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I’m more sure we’re in for a short-term risky setup this week than I am about having a cranberry with my Turkey this Thursday.
Traditionally, November was a strong month for the S&P 500, with an average increase of 0.88% in performance. This positions it as the third most profitable month for the year on average. We are clearly past that. And yes – despite my worries about a credit event coming up towards the end of the year, I have to admit that so far the stock market does look like it tends to look going into Thanksgiving. During Thanksgiving week, the S&P 500 generates positive returns 68% of the time historically. These returns are higher than the average week. In other words, it looks like seasonality works despite my initial skepticism that it would (so far).
The big plus going on here is small-cap momentum seems to be happening alongside continued momentum in Treasurys. This is important because if indeed “higher for longer” does not happen, and yields decline further from here, it gives more breathing room for many zombie companies to possibly survive on higher interest rates (or at least this is the story, who will push). prices in those stocks up). That momentum seems to be happening now.
Consumer Spending in Focus
The key issue at hand is related to the stability of consumer spending. Sales on Thanksgiving and Black Friday act as a barometer for market sentiment. If retail figures during this time are strong, it may signal the start of a brisk shopping season, which could potentially push stock prices higher. On that, I remain skeptical regardless of short-term momentum here. Retail stocks in general are still suffering, and it appears that higher rates are hurting consumers. If sales end up surprising to the top, then sure – that could be enough to push us into a December rally. However, I am not convinced that this is the likely arrangement.
When I see the stock charts like Walmart (NYSE:WMT), I worry that something larger in the bull story is being missed about consumer health. That’s what makes this a more tradable accumulation to me than a long-term allocation, assuming conditions remain the same. While consumer spending is expected to reach $130 billion this Thanksgiving weekend, up 4% year over year, according to the latest survey from the International Council of Shopping Centers (ICSC), I find it hard to believe that consumers can continue to operate on empty. for much longer.
The Bottom
Bottom line here? As I noted on X and in The Lead-Lag Report, we remain in a short-term risk setup, and caps seem to be the way to play it at the moment. But caution remains warranted. Too many people take high odds for granted thinking they are guaranteed. There is always a chance that the year will end with fireworks, as it did on Christmas Eve in 2018, when the Dow Jones Industrial Average dropped 1,000 points.
As of the date of publication, Michael Gayed did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com’s Publishing Guidelines.
The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. All views and opinions mentioned in this report constitute our judgments at the date of writing and are subject to change at any time. Information in this material is not intended to be used as a primary basis for investment decisions and should not be considered as advice meeting the particular investment needs of any individual investor. Trading signals produced by the Lead-Lag Report are independent of other services provided by Lead-Lag Publishing, LLC or its affiliates, and placement of accounts under their management may differ. Please remember that investing involves risk, including loss of principal, and past performance may not be indicative of future results. Lead-Lag Publishing, LLC, its members, officers, directors and employees expressly disclaim all liability in connection with actions taken based on any or all of the information in this writing. Michael A. Gayed is the Publisher of The Lead-Lag Report, and Portfolio Manager at Tidal Financial Group, an investment management firm specializing in ETF-focused research, investment strategies and services designed for financial advisors, RIAs, family offices and investment managers. InvestorPlace readers who are new subscribers to the Lead Lag Report can receive a 30% discount.
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