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 ⬆️
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
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.
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.
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.
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)
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.
Stay tuned for weekly updates on our positions, holdings, and strategies.
Options trade below…
