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allow us to quickly move on to this Gathering that broke all records Tom Lee is the head of research at fun Strat Global advisors and a writer to CNBC he is now joining me Tom thanks for being here this morning the Dow went up 1,500 points that's a move we haven't seen in 2 years what's next wow I believe that today's events clearly demonstrate that the market did not anticipate the result of the election if it did the market would be flat a lot of investors lower their risk before an election because they think there will be a lot of social unrest Etc this is something we could tell by talking to our clients thus I believe that money is being used but in a way that shows a lot of animal spirits in the areas people choose such as small caps just so you know qualcomm's earnings report is out now we're going through it now and we'll send it to you in a moment Mike santoli is also here now I'm going to ask might for help with this the Trump trade has been clear today as seen in the stronger dollar compared to other currencies and the general rise in stock prices especially among steel makers Banks and other companies that tend to grow quickly and without many rules Bitcoin is also more expensive however there have been sell-offs in this market as well people had different ideas about whether the so-called Trump trade would happen or not what do you think we can see that it's happening and it makes sense that it would at least at first on most of those fronts I think it's just been an extra push for trends that have been going on under the surface leadership has been coming and going for a while now since the FED cut rates yields have been going up the dollar has been pretty stable and economic shocks have been good now it's time to use some of the strategies from 2016 and maybe make them better small caps are moving and banks are making more and more money there is a question about where to start though in terms of prices inflation deficits and current growth rates we are not quite at the same place we were in 2016 in terms of how investors felt the market was flat for 18 months before the 2016 election since then it's gone up 40% if animal Souls have been sleeping I don't think they are I think this possible policy mix has woken them up to begin let us look at Amazon what did you think of the Finish Line it looked interesting to me even though Cloud didn't meet expectations the price is still going up that's right yes some things were wrong with Amazon and after yesterday you might have thought that everything would be punished but not Amazon today a big surprise in the quarter was a huge profit on the bottom line which gives investors peace of mind I think that had a lot to do with that since sales were close it's not a surprise that stock is up it hasn't been one of the best megate tech companies either so there's room to grow Amazon has really impressed people who spend what do you think about this they raised kex by 81% while seeing margins grow it's hard to do that it really is it was important to know the capex number they are still focused on kex and spending huge amounts of money we've now gone over The Big kex Spenders and the cloud Spenders because of what jasse said about Ai and how they focused on that the story goes on Nvidia is The Last of The Magnificent Seven to report so it should be a good read let's talk about Apple the price of shares has dropped by just over 1% it looks like advice but there were some good things like the comment about the iPhone and a 6% rise in sales but jean mster from Deepwater thinks that Revenue will grow by only 4 to 6% this quarter Which is less than the nearly 7% that was predicted given the good things does that make sense this year was a good one for apple as they got ready to release the iPhone 16 and I but the features weren't as good as they were promised the stock is only slightly down because sales were better than expected Apple hasn't done well lately so a 1% drop isn't too bad especially since the iPhone 16 is coming out soon because apple is so big in the market I agree but does this 1% drop even though there are some good news show that investors are paying attention to forward P/E Val and per infection pricing that's what we saw was chosen for the Dow instead of Intel given how important Nvidia is to the economy right now after the fact you could say it's a momentum play both apple and Nvidia are about the same size but Nvidia makes a third as much money and apple makes half as much it costs more but the value of the stock grows faster since not much money is tied to okay that's all good information but I'd like to learn more about what n is addition to the Dow means for the market as a whole does this change in the index tell us anything about the direction of the market or where buyers might look next to be honest maybe the fact that Nvidia joined shows how much the tech industry affects the economy and how I and high performance computers are becoming important growth dagers but since the Dow doesn't have much of an effect on flows it's not a perfect sign of future Trends it's more of a sign that Tech is still important and investors may be right to focus on stocks that are driven by Innovation it doesn't mean though that the rest of the chip industry will perform as well as Nvidia now we'll talk about cyclicals and the Trump trade do you see any areas where investors excitement might be getting out of hand especially now that we're thinking about possible rate hikes or policy changes that is a good point Industries like Industrials financials and materials are all making big gains right now this is because people are expecting growth to to pick up and regulations to be eased but because of the uncertainty about rates and the fear of inflation we might see some give back if those expectations don't come true for instance financials might have trouble if rates don't keep going up or if the yield curve flattens so it's not always a good idea to draw too many conclusions from recent Trends especially when macro conditions are changing now let's talk about the Federal Reserve more and more people think that rates might go up sooner than thought do you think the market is taking the fed's moves into account what might that mean for different areas the market is paying close attention to the fed's possible rate hike and there is some hesitancy as buyers think about when it should happen High interest rates may have a bigger effect on some Industries like Tech that need cheap cash to grow as we already said cyclicals and financials could do well if rate hikes mean that the economy is growing faster but if the rate hike happens too quickly or if inflation stays High the market may lose interest in sectors with high prices which could cause money to be moved to defense or yield focused assets when we talk about defensive Investments are there any areas or assets that you think will do well if there is more volatility after a rate hike of course during times of uncertainty about interest rates investors may look for safer Investments this could help areas that are already doing well like consumer staples and utilities rats might be appealing because because they can bring in money but they are subject to rate hikes if prices go up bonds especially short-term treasuries might also become more popular as a safer Choice it's possible that the market will move towards a more balanced approach with a mix of growth and defense positions let's get closer and small misses are making people react more strongly the bar is very high for the Magnificent 7 so even small failures can lead to pull one last question investors are interested in international markets especially those in developing economies because they still see growth opportunities especially in places where prices are lower since the dollar has been strong lately investors in the US May face currency headwinds but there are still chances in places like Asia and Europe for example China's economic rebound could help Industrials and commodities around the world diversification is always a good idea and US investors might think about increasing their exposure to foreign markets to take advantage of growth outside of the US especially if the US market stays unstable okay that's a lot to take in Tom and Mike thanks for your ideas the end of the year looks like it will be interesting and we'll keep an eye on those Trends thanks once more this should continue naturally from where the last part left off keeping the same structure in tone let me know if you want more to be added
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