Lock it in or let it ride? It’s a question that investors might ponder at this point in an unexpectedly rewarding year, as the calendar pivots appropriately from the season of feigned fright to one of gratitude for life’s bounty. For most people, this is less about getting fully out of or staying wholly in equities, but it’s a moment to set expectations and perhaps portfolios in recognition of the distance traveled to date. The S & P 500 is up 16.3% this year to 6,840, which is almost exactly 2,000 points higher than its intraday low at the depths of the tariff panic on April 7. With dividends, it’s delivered more than 17%. Even the staid 60/40 stock-bond portfolio, as represented by the Vanguard Balanced Index Fund, has logged a total return of 13.1% this year, trouncing its long-term average just above 8%. On a three-year trailing basis — dating back to the end of the 2022 bear market and just ahead of the launch of ChatGPT — the S & P 500 has delivered an annualized total return of 22.8%. This is better than 90% of all three-year periods back to 1945, according to Strategas Group. .SPX YTD mountain S & P 500, YTD What tended to happen afterward when three-year gains hit the top decile? Over the ensuing six months, forward returns were slightly better than average, though the average return starts to lag over one- and two-year lookahead periods. The present rally has also been uncommonly steady and uninterrupted by jarring pullbacks. The S & P 500 has gone some 130 trading days since the last 5% setback ended in April. That places it among the half-dozen longest such streaks without a 5% drop of the past four decades, according to investment analyst and blogger Urban Carmel. Which suggests the clock is ticking at least faintly on this orderly advance — though the longest such run lasted more than twice as long as this one has. And the first 5% pullback, whenever it comes, has typically not marked the ultimate top of a bull market; usually it’s bought for at least a final upward move. The current hot streak is, of course, now at the entry point of the best seasonal window of the year, on average. Keith Lerner, CIO at Truist Wealth, notes that out of 21 times when the S & P 500 has been up more than 15% through October, it was positive the remainder of the year all but once, with an average further gain of 4.7%. What happens if AI trade cools? Part of the story here is the way the market’s concentrated and persistent leadership in mega-cap tech and other quality-growth names has flattered the S & P 500 beyond most other broad benchmarks or active portfolios. The passive S & P 500 index fund is again outperforming more than 70% of all large-cap mutual funds this year. And owners of such an index benefit from the way these funds inherently let the winners run. If given the 500 stocks in the index to manage actively, would most people let Nvidia grow to an 8.5% position without selling a share, or allow the seven heftiest holdings to expand to 35% of the account? A year ago, rotating into the equal-weighted was a trendy call. But while that more balanced approach has done fine and is still in an uptrend, its 8.7% total return this year is just over half that of the market-cap-weighted version. Of course, market character can change and a downswing in the AI trade would more acutely damage the index than to a less-concentrated portfolio, as happened in 2022 when the Nasdaq 100 tumbled almost 30% from peak to trough. Jason Hunter, chef technical strategist at JP Morgan, lays out the setup: “The contrasting performance of the bullishly trending cap-weighted S & P 500 and stagnant, equally weighted S & P 500 Index since mid-summer also helps illustrate the high dispersion within the index and associated crowding in the thin leadership.” He adds, “momentum indicators on the daily and weekly timeframes are not confirming the new highs. All of the above are indications of rally exhaustion, but they are also conditions that have been in place on many occasions throughout the evolution of the rally in recent quarters, which have had little to no impact most of the time.” As has been the case with some frequency, last week’s action was less impressive below the surface. The equal-weight S & P 500 was down 1.75% and lagged the main index by 2.5 percentage points. And each of the key threads of the bullish narrative frayed just a bit: The Federal Reserve cut rates a quarter-point but sought to cast doubt on another reduction in December, with homebuilder, regional-bank and retail stocks suffering in reaction. The trade summit with China yielded a tepid truce rather than breakthrough deal. And while Magnificent 7 earnings were unassailably strong and capex intentions lifted, the market responded stingily to Meta Platforms (down 12%) and Microsoft (off 1%). It’s fair to withhold style points for such uneven rhythms, but Tony Pasquariello, Goldman Sachs head of hedge-fund coverage, gives voice to a sort of market-breadth agnosticism: “Has the recent rally been particularly narrow? Yes. Is S & P a very top-heavy index? Yes. Is this a meaningful departure from the regime that has totally dominated the past three years? No. Does this history book tell us that highly concentrated markets have to end badly? No.” All points are well taken, and along with most broad assessments of the landscape they argue for giving the market the benefit of the doubt over the immediate horizon. While not losing sight, of course, of the way the march higher has compressed some risk-absorbing cushions along the way. What the ‘hyperscaler’ earnings showed Meta, for instance, can effortlessly afford the additional $30 billion in debt it issued last week to help fund its AI ambitions. But more broadly, this data-center buildout is