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Shopify and AbbVie among the main stocks moving on catalysts this past week (1:10). Evaluating Tesla (2:45). Crypto, Bitcoin run the heart of the Trump Trade (4:40). Nvidia’s big earnings coming up (8:05). Why macro data and Fed announcements matter, especially now (9:50).
Transcript
Rena Sherbill: Brian Stewart, welcome to the podcast. It’s great to have you, our Director of News at Seeking Alpha. Super happy to have you on the show. Thanks for joining us.
Brian Stewart: Thank you. Thanks for having me.
RS: Excited to start this segment off. We’re going to be looking a bit at the week that was and the week ahead and what themes we should be chewing on and trying to digest as best as possible.
I’d like to start off in the world of stocks, specifically. What stocks are popping? What stocks are dropping? What stocks are we looking at this week that are making you pay attention, either on the high side or the low side?
BS: Yeah. So, as a news guy, I’m always looking for the stocks that are moving with some catalyst. So, on the downside this week, we had AbbVie (ABBV). They dropped about 15% in the past week after missing a goal in a schizophrenia treatment trial. There’s not a lot to take away from that macro-wise. It’s a very stock-specific story, but just a big decliner in a larger cap stock.
More interesting really for the longer-term view of the market, we had Shopify (SHOP) earnings, that sent the stock higher 40% over the past week. It popped about 20% day after earnings, and then has kept pushing forward.
They announced a 24% increase in the gross merchandise volume, which is a really good sign, headed into the holiday shopping season. They’re a bellwether for the e-commerce sector. So, for anybody looking at the health of the consumer and the health of retail, writ broadly, it’s a good data point.
And then Tesla (TSLA) keeps rolling higher, up 14% in the past week, it’s now 29% higher since the election, 50% plus higher in the past month. Market cap there is back above $1 trillion, so in rarefied territory once again. We had an interesting piece a couple days ago. Tesla’s now valued more than the next 10 biggest auto stocks combined. So, it’s been a good run for Elon Musk.
RS: It’s funny because there’s so much talk of the Magnificent 7 this past year, and there was a lot of people down on Tesla and wondering if they belong in that conversation. And look at us now. It’s like Tesla and NVIDIA (NVDA) as, like, the behemoths of the market. Anything that you would, I guess, point to for Tesla bears to be thinking about or Tesla bulls to be encouraged by more than you just mentioned now?
BS: Yeah. I think, you have to look at Tesla in view of the overall Trump trade that took us higher last week. It’s still in effect. I think, the markets are still digesting the long-term future of that. And I think if you’re a bear in Tesla, your argument would be that it’s run pretty far on speculation. It’s not a fundamentals-driven upswing.
There’s the roadrunners stepping out over the cliff and looking down and discovering there’s nothing under him, kind of potential there, but if you’re a bull, your argument is it’s always been a technology company more than a car company.
And this is just the market recognizing the long-term value. We had the CyberTaxi announcement recently that included humanoid robots, and it has the other parts of its business, the solar aspect and things like that. So, if you’re a long-term bull, you’re just thinking that the market’s catching up to what was always there.
RS: And speaking of the macro, I just wanted to get back to your point about Shopify being a good sign going into the holiday season. Any other stocks to be paying attention to in that regard?
BS: Yeah. There’s retail sales data coming out, just over the horizon. So, you want to keep an eye on that. Also, companies are going to start releasing their monthly reports for sales. And so, the big players there, obviously, are the Walmarts (WMT) and the Costcos (COST), and things like that. And a lot of that’s going to be company-specific, but you can start to get a feel for, the early holiday traffic, with Thanksgiving just around the corner.
RS: So, speaking of points of light in the market, anyone paying attention to Bitcoin (BTC-USD) and crypto is well aware of the record highs that Bitcoin’s been hitting. It’s inching into 3-digit territory. What are you thinking? What are you looking? What are you hearing about the crypto space and Bitcoin specifically?
BS: Yeah. I mean, the run for crypto recently has really been the heart of the Trump trade or the most prominent part of it. Basically, the idea that there’s going to be a very friendly regulatory environment around crypto. I think the medium to long-term outlook for crypto is very dependent on how much institutions and mom-and-pop investors want to buy into it as an investing class.
I think when you look at the longer-term arguments for Bitcoin, specifically and crypto in general, it’s always been inflation hedge source of store value, and the idea that it’s going to replace the fiat currencies sometime. And both of those are very far on the horizon, if they’re ever going to come at all.
So, you’re really looking in crypto to have it become a broader asset class, part of something that a vanilla portfolio is going to have x percent in crypto just as a way to have a risk asset in there.
So, the question really becomes, I mean, Bitcoin’s run from 68,000 on the Monday before the election to, above 93,000 recently peaking. And like you said, aiming for a 100,000, which a lot of people had a round target a couple years ago. So, I think there’s a lot of cheering in the crypto space to get above 100,000 just as a proof-of-concept that people were right about the asset class all along. So, the real question is, how much of this is sustainable as we move into the Trump regulatory environment.
And I think it’s interesting to think about crypto in the sense of, I don’t know if every crypto investor would have the same opinion about what would be the ideal regulatory environment for crypto.
I think there’s a portion of the market that wants to keep it Wild West, unregulated. That’s the spirit of Bitcoin and crypto in general. And there’s another group that says in order to get that institutional buy-in and that retail investor buy-in, you need to have, guardrails. You need to have, a sense of security.
What took the legs out of crypto a couple of years ago was FTX and some of the scandals around it. And so, it might be more beneficial for crypto to have a stronger regulatory framework, and I think that’s part of the debate in the investing community about what they want to see happen surrounding crypto.
