XLI

A Thanksgiving week is closely associated not only with early colonists and native people having their first barbecue together. Late November used to bring more upticks on trending equity markets. This year was no exception, as the Dow Jones index of Wall Street hastily hit a historical record after rising 440 points on Monday to close at a new all-time peak of 44,736.57.

Meanwhile, the AI darling NVidia slipped to its 3-week low at $136 losing more than 4% on the same day. Tesla stock dropped down almost the same. The EV maker failed to expand a 40% upward momentum surge since the U.S. election led rather by agitating sentiment than fresh fundamental changes. A similar price adjustment pattern was observed for many other techs. This process could be described as a capital flow rotation into the so-called "cyclical" stocks, including industrial and financial segments, with the term "cyclical" being related to better synchronizing with expected periods of economic upturn or downturn. Unlike in previous years, the current time before and soon after Thanksgiving, which is officially celebrated in the fourth Thursday of the month (this year it falls on November 28), would barely be marked by a lot of consumerism. Most households are finding ways to live frugally, and so the new-fangled idea behind accelerated growth in cyclical stocks is now hope.

In particular, a fresh boost in overall market dynamics was fuelled by news that the U.S. President-elect Donald Trump nominated Scott Bessent, who is a prominent career investor, as Treasury Secretary instead of Janet Yellen. Being a billionaire hedge fund manager, Scott Bennett repeatedly called for tax cutting reforms and more decisive deregulation for businesses. But another encouraging side of this appointment is that he also opposed conceptions of too strict trade tariffs, which may lessen chances of an excessively damaging trade war against China and U.S. neighbouring countries under a second-term Trump administration. Trump hailed Bessent as a geopolitical and economic strategist and called Bessent's journey “the American dream”. True policy changes would need proof, but more favourable conditions including lower taxes for U.S. manufacturers will give it, with expectations already possessing investing souls. Another, but rather one-off and temporary help for the market sentiment was provided by reports that Israel may reach a ceasefire agreement with the Hezbollah military group based in Lebanon.

A minor intraday market retracement came out when Donald Trump emotionally threatened on Truth social network that he will impose additional 10% tariffs on all Chinese imports to the U.S. until Beijing authorities would act properly to curb the allegedly high flow of illegal drugs, particularly fentanyl, as “drugs were still pouring into our country, mostly through Mexico, at levels never seen before”, according to Trump. He added that he would impose a 25% tariff on all imports from Canada and Mexico as a punishment for illegal immigration and “one of my many first executive orders” after January 20. “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country! Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem,” Trump posted on Sunday night, yet it had a limited effect on markets, with the Dow Jones Industrial Average (DJIA) futures only slid to a 44,500 area and then quickly recovered to test fresh highs above 44,800 once again.

A positive view for further market development still prevails and would probably remain during the nearest weeks before Christmas. The tech segment trend could be less stable right now, but we think it will also catch up fully, led by flagship stocks like NVidia, which is subject to natural and purely technical vulnerability on charts but has no major weakness according to the latest projections. Meanwhile, the U.S. manufacturing stocks, like a road construction machine monster Caterpillar (CAT), "drill, baby, drill" motto based U.S. oil companies and many others united into the Industrial Select Sector SPDR exchange-traded fund (XLI) may lead the bullish race. Having recently closed around $143.50, XLI price could rise to our next target at $160+ in the 3 to 6 months horizon, being now blessed with a better chance to be attained sooner than a 6,500 target for the S&P 500 broad market barometer.