Stocks turn positive for the trailing month as we await the next week.
Stocks continue to grind higher as the week comes to an end. Small caps continue to lead, and semiconductors are outpacing the Magnificent 7 despite the 800-pound gorilla, , trailing the group. The even-weight S&P has doubled the return of the market weight in the trailing month, thanks to the Magnificent 7 being slightly in the red. It’s a positive that smaller companies are catching up with Mega Tech, and also reflects the continuing concerns about an AI bubble.
The S&P is now only 30 points from the all-time high, the 377 points, the Dow 305 points, and the 14 points. The even-weighted S&P is at an all-time high. The Magnificent 7 is 2.8% from its all-time high, semiconductors 1.3% despite NVIDIA being 13.6% behind its high (still +36.4% YTD). Odds for ending the year at all-time highs across the board are strong, especially if NVIDIA recovers.
There’s a big focus on the Fed cut next week, not so much if it happens but rather how it is characterized. It could be seen as dovish and the first of a series of cuts, or hawkish as grudgingly given with plans to stand pat for a few months. If they surprise and don’t cut, there will likely be meaningful downside volatility.
Regardless of what occurs, in the medium term, rates will head lower, whatever inflation is doing, when Trump replaces Powell when his term ends next May. When rates come down, a material part of the $8 trillion in money market funds will likely move, looking for better yields, bidding up debt instruments and further pushing down debt yields, as well as into dividend stocks.
Today we’re seeing a broad-based move up, led by tech and communication services, with only utilities and healthcare in the red and only slightly. For the trailing month, the only sectors in the red are tech (-1.0%) and utilities (-1.6%).
Interest rates are flat on the day, and are at 2-week highs, well above the late November lows. Rates remain challenged by the still delayed economic data, with September PCE data reported today still showing a 2.8% inflation rate, far from the Fed’s 2% target. We did see consumer sentiment data from the Michigan survey improve, as well as lower inflation expectations.
On the commodity front, gold is 1% higher to $4,285, up 7.2% in a month, and silver is back near its all-time high, up over 23% in a month. Copper is extending its all-time high, now near $5.50/oz, up 9.4% in a month. has clawed back above $60/bbl, while natural gas continues to surge, breaking $5.40/mcf, up 28% in a month. Crypto is the notable asset class continuing to underperform, with Bitcoin back to $91K, down 12.3% in a month. Hopes remain for regulatory approvals for wider trading to bring in new investors.
It now seems very likely we will revisit new highs before the year’s end. As we look to 2026, there are several catalysts for further growth that investors will want to get in front of in the form of stimulus spending, bigger tax refunds, and lower interest rates. There may be some delayed profit-taking/ repositioning initially, but optimism is growing. The trend is clearly positive.