Goldman Sachs expects Nvidia ’beat and raise,’ lifts price target to $240
Biggest earnings week of the season. All-time highs across the board.
The market is on fire. With today’s gains, the S&P 500 is up 1.8% in a week, 2.9% in a month. So much for the volatility of October. Even more encouraging is the Russell 2000, small caps with as much as 40% that don’t print accounting income, is up 2.5% and 4.1% in the same time periods. This reflects a strong optimism about future earnings potential across the whole economy. All this while the government is still closed.
Today’s catalyst is the news that negotiations with China over tariffs are expected to go well. At the same time, Trump has stopped negotiations with Canada. There is clearly a growing confidence that Trump is working effectively in negotiating for agreements that benefit the US. The lack of tariff-fueled inflation is key here. As is the huge amount of proposed investment in the US to avoid tariffs.
The bullishness of the sentiment is also reflected in the pullback of precious metals as a safe haven. Gold is pushing back down to $4K, down 8.2% in a week (+51.7% YTD). Silver is down 8.5% (+58.7% YTD). Copper, on the other hand, is up 2.1% (+27.7% YTD) as it is more reflective of construction and growth. We are also seeing a risk-on sentiment in crypto, with Bitcoin back to $114.9K (+23.4% YTD).
Interest rates are higher today. The US 2-year +3bps, the 10-year +2bps. Interestingly, while the bet for a quarter-point cut this week is 99%, the bets on a December cut have pulled back below 90%, and follow-through cuts in January and March have also softened. The only explanation is that the market is so strong that aggressive cutting may be seen as risking overheating the economy.
We will have a better picture of year-end potential by the end of this week. We have 5 of the Magnificent 7 earnings, 20% of the S&P earnings, the Fed cut and comments, and Trump’s visits with Japan (whose stock market just broke 50K for the first time) and China. Needless to say, the trend is our friend.