well, liquid just happened here. If you don't have a commentate optic in earnings anytime to earnings execrations anytime. So IT loads really expensive.

yeah. I mean, we've talked about finances in this earnings season as kicking off the season in a really good way. So they did, from a fundamental perspectives, say good things.

And I think that boats well for the valuations as they were before this happened. But when we're looking at IT now, I mean, this is there's a lot of tAilings here. If you're thinking about the idea of why are they up today, you've mentioned all of them.

I think we've got the idea of deregulation or at least lower regulations. You've got yields going up. Maybe that means that we would see a bear steep ener, which would mean that both and go up but the long and goes up further, which then feeds into net interest margin.

You've also just got the idea of sicily, where I think investors are assuming OK. That means defauts rates don't take up. We don't have as much credit risk in a lot of these names and just clicking in general, more money flowing throughout the economy should benefit banks.

So that's why I think we're seeing such a big update today. This the size of this uptick is surprising to me. So this feels a bit overdone.

This feels like we will probably have to give some of IT back, and we also would need to twenty, twenty five some of these things to be confirmed. The increase in capital market activity, M N A activity, we would need to see stock buybacks happen in a lot of spaces, not just in financial. And we won't know if that's actually going to happen until we're into twenty, twenty five.

So this is one of those spaces where if you were in IT beforehand, congratulations, enjoy this run if you're buying IT. Now we're looking for an entry point now you Better hope that all of these expectations come to fruition in the next six months or so, otherwise, these valuation start to look rich because this today, to me, is multiple expansion. This is not fundamental rising.

agreed. You know, bank amErica at an interesting tweet. This is addressed as a couple of questions that I see in the chat, but thought that bank amErica tweet about consumer, about the fact that their sung across the board.

And if you start to think IT out, IT actually makes a little bit of sense in terms of some of the policies are going to put in place what the terrace mean, what IT potentially means to some of the retailers. And you're seeing IT here through this lens. And if you go to the next side, real quake, you'll see the consumer staples that X L P.

Dan, and it's had this fascinating. I mean, you look at this move we're looking at right now. I mean, it's a really interesting chart and a downtrend in place from obviously, september.

The uptrend has been in place. We're right up against the moving average. This is, to me, a really interesting set up over the next couple of weeks as well.

Well, you think that rates going. higher. These things look less attractive. Um there's no need to have offensives like it's all systems go that sort of thing. I guess where my contrary hat starts to um I don't know where my antenna, let's say, start to get up here is just like the universal optimism about a handful of trade, the trump trade, you know um is the thing that I just think it's you really careful you you want to be I had a lot of friends reach out to me today and it's like, okay, are we off to the races on again and we're are you off to the races like you know, the markets are already acting really well.

I think I said in on one of the apods the other day, I mean, like I think of Harris one, I I think the markets would be trading up potential, not like this, but in different manners because IT would amend split government. In the last night, guy and fast body, we were talking about some of the self. I said there's two very likely scenarios.

SHE wins and it's a split government. He wins and it's a sweep. And so I can't remember the last time where you didn't have divide the government. And that's something that market participants likelihood we don't have to go through all, all the details. But I guess, you know you were shaking your head when I said my antennas are up about this kind of move so quickly.

What do you think a scenario would be that would cause a checked and equity put a little fear and IT? We talked about a fix that was going into yesterday. You know about twenty.

Here is at sixteen. I don't know. I I want to thought may be it's down more, but I think there's been a bid for protection this whole time.

They're do you mean like the put call ratio? There was a big Spike and put calls yesterday. There was a big bid for protection and and now it's a little bit back down. But so what do I think could sort of the rail and there are a couple I want to talk about materials at some point. Two, because that sector is trading a little funky to me today.

But um what could be rail IT if you look at something like the break even rates, especially the two year break even rates, and just for everybody listen who doesn't follow that sort of a data, the break even rate is basically the rate that makes you indifferent between buying an inflation protective security and a ominous security OK. So what the rate itself means, what people are expecting inflation to look like two years from now. You can do this on a two year basis of five year basis, a ten year basis, but i'm focusing on the two year right now and it's Spiked today.

I mean, all three of them have Spiked, but the two year has Spiked quite a bit. So what could deal this? Why does that matter? Inflation, break evens are what the fed watches.

One of the things that the fed watches to decide whether or not expectations have gotten out of hand. And number two, to decide whether or not inflation expectations are entrenched. So you can see this this climb that happened since midd september, and now we're up one hundred basis points higher in break events.

