Your Weekly Preview: Regime Change (You are here)

“Do not allow negative thoughts to enter your mind for they are the weeds that strangle confidence.” — Bruce Lee

The current market regime is REFLATION—a risk-on environment where policymakers support economic growth. Investors are rewarded for taking on risk, and portfolio construction favors:

• Risk Assets > Defensive Assets

• High Beta > Low Beta

• Cyclicals > Defensives

• Growth > Value

• International > US

• EM > DM

Key global liquidity indicators suggest modest increases over the medium term.

Regime Probabilities ⬆️

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Market Highlights (Last Week)

• SPX Momentum: Another +1% gain pushed the S&P 500 into all-time high territory. The post-election rally marches on, with no clear bearish catalysts on the horizon.

• Investor Sentiment: Bullish psychology dominates, supported by:

  • A strong U.S. economy

  • A business-friendly incoming administration

  • Positive seasonality

  • Potential for year-end performance chasing

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Economic Data

Last week’s data supported the bullish case:

• Nonfarm Payrolls: 227K (above 220K expected); October revised higher.

• Average Hourly Earnings: +0.4% MoM, beating expectations (+0.3%).

• Unemployment Rate: 4.2%, as expected, with a slight tick higher from October.

• ISM Manufacturing: Rose to 48.4%, above expectations.

The Atlanta Fed’s GDPNow model bumped Q3 growth estimates to 3.3% from 2.7%, thanks to strong construction spending.

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Rates & the Fed

• Treasury Yields: Continued their slide, supporting the equity rally.

  • 2-year: Down 7 bps to 4.09% (5-week low)

  • 10-year: Slightly lower at 4.165%

• FOMC Expectations:

  • Fed rate probabilities sees an 86% chance of a December rate cut, up from 70% last week.

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Bitcoin’s Milestone

Bitcoin hit $100K after weeks of consolidation. Renewed interest in speculative assets, crypto-friendly policymakers, and heavy options activity fueled the move.

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Earnings Calendar

• Key Reports:

  • Monday (12/9): Oracle (ORCL), MongoDB (MDB), Toll Brothers (TOL)

  • Tuesday (12/10): AutoZone (AZN), GameStop (GME)

  • Wednesday (12/11): Adobe (ADBE)

  • Thursday (12/12): Broadcom (AVGO), Costco (COST)

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What to Watch Next Week

• Macro Signals: The reflation regime still dominates. Look for breakouts in stocks, commodities, particularly industrials.

• Key Trades:

  • SMH (Semiconductors): Setting up for a big move. Higher = tailwinds for equities; lower = headwinds.

  • Energy Commodities: Oil is holding a key level, but no trend signals yet.

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Stay tuned for weekly updates on our positions, holdings, and strategies.

Options trade below…