Wall Street posted its worst week since early October on Friday, as Nvidia’s blowout quarterly results failed to lift the AI trade and economic data presented a difficult situation for the Federal Reserve. Nvidia easily beat earnings expectations confirming that the AI trade remains robust. The September jobs report showed that employers added 119,000 jobs, but the unemployment rate edged up to 4.4 percent, a four year high. This could be construed as a sign of weakness that could prompt the Federal Reserve to cut rates in December. More bad news arrived on Friday – US consumer sentiment fell to one of the lowest levels on record. The November sentiment index dropped to 51 from 53.6 in October.
For the week, the S&P slipped 2.0%, while the Dow declined 1.9%. The Nasdaq retreated 2.7%.
Future Wealth’s View
There is a lot of uncertainty in the stock markets now. There is a massive disconnect between the economic data and what average Americans are experiencing, confusion over the path of the Fed and interest rates, and most importantly, whether the massive amounts of AI spending will generate enough revenue to justify the investment. These themes have driven the stock market higher all year but this investment thesis is increasingly becoming unreliable.
Since September, we have been questioning the fundamentals behind this rally that appears to be based on too many optimistic assumptions. Our report on Sep 21st was titled “Fed’s Math Does Not Add Up”. Link to the report is here – https://futurewealthllc.com/
Going into the shortened week with the Thanksgiving holiday, we expect that the market will likely take a deep breath to assess the prospects for the month of December with the marquee event being the Fed meeting on Dec 10th – the final Fed meeting for 2025.
If the Fed does not cut interest rates, the markets are not going to take it kindly and the 2am posts on social media from our President will be filled with vulgarities.