Then we were in midsession over in the two year. So what derails this, I think, is that the fed s starts to get nervous about that. Maybe they just pauses.

They stop cutting, because I think some of this thesis is based on the idea that they are gonna keep cutting rates, maybe just gradually because the economy is fine, we don't need to be in any big hurry, but then inflation starts to reignite, at least expectation start to ignite, and you've got a problem there. And yields continue to go up because inflation expectations have been reignited. Now the expectation of tariff s is something that will drive inflation down the roads, not gona happen tomorrow, obviously, but IT will drive inflation down the road.

So I think there there is going to be an interesting thing to watch here. We might have a shift back to where markets are more concerned about the inflation readings than they are about the labor marked for a while if this gets out of hand. So I think this is a really big rise to watch. Now on the flip side of that, if you look at a sector like materials and you want to play an inflation trade, you want to take offence on inflation, you could look at material and just look at some how that some of these names are trading today or even just some of the industry groups within materials.

So within that space, you've got construction materials, you've got metals and mining, both of those groups today up more than three percent, construction materials up on seven percent today on the expectation of more infrastructure spending on sharing a materials up because if were terrace, if we're putting terror on all of the international goods and all of the us. Companies can benefit from that. This is one of those trades that if that is how that works out, maybe these are the early days of a rally. Or and guy, I would be interested in your take on this. Or this is a really big measure reaction that isn't quite thinking through the downstream effects of putting troops on everything.

A hundred percent your spot on. I don't think the market is thinking through at all. But in the short term, as you know, this can last for a while, and I think they'll be a day of reckoning in terms of the terrace on what they potentially could mean to these stocks.

But it's not going to happen tomorrow. So for example, for you folks to watch fast money, the m in my clam and a man can throw charter is Martin mariatta. Look at the stock over the last couple weeks and then specifically today, I mean, you don't seem moves like this in names like this all that often.

And by the way, this was the stock that did not trade well for the majority of this year from the spring until basically late summer, early fall. IT was a train reck and now is basically got the entire thing back in one fell soop. So the market is making bets here, clearly.

But to eliza point, I think at some point people going to sit t back and see a way to second what are the ramifications stand for these tariff s and what does that mean for the profit margins of some of these companies? And will they be able to pass on assuming these higher costs to the consumer? And I think that's going to the rob, listen today there's a ephori. Clearly, I get IT core heads will prevail and I think the marked start to figure out who's gona win and who's going to lose.

Yeah and let's look going to a sector that I think we spent obviously a lot of time on over the last year. So um and there's lots of different implications. Obviously, there's a secular shift and then there's also a lot of geopolitical issues associated.

Looks to get the sem here for second. And you know it's interesting because the semis, despite the fact that the nas jack in the S M. P.

Made new highs. Look at this. It's just kind of stuck in the mud here. We know in video is a big part of this in videos is back at um it's all time high but is also since its highs the prior hides in july or june is really under perform the S M P. Five hundred.

You and I were talking about this earlier guy, you know one of the things that sticks out to me is that taiwan semi in a sea of Green was immediately down, right? And so you trump in his last administration talked about tariff on taiwanese chips um what might he do or not do if there is some sort of aggression towards taiwan by the chinese? You know we've talked about this, as you know, A A massive issue as they produce eighty five percent of the high and g use, which are basically coming from invidia as they own that market or so. So if if we think of this kind of economic war that we've been in, this hot war with china, it's gonna a be redefined by e you know, AI chips in foreign demand for these sorts of things, not just on, you know the the the corporate level, you know that sort of thing. So to me, what do you make of the um the S M H Price action here, guy is that something that once again it's in the hands of in videos as we get closer to the earning report?

And no, it's interesting. I mean, I actually think this scenario where the semiconductor stars can start to really underperform the broader market in a meaningful way. And you know I think of again, i'll say the existence al risk of this entire semi trade still is at the feet of china, taiwan.

Which one would think, given the election results, makes that more of possibility? And that was maybe forty eight hours or so ago. And jenson wang has talked about that. I thinking mentioned in a year and a half, two years ago that you know, one of his primary concerns was exactly that. So we will see how that plays out.

