These Six Market Themes Will Drive Thanksgiving Week Trading
Trump’s pick for Treasury Secretary boosts bonds and generates more economic optimism.
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Thanksgiving week on Wall Street is well-known for positive seasonality and a surge in speculative trading. This is a tendency and not a certainty, but conditions are ripe for some upbeat action.
The week is starting strongly following an announcement late on Friday that President-Elect Trump has chosen Scott Bessent as his Treasury Secretary. Bessent is viewed as a positive for both the stock market and the economy. There is already a strong move in bonds and lower interest rates based on the view that Bessent will be effective in dealing with the inflationary pressures of Trump’s economic policy.
That good news hits with the market already quite extended and sentiment downright frothy in some areas, particularly Bitcoin IBIT and related names. Volatility has picked up in that group, but there are a number of themes running with very strong momentum, including Bitcoin-related with names such as MicroStrategy MSTR, space exploration with names like Rocket Lab USA RKLB, uranium/nuclear, quantum computing stocks like IonQ IONQ, power generation names like Vistra VST, and AI/software stocks such as Palantir PLTR.
Aggressive traders that chase momentum are gravitating toward these key sectors, but other themes can develop quickly during holiday trading as traders sift through smaller stocks and look for undiscovered gems.
The Magnificent Seven MAGS names have been struggling recently as there has been a lackluster response to earnings in the group. Nvidia NVDA put up very good quarterly numbers and has very high expectations for the years ahead, but the stock is unable to generate positive momentum as traders look for more immediate results elsewhere.
The bears have been crushed by the post-election market strength, but they are now focused on proclaiming that the action is too positive and that the high level of optimism is a contrary indicator. While it's true that many sentiment indicators are elevated, it is extremely difficult to time market tops based on that data. As I’ve often stated, momentum tends to last longer and go further than seems reasonable.
The strong move in bonds TLT on Monday morning gives the bulls additional fuel for the Goldilocks economic narrative that has been the primary driver of the recent positive action. The worry has been that Trump may help produce more growth but it will cause increased inflation and cause the Fed to be less dovish. Chances of a quarter-point cut at the meeting in December are around 50/50, but if bonds start to act better, that may influence the Fed to be more upbeat.
We have a strong start on Monday, and speculative traders are anticipating a busy week of trading.
At the time of publication, Rev Shark was long IBIT and RKLB.
