Weekend Update #206
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Markets continued to climb this week despite dipping Tuesday amid rising Ukraine-Russia tensions. Blue chips and small caps led Friday’s equity gains with the S&P 500 rising 0.3% as investors pour into U.S. stocks in November on optimism over Donald Trump’s proposed tax cuts and pro-business policies. Meanwhile, the dollar continued its upward momentum, marking its eighth consecutive weekly gain—the longest streak this year. Investors were heavily focused on Nvidia’s fourth-quarter which handily beat revenue estimates across most product categories, but guidance fell short of some analysts’ high expectations. However, Nvidia’s CFO confirmed that Blackwell will begin shipping this quarter, with “staggering” demand that is expected to exceed supply well into fiscal 2026.
In economic news, PMI data showed business activity expanding at the fastest pace since April 2022 and the demand outlook brightening in anticipation of incoming Trump administration policies. U.S. consumer sentiment in November fell to 71.8 from a preliminary 73.0, reflecting slightly weaker outlooks on income, household finances, and buying conditions, despite remaining above October’s 70.5. Long-term inflation expectations rose to a median of 3.2%, while year-ahead expectations held steady at 2.6%, with sentiment influenced by differing partisan views on future economic policy.
Bitcoin’s post-election rally continued this week, nearing the $100K milestone as the total cryptocurrency market cap reached record highs, fueled by optimism over Donald Trump’s pro-crypto stance and expectations of lighter regulation. The upcoming resignation of SEC Chair Gary Gensler, known for his aggressive crypto enforcement actions, has further bolstered industry confidence. Trump’s transition team is reportedly considering Teresa Goody Guillén, a blockchain law expert, as a potential SEC chair replacement. Additionally, discussions are underway about establishing a White House role dedicated to cryptocurrency policy, signaling a significant shift in the regulatory approach.
Corporate Highlights:
The Department of Justice is pushing Google to divest its Chrome browser, potentially valued over $20 billion, to create a more equal playing field with other search competitors.
Walmart Inc. boosted its outlook for the year on a solid start to the holiday season and strong demand from US consumers searching for value
Target missed Wall Street’s third-quarter earnings expectations by 20%, its biggest in two years, and saw its first revenue miss since Aug. 2023, while cutting its full-year guidance
Lowe’s Cos. extended its streak of declining sales during the third quarter as it continued to feel the ripple effects of a weak housing market.
Gap Inc. stock soared after it raised its full-year outlook as the apparel retailer attracts wealthier shoppers seeking value.
Super Micro Computer Inc. surged after the company hired a new auditor and filed a plan to come into compliance with Nasdaq listing requirements.
Bakkt Holdings Inc. jumped after news reports that President-elect Donald Trump’s Trump Media & Technology Group Corp. is in talks to buy the digital-asset marketplace.
Ally Financial Inc. is exploring a sale of its credit card arm, according to people familiar with the matter, after getting back into that business through an acquisition three years ago.
Friday’s Close (Weekly Performance)
S&P 500 5,969.34 (+1.68%)
Nasdaq 19,003.65 (+0.16%)
Dow Jones 44,296.51 (+1.96%)
Thank you Blue Room Analyst NICK PEART
Fund One had a solid week finishing up over 1.6% and in line with the S&P 500 Index. In addition, our lead on the market remains an impressive 600 bps ahead for the month. Earnings reports continue to be the biggest driver of performance in addition to beneficiaries of the incoming administration’s looser regulation and business-friendly stance putting forth a strong showing this week. Stocks gained while Bitcoin crushed doubters and the dollar extended gains into an eighth week, the currency’s longest run of the year. Blue chips and small caps led Friday’s equities advance as this year’s big tech winners struggled to gain ground. The small-cap index climbed 4.5% this week while the biggest technology stocks, like Nvidia, Alphabet and Facebook-parent company Meta Platforms, lagged.