But you said at taiwan and semi, we've said at all the times one of the three or five, three most important companies in the world, you have to take a quick a good look at that and don't underestimate. And this is completely someone ic dotal, but super micro popa chart row. Quick, AManda, just look at how poorly this is done and some of the noise around this company. And one has to wonder then, I think out loud, if there is going to be some knock on effect at some point with some of their customer base or the or you know the fact that they are pretty large customer to the information and videos. Yeah.

last thing i'll to say and this is like so where we're taking A A look at a lot of stocks that are acting in certain ways relative to what we think you know you know some of the nack on effects of policy and the like AR, it's interesting that dell is only up, I don't know, two two and half percent. So they're obviously, you know a server maker just as C I is.

And um you know I would have expected deal to be acting Better as one of their main customers is basically going to zero. So it's always actually to check these sorts of things out with any any parts attack that you are really focused on. I know that you are often looking at this relationship between soft software um and semi um you know mega captcha might IT be good if if there is basically some um you know you're seeing basically some money shift out of some of the bigger names into some of these others. That's why I feel like that dynamic would be a lot more important. Then the the small caps, the rustle two thousand because we know the weight of that is basically less than invidia.

right. yeah. So when you look at what's happening in tech, I do think that, that would be a good sign if tech wasn't the main leader here again because that would be our thirty in a row of that same dynamic. And as we know, market concentration is just gotten worse and worse and IT does pose a risk. So today, tech is interestingly middle of the pack in the sectors.

What I think investors will have to figure out and and maybe they are trying to figure that out right now is if I can't get the growth in tech that i've been getting because valuations are so high, theyve had such a good run. Now we're sort of in this waiting game of when as A I gonna pay off and they need to rotate into something where they can generate that growth. And what's the answer to that? So number one, we have to get to a point or are comfortable with.

We're not going to have double digit earnings growth. And when I say double digit, I mean like thirty percent, forty percent, fifty percent earnings growth out of every other company. But where can we look from a sector perspective for actual growth? And I think right now, the answer seems to be in a lot of the cynically areas.

But I still think that health care can be one of those spots. And there's been a dip, there's been a correction recently because of some of the stuff that happened with individual names. But I still think healthcare can be one of those spots, and I think that's gonna.

The real decision factor from investors is i'm used to having this knockit out of the park sort of growth from technology. We have to come back down to earth on that and understand that growth under a trump administration in particular is going to have to come from other sectors and is going to be targeted actually at other sectors. So there's a lot of decisions to be made here.

also. The last thing I would say is because tech is such a big portion of the index, you don't just come out of that and go into one other sector, right? You come out of tech and you have to spread IT among a few sectors to find that same outside.

Yeah, I know doubt, guy, you canna tease this a little bit at the start of this program. If it's wednesday is what IT is.

John butters? yes. So john butters.

he is the senior earnings is inside analyst over there at fact, that he puts out his report. Maybe AManda can flash IT up where you can get this to your inbox. Facts at dot come slash insight slash subscribe friday mornings.

But we're going to do a little preview of IT here. I think this is an interesting one. We're probably on the the other side of fifty percent or maybe even seventy percent of S P five hundred earning. Um we're tracking beats and raises. This is what butters is doing through yesterday. The market has rewarded positive E P S surprises less than the average uh and punish negative E P S surprises more than the average for q 3SMP five hundred companies reporting positive bs surprises have seen an average Price increase of point six percent， which is similar to the five year average, about one percent. That seems let's let's hit that .

really quickly here, which is small and know it's almost half of what the history ally is. So basically, the market is not giving you any well in historic notions, not giving you the credit and historically is giving you which sort of make sense given some of the run sey stocks had and given the need to really outperform in a meaningful way.

What's more interesting to me is the next part of this S P companies reporting negative B P, S Price to seeing average Price decrease of almost four percent, which is largely in the fiber average of two point three. So i'm going to run a little bit here. But upside surprises you get, half the reward you typically get effectively, and downside misses you almost getting puni shed twice, almost twice that you are historically, which is fascinating to me.

Now once gone to ask a question, what's going to happen under this new sort of regime in terms of the market? Are those numbers going to extort and Normalize a little bit? We're going to see, but I do think for the foreseeable future then that you're going to continue to see companies that must get punni shed more then rewarded for companies that beat, if that makes sense.

yeah. Does at least do you think that's a function of expectations? You know you talking about this a lot over the course of twenty twenty four when we came in and expectations were for double digit year over a year earnings growth.

