Good morning investors. What better to illustrate how fickle markets can be than unpacking the reversal of the Trump Trade that’s captured Wall Street’s attention all month?

Today’s letter is brought to you by Public!

More Fed rate cuts are coming. You still have time to lock in a market-leading 7%* bond yield with Public.com.

Learn more.

What Trump Trade?

Like a desert mirage, the Trump Trade evaporated just as it seemed most real, leaving Wall Street back where it started on election day. 

Save for bitcoin, most of financial markets’ gains since November 5 have reversed. As of Friday, the S&P 500 has erased the entirety of its post-election gains. Its two benchmark peers — the Nasdaq Composite and Dow Jones Industrial Average — are also coming off losing weeks. 

The small-cap Russell 2000, meanwhile, has shed about half its gains from the last two weeks.

Now, as Opening Bell Daily subscribers know, the president tends to have less influence over the stock market than the Federal Reserve.

Central bank chairman Jerome Powell reminded us as much on Thursday when he remarked that his team isn’t “in a hurry” to cut interest rates. 

Boston Fed President Susan Collins told the Wall Street Journal the same day that a rate cut in December is “not a done deal.”

Those comments followed October inflation data, which showed CPI climbing to 2.6% year-over-year — above the 2.4% seen the prior month and 30% higher than the Fed’s stated 2% target.

“The CPI release is no help for a Fed that faces the awkward prospect of cutting rates in the face of ebullient markets,” said Peter Graf, CIO at Nikko Asset Management, Americas, noting that the lack of inflation progress makes easing rates hard to justify. 

To that point, traders’ expectations for the Fed to skip a rate cut in December have steadily creeped up, data from CME shows.

While consensus still favors a cut, chances for no move have jumped to 38% from 26% a month ago.

Goldman Sachs, for one, maintains its forecast for consecutive 25-basis-point rate cuts in December, January, and March, followed by two more in June and September.

“But we now see a greater risk that the FOMC could slow the pace sooner, possibly as soon as the December or January meetings,” said Goldman Sachs chief economist Jan Hatzius. 

Investors remain bullish

To be clear, recent stalled momentum in equities and a wrinkle in the Fed puzzle do not change the underlying bull-case for the months ahead. 

If anything, investors remain almost too bullish, according to Bank of America’s fund manager survey.

The report revealed the highest reading in a decade for investors who are overweight on US stocks, jumping from 10% to 29% compared to the October survey. 

Forty-three percent of respondents expect US stocks to be the best-performing asset class in 2025, outperforming global stocks (20%) and gold (15%). 

Ken Mahoney, CEO of Mahoney Asset Management, said he’s never seen this many tailwinds for stocks at any point in his three decade career.

AI spending, strong corporate earnings, and a pro-business White House should all be net-positive for markets, in his view. 

“There have been some incredible moves in a lot of less household-name stocks,” Mahoney said. “It shows more businesses are thriving than just [the Magnificent 7], which was the narrative for the bears for a very long time and they have gone completely quiet now.”

Comments or feedback? Reply directly to this email or let me know on X @philrosenn.

Elsewhere:

🏦 Who will be Trump’s Treasury secretary? The president is reportedly deciding between Scott Bessent, the founder of Key Square Group, and Howard Lutnick, the CEO of Cantor Fitzgerald. Elon Musk tweeted that the former would be the “business as usual” choice, while the latter would “actually enact change.” (Yahoo Finance)

📈Trump won’t let stocks fall. Wall Street knows by now that Trump likes to point to the stock market as a scoreboard for how he’s doing in the White House. That’s led some strategists to conclude that the president won’t implement any policy changes that could derail the bull market. That said, some of his campaign promises — like hefty tariffs — aren’t what you’d traditionally consider investor-friendly. (Bloomberg)

🤝 China wants stable relations with the US. During a meeting with Biden on Saturday, Xi Jinping said he’s looking forward to working with the incoming administration. He also cautioned that stability between the two nations are critical to the “future and destiny of humanity.” (CNBC)

Rapid-fire:

• Elon Musk’s xAI is raising another $6 billion, bringing the startup to a $50 billion valuation (CNBC)

• The Biden Administration reportedly gave the green light to Ukraine to use US arms to strike inside Russia (Reuters)

• MicroStrategy’s $26 billion bitcoin stash is larger than the cash holdings of all but about a dozen S&P 500 companies (Bloomberg)

• TikTok parent company ByteDance is valuing itself at about $300 billion as industry experts believe Trump won’t ban the app in the US (WSJ)

• Barnes and Noble is making a comeback as its opened more than 60 new locations this year (CNN Business)

• US ETFs have seen nearly $1 trillion in inflows this year, breaking the record set in 2021 (Bloomberg)

Last thing:

Interested in advertising in Opening Bell Daily? Email [email protected]