RS: Which reminds me of another sector that observers and fans and investors are very positive about Trump’s government thus far is cannabis, and people are excited about what he does there. And there’s also a big divide in terms of how it should be run, how it will be run, what we should be doing, so very reminiscent of that.
And may I say how humans are just inherently fascinated by round numbers as arbitrary as it seems to be, but certainly something to look for in the crypto space.
What else are you watching? We’ve seen a bunch of earnings come out. There’s a bunch of earnings ahead. We spoke of NVIDIA. That’s one that’s coming up. What are you looking for when it comes to earnings, or what have you taken away thus far?
BS: Yeah. I think NVIDIA (NVDA) is the big one coming up, more than just what it means for NVIDIA and NVIDIA shareholders, but as a signal of how much the mega caps and the AI trade, in general, are going to recapture the direction of the market. I mean, that was the engine for most of the year, for the market, were those areas, and then we’ve taken a breather to think about politics for a while.
And now that that’s passing, I think it’s going to be interesting to see whether the investors in general are going to turn more towards what had been important prior to that.
So, as NVIDIA comes out, I think a key thing to note is, how much spillover there’s going to be to the broader market. So, whether it’s up or down with its earnings, is that a driver for the market to go up or down or is it an NVIDIA-only play.
In terms of earning season in general, I think, it got washed out in the overall imagination by the election. This earning season happened to coincide with the election. And so, I think coming out of it, people are ready to get back down to fundamentals and stop thinking about, politics for a while and take it company by company.
RS: Something else that is always talked about is the Fed and recently the interest rate numbers, whether they’ll be continuing to be cut, how we’re looking and thinking about inflation, and yet it seems that there’s not much to digest after those things happen.
How are you thinking and talking about the big picture over at the Fed, and how would you encourage investors not only to be thinking about it, but as that data comes out, how do you best advise investors to be digesting it? Like, how much does it matter?
BS: I think it matters, especially since with NVIDIA passing, that’s the last big, big name in in this earnings season. You’re getting into a period of time where there’s going to be a lull in corporate announcements.
With the political situation settled, I mean, I know there’s the transition in getting the Trump administration off the ground, but in the immediate term in the next couple weeks, or next several months going into the end of the year, there’s not going to be a whole lot of catalysts to look for. So, it puts the Fed in the spotlight, they’re on stage by themselves.
It’s also interesting because the first time in a while there’s controversy in the upcoming meetings. So, the next meeting is going to take place in mid-December. Before the meeting, we’re going to get another jobs report. We’re going to get another inflation report.
The last inflation report was taken as a positive, but it was more of a lack of negative type of positive and not a positive in itself. Basically, the numbers were in line, which people took to mean that the Fed would have permission to cut again even though there’s some signs of stickiness in the retail inflation numbers.
Mostly because energy has been, which has been a drag, a disinflationary pressure for a while is starting to come back a little bit. So, that’s something that hits consumers directly. So, if there’s a spike in energy, whether it’s something in the Middle East or something else that causes that to go up, there could be a larger economic impact for that that the Fed will have to take notice.
So, as of now, the markets are pricing at about 75% chance of another quarter-point rate cut, at the next meeting, but I think there’s room for that to move around as we get data. Just about, earlier this week, there was about a 60% chance priced in that there would be a cut. So, getting close to 50/50 territory there in terms of whether there’d be a pause or a cut.
So, I think it’s going to be very data-dependent. I think investors should watch the Fed speak. They’re going to signal as much as possible what they want to do. And then after December, it’s going to be very dependent on what the Fed says as it makes its next announcement, whether or not it’s going to be it for December and then a pause, whether it’s going to be pause in December and then see what happens.
So, I think there’s a lot riding on the Fed’s judgment of both inflationary pressures and what the economy is doing because the jobs data has been deteriorating in recent reports. And so, I think there’s going to be pressure for them to both keep the economy rolling, but also put a clamp on any backsliding on inflation.
RS: So, as we head into the week and by the way, these conversations with Brian, we’re going to be releasing every Friday. So, look for these weekly wrap-ups and look ahead on Friday. And as always, Kim will be having his outstanding Wall Street Brunch on Sunday, which is a huge digesting of what’s to come in the week ahead. But I’m curious, what are your thoughts, maybe your picks for what might be the top stocks coming out next week or the biggest themes or the biggest movers? Anything else you would add to this conversation?
BS: Yeah. I think it will be interesting to see how the market readjusts. So, as I mentioned before, I think NVIDIA is going to be a bellwether in whether the AI trade is going to reassert itself. Tesla has obviously marked EV resurgence.
There’s been, within the EV theme, there’s been a legacy automaker versus EV startup, especially the ones out of China, and whether or not the smaller pure-play nimble companies can overtake the Fords and GMs of the world as they try and roll out their EV products.
And then Tesla is balanced in the middle there. It’s a large EV maker. So, not a legacy automaker, but certainly not a young startup. And so, it’ll be interesting to watch the dynamics of that trade. And then, in general, like we said before, I think it’s going to be really important to watch retailers as we go into the holiday shopping season because I think for 2025, I think the early theme is going to be the health of the economy writ large.
We’ve seen pickups in corporate layoff announcements, so it’s another thing to watch if there’s the anecdotal evidence that you’ll see before layoffs start to show up in either initial jobless claims or in the jobs data, the monthly jobs data itself. So, if as an investor you start to see more of those firings going on, then you can start to worry a little bit maybe about the economy in 2025.
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