And I think, guy, I clearly thought that was a bit optimistic, right, especially where rates were when we started this year and where we thought we were as far as the cycle. And you know x the mag seven. So here we are and that you know ten percent um expectation still intact as we kind of get towards your end. And then we are going to start to focus on twenty twenty five, where I think we again have double digit expectations as perfect that maybe thirty to fourteen percent. So expectations a bit high and yet you're not getting that rewarded when you kind of beat and raise, you're kind of a get beat up when you miss.

I think this is all about psychology and that's one of those things that a difficult because obviously, there's not a mathematical explanation for IT. But for one thing, this, I think this is a two pronged psychology response.

The first thing is that no matter the commentary, no matter the commentary by CEO and cfs, no matter the commentary by people like us, companies have still beat and raised for the most part, and they've come through on earnings expectations that we thought were a little bit too high. It's still materialized. So investors are now accustom to that occurring.

You get used to a certain thing and IT takes more and more and more. It's like sugar, right? IT takes more and more and more to get the satisfaction or caine, more and more and more to get the same satisfaction.

So there's that psychology. The other thing is as markets have gone up so much, obviously, valuations have gone up as well. And as investors, I don't think everybody is irrational. I think people are watching valuations, but then IT IT turns into, well, now you have to prove why we deserve to be at this level and the bar gets higher as that goes. So yes, to be at this level, you should beat earnings expectations.

And to be at this level, you should raise your guidance and tell us that things are going to get Better in the future because then I am willing to pay twenty two times forward earnings. If you're not doing that, i'm no longer willing to pay twenty two times forward earning. So I think the expectations just of investor psychology have gotten harder to beat.

And and that's okay because IT does feel more rational that way. Now in the twenty twenty five, the expectations are pretty high as well. We're expecting another year of double digit earnings grow. So this I think this trend is going to continue.

And the minute this is the heart part, the minute that a company disappoints or that an entire industry group starts to disappoint, I think we're going to see the wind come out of the sales. But that has not happened yet. And if the economy stays strong of spending stay strong, if the click trades stay strong, we may not see that happen for a while. Yeah.

I guess the last bullet um you know addresses somewhere. We just talked about that these Price reactions may be related to lower expectations for you for that. The quarter of that weren't right now as ebs guidance for q four has been more negative than average.

And you know that tells a slightly different story. Maybe this year twenty, twenty four was kind of front and loaded with E, P, S. expectations.

And now we are starting to come down a little bit as you maybe there's just further pressure on margins in the lake here. So that'll be interesting to track. A thanks to butters. guy. Guy, we could get a couple .

questions here before and this one for this some gary webs here all the time. No consideration today for increased possibility of the chips act being pulled apart. You know, this is something that we address in our earlier podcast, but it's something worth talking about now.

We met we've talked about intel, brazilian and different times. And quite Frankly, I was surprised that intel wasn't higher than IT currently is. But there's a lots of rebel there are done and this is something .

you equip to talk about yeah I mean, trump is called IT a stupid deal. And if we go back to his first administration when he called something a stupid deal or a bad deal, whether IT was trans pacific, whether IT was, uh nata, whether IT was a the iranian, you know, he just ripped him up.

And so you know, if you're not gonna him somewhat literally on this sort of stop now, he may get IT that there is plenty red states that are benefiting from this. There's no different than the I ra know, the inflation rect. So if you might be really interesting to track this sort of stuff.

But I take IT seriously. And when I think about an interview, you know, is we heard this, there was a rumor that calm was talking about buying, uh, emerging with intel. The company actually, uh, made a comment about the rumor.

This is like a few weeks ago, rather than just denying and saying we're going to wait and see what happens with the election before we make any other search a decision. So IT goes back to kind of regulation and and guys made this point about an email that you know for whole host reasons ah you know probably top is is national security. We saw what you know difficult supply chain issues during covered you know did to our economy, and we just highlighted a little bit the taiwan semi. So I guess my question to you is, do you expect you know just A A Better sort of environment for m and a and is likely to pass the ftc D O G those sorts of scrutton? I mean.

it's onna take a little while. You have to reappoint a lot of leaders um and obviously none of this goes into effect until twenty twenty five at the earliest. But generally speaking, I think investors would expect a frontier environment for M A.

yes. And when we've talked about Emily in the past, i've always try to make the distinction for people that you've got strategic ami and financial ami. You don't want IT to start in some kind of cycle words, financial emini, meaning that companies are being saved.