coming to rely increasingly on leverage than spare cash. The Fed, meantime, is halting the runoff of its balance sheet in part because overnight money markets have started to show signs of intermittent tightness. And investor sentiment has turned more aggressive, if not alarmingly so. Here we see the ratio of bulls to bears in the Investors Intelligence survey of market advisory services popping above the “excessive optimism” threshold after months of residual caution following the April selloff. Note that it can stay elevated like this for a while with little payback in the market, as it did last year, but fair to say this is no longer a truly “hated rally.” The prevailing takeaway from the “hyperscaler” quarterly results was that they still feel they don’t have enough computing capacity to meet demand. Nvidia shares gained almost 9% last week, enlarging its market value by $400 billion, and accounting for most of the S & P 500’s net gain. The correction in Meta shares showed that the Street trusts the company less or perceives its strategy as more desperate and less certain than its peers. For now, though, the market is willing largely to accept the way the massive cloud and social-media players are funneling what would otherwise be their free cash flow to Nvidia and other AI infrastructure vendors. Here’s the free-cash-flow yield of the four big spenders, crashing to or below 2%. How quickly the standard investment case for these companies turned from “asset-light cash machines” to “builders of the physical future of computing.” As with so many attributes of the current environment, this shows a remarkable level of investor fortitude and “informed greed,” underwriting the market’s resilience amid macro flux and bubble anxiety – a collective willingness to let it ride, for at least a bit longer.
Author: admin
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Bird flu case ‘confirmed’ at Billing Aquadrome, Northamptonshire
Defra said the risk to the public was very low, but people should not touch or move any dead or sick wild birds.
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Countdown to Kickoff: Mountaineers Face 22nd-Ranked Houston Today
MORGANTOWN, W.Va. – West Virginia returns to the University of Houston’s TDECU Stadium, site of one of the most disturbing losses in Mountaineer football history back in 2023.The Cougars, then coached by former West Virginia coach Dana…
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Frustrated Ja Morant hints at issues with coaching staff
A frustrated Ja Morant told reporters to “go ask the coaching staff” about his struggles during the Memphis Grizzlies’ 117-112 loss to the Los Angeles Lakers on Friday night.
Morant was held to a season-low eight points, going 3-of-14 from the…
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South Korean president Lee asks China's Xi for help engaging North Korea – Reuters
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China to exempt Nexperia chips from semiconductor export ban – DW – 11/01/2025
China will exempt some Nexperia chips from an export ban that was imposed amid an escalating row with the Dutch government, officials said on Saturday.
“We will comprehensively consider the actual situation of enterprises and grant exemptions to exports that meet the criteria,” the Chinese Commerce Ministry said in a statement.
Nexperia produces components in Europe, sends them to China for finishing and then re-exports them back to customers in Europe.
The Netherlands-based company is owned by China’s Wingtech Technology. But the Dutch government invoked a Cold War-era law to effectively take control of the semiconductor maker in September, citing security concerns.
This prompted China to announce export controls on the chips in October.
China, EU and US talk export controls
The Wall Street Journal, citing unnamed sources, said the exemption for Nexperia chips came after a meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea.
The Dutch government refused to comment on the reports and said it remained in contact with Chinese authorities “to work toward a constructive solution that restores balance to the chip supply chain and that is good for Nexperia and our economies.”
Nexperia manufactures components in several European countries before sending them to its facilities in China to be finishedImage: Fabian Bimmer/REUTERS Meanwhile, Chinese and European Union officials also held talks on export controls more broadly.
“China confirmed that the suspension of the October export controls applies to the EU. Both sides reaffirmed commitment to continue engagement on improving the implementation of export control policies,” EU Trade Commissioner Maros Sefcovic said in a post on X.
Why are Nexperia semiconductors important?
Nexperia components are mainly found in cars, with the company supplying 49% of the electronic components used in the European automotive industry, according to German business newspaper Handelsblatt.
Although the components are technically replaceable, establishing alternative supply chains poses a major challenge for European automakers and other Nexperia customers.
“Without these chips, European automotive suppliers cannot build the parts and components needed to supply vehicle manufacturers and this therefore threatens production stoppages,” European auto lobby ACEA warned last month.
In its statement on Saturday, China’s Commerce Ministry placed blame on “the Dutch government’s improper intervention in the internal affairs of enterprises” for causing “the current chaos in the global supply chain.”
Edited by: Srinivas Mazumdaru
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Too much screen time may be hurting kids’ hearts
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