Summary
Highlights
The hosts discuss the last full trading week of the year and the potential for strange market behavior due to holiday-shortened weeks. They note the VIX is active and that the initial Fed-day rally often fades. They observe a divergence between the S&P 500's strong performance, driven by financials, and the Nasdaq's struggles, with some large tech names seeing panic selling.
Oracle is highlighted as a 'disaster' with its stock performing poorly. Broadcom, despite some good earnings, failed to meet high expectations for its valuation. Coreweave, a data center company, is discussed for its rapid revenue growth but also its significant debt, implying potential balance sheet issues in the current market climate.
Carter Braxtonworth discusses a rotation of money out of mega-cap tech into other sectors like financials, industrials, transports, and retail. He also points out 'idiosyncratic' strength in specific story stocks like Warby Parker, FIGS, and LendingClub, which experienced initial public offering (IPO) struggles but are now showing strong bullish reversals. This trend also extends to deep value, heavy large-cap names like Western Union and UPS.
Dan reviews several 2025 IPOs, including Figma, Coreweave, Klar, Chime, Gemini, and Circle, noting their generally poor performance post-IPO, often trading below their initial price. He emphasizes Carter's point that stocks breaking their IPO price is a very negative sign, reflecting an 'unhappy' situation for investors.
The discussion shifts to expectations for year-end trading, with a general bias towards upside movement due to holiday quiet periods and fund managers' incentives. However, they caution against assuming low volatility will continue into January, citing historical instances of sharp sell-offs at the start of the year. Strategies like selling volatility on a short-term basis and put calendars are suggested for navigating these periods.
The S&P 500 (SPY) is noted to be in a tight range, with the 150-day and 200-day moving averages becoming key support levels. A potential retest of November/October lows in early January is anticipated. A put calendar strategy is suggested, involving selling a short-dated put to finance a longer-dated one, to benefit from short-term premium and hedge against a potential January sell-off.
Bitcoin's recent trading is examined. While it has bounced from lows, its status as 'digital gold' or a pure risk-on/risk-off indicator is questioned. The current price action is described as stabilizing but without a clear trade direction. Concerns are raised about fantastical price targets and the lack of traditional financial metrics (like cash flows) for Bitcoin, making it a challenging asset to evaluate. It is also suggested that an unraveling in crypto could affect the broader tech/AI trade, as there is a crossover investor community.
Mega-cap tech stocks like Microsoft, Meta, Apple, and Amazon are noted for underperforming the S&P 500 for the year, suggesting the 'AI trade' might be cooling off. Oracle is again cited as a cautionary tale due to balance sheet problems. Tesla is highlighted for its sustained rally, breaking out of a long base, with its narrative shifting from a car company to a broader AI/robotaxi story, driven by CEO Elon Musk's incentives.
The discussion concludes with the importance of the bond market. A potential bond market sell-off, indicated by the 10-year Treasury breaking above 4.40%, is seen as a significant threat to the S&P 500, potentially leading to a 5% or more decline. The hosts emphasize that the bond market, rather than equities, will likely dictate broader market direction.