Now of course, that happens from time to time in any part of the cycle, no matter how healthy or unhealthy. But I think the expectation, especially under republican ministration, is that IT will be a friendly or environment. For strategic M N A.

And that could be a boost to a certain sector, certain industry groups. And and guy, I think you've talked about this, especially for the energy sector. IT could be a boost .

for some of those stacks, no doubt about IT. And you know, I think we saw a lot of we saw lot of ema talked about an energy over the last couple years. I think once we get into the new year, then you're going to see a lot of energy ma on the forefront without question, and we'll start to talk about data as we get closer to january.

We have a question from standing. And bill schutt basically the same question, what's want to do with gold now? And bill is asking, what about medals? Time to buy?

I know this with a strong feelings about this as to why IT makes sense today that goals get in lack. I think last I look was done about seventy five box of a man wants to poll the chart. You know you'll see it's it's having a rough day, but we're still, in my opinion, and a pretty significant uptrain here.

And I don't think that trade is over at all. And I think the market to come, the realization that you know, inflation is probably going to be accelerate. All the reasons to own gold have not gone away. I mean, for a day, IT looks difficult. The miners obviously are not trading particularly well, but i'm not ready to call quita lives on the gold trade.

Yeah, I wouldn't call a quiz. Obviously, they're taking IT on the chin today. Some of some of that is you have to always remember gold as a zero yielding asset.

So if there is a more attractive asset to buy that has a higher yield. We ve got the dollar rising today. We've got yields that have gone up quite a bit over the last month.

A zero yielding asset is just not onna. Keep up. Same goes for like dividend stocks today, something like that. So um but I do think that the gold trade is still here. And this goes back to an earlier comment that I made about the fact that china is buying gold instead of treasuries. Now as a reserve, I don't think that's changing anytime soon.

Another trend that i've talked about and we've talked about this with the animals as too is that you don't have any retail participation in the gold trade a which means that it's probably not toppy. And actually, I I made a promise to myself that if gold sauce, some material pullbacks S I would actually add to my positions. So I I still think that it's a good place to be.

Uh, I still think that there is probably a medical reaction in a positive direction today in a lot of different sectors. So we want to wait and see how this shakes out. But I would not be exciting gold, especially on a day when it's down three for hey.

guy, really quickly because you and i've been charting the goal for a while. We've looked at that up trying you can see IT with your eyes there from the february lows. You get down to that up trend.

It's like twenty six hundred. And you've talked about reloading the move. If a man wants to pull up the dixi, the U S. Dollar index like this makes sense.

You don't mean like you see the dixi trading this way and you know gold was going up no matter what the dixi you know had been doing over the last you know couple months or so. So this makes some sense. You get gold back to twenty six hundred. I think that's the real level for all the reasons that you guys have laid out.

Last question really quick. What about the transports names like GPS, fedex? You know, I looked at fedex earlier. One would think on a day like today, a name like fedex would be out least.

I would think that given valuation and given how economically sensitive IT is and given what we're seeing in the rustle and everything else, fedex would be up three and a half four percent. Fedex is up a percent is today. And by the way, I still dance significantly lower than the all time high IT made.

I want to say, if i'm not mistaken, in the summer ish of twenty twenty one. So you know, fetis, as i've said, fetis issues are a lot of times are feathers specific. But metics, at least that stocks specifically is not backing up some of the things were seeing .

today or ups and maybe really quickly before we get out of her romantic can pull up csx. This is curious. Like look at the move that the rails are having here.

You know I mean, relative to airfare, put put IT up on a one year, you see it's breaking out of this range and it's been in since may or so. So lots across currents is a very complicated case mode. Lot of ins, a lot of outs, a lot of what have used up with Young great having you here. If you guys want her weekly note in your inbox, AManda, you're going to throw this up here and i'm going to murder, uh, the U R. L.

because it's just that hard .

but you dash money or at is tell you just go to this so far investing blog and you'll find IT there. Uh, so liz, thanks for being here. We appreciated guy di. We did to be heavy lifting here. Um what is an easy day to do IT, because who knows what they have going to happen tomorrow? We have a fed meeting, ninety nine percent probability of a twenty five basis point cut.

But who gives a crap? We'll be here tomorrow for sure. I think got to brake. And worth will join us, obviously is always great when E Y T joins this market matrix again, our nineteen year checked out risk reversal youtube page, please subscribe, tell your friends will be back tomorrow. Thanks, everyone.