Our holding in Sweetgreen and short position in Target were standout performers this week. Sweetgreen, already one of our best performers for the year, surged nearly 30%, reaching a new 52-week high. This impressive rise reflects growing investor confidence in Sweetgreen’s prospects, especially in the healthy eating sector. Despite an initial dip following its Q3 earnings release, investors are reassessing the company’s growth potential. With continued expansion—five new restaurants last quarter and plans for 40 new locations in FY 2025, half featuring its innovative Infinite Kitchen technology—Sweetgreen is poised to drive operational efficiencies and margin expansion. We remain bullish on its future.
Our short position in Target also paid off as the retailer’s shares plunged 22% on Wednesday and closed the week down 17%. Target reported weaker-than-expected sales and earnings for Q3 2024, with a 1.1% increase in sales but a 12% drop in net income. Analysts had expected stronger results, but Target's struggles with inflation and cautious consumers led to a downgrade of its earnings forecast for the current quarter. CEO Brian Cornell acknowledged that consumers are tightening their budgets and prioritizing deals, which further complicates Target's outlook. We believe the retailer will continue to face challenges, and we are maintaining our short position.
As the week closed, markets remained in a cautiously optimistic mood, with the U.S. dollar and Bitcoin showing notable strength. Small-cap stocks are drawing attention as potential beneficiaries of deregulation, and there is continued focus on the broader economic outlook, particularly in light of recent positive economic data and easing geopolitical volatility. However, investor sentiment remains sensitive to shifts in global tensions and policy changes, particularly around the forthcoming U.S. administration's business-friendly stance. We are confident in our current positioning but we will remain nimble in what is proving to be a dynamic market environment.
Thank you Blue Room Investing President JOHN FENLEY
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RFK JR.
The U.S. Secretary
of Health and
Human Services:
Mapping the Potential Impacts to Pharma & Biotech
Meta AI-generated image
by
JARED FENLEY
BLUE ROOM ANALYST
“I’m going to let [RFK Jr.] go wild on health. I’m going to let him go wild on the food. I’m going to let him go wild on the medicines.” — President Trump at Madison Square Garden, October 27, 2024
“President Trump has asked me specifically to do two things. One, to help unravel the capture of the agencies by corrupt influence. In other words, to drain the swamp.” — Robert F. Kennedy Jr. on the Tucker Carlson Tour, September 17, 2024
“[Dr. Oz] will also cut waste and fraud within our Country’s most expensive Government Agency, which is a third of our Nation’s Healthcare spend, and a quarter of our entire National Budget.” — President Trump on Truth Social, November 19, 2024
Who is Robert F. Kennedy Jr.?
Robert F. Kennedy Jr., a graduate of Harvard University and the University of Virgina School of Law, stepped into the political spotlight in 2023 with his candidacy for the Democratic presidential nomination. Since 2000, he had considered running for various positions, such as the U.S. Senate and the New York attorney general, but his recently stated views on the need for reform in the U.S. public health system define his public persona. Following his switch to an independent presidential candidacy and later endorsement of Donald Trump, RFK. Jr. has now ascended to President-elect Donald Trump’s selection for the Secretary of the Department of Health and Human Services.
As the son of Robert F. Kennedy and nephew of John F. Kennedy, his political views in support of minority communities, against excessive military operations, and in support of sustainable environmental practices have been well documented. After working as an attorney for various organizations throughout his career and founding the environmental law firm Kennedy & Madonna, RFK Jr. now has the chance to shape the United States health system.
“Suddenly, those trusted institutions seemed to be acting in concert to generate fear, promote obedience, discourage critical thinking, and herd seven billion people to march to a single tune, culminating in mass public health experiments with a novel, shoddily tested and improperly licensed technology so risky that manufacturers refused to produce it unless every government on Earth shielded them from liability”
— Robert F. Kennedy Jr., “The Real Anthony Fauci: Bill Gates, Big Pharma, and the Global War on Democracy and Public Health”
Mainly concerned with enacting change within the American food industry, RFK Jr. has established a viewpoint that massive reform must be enacted on “big food”, “big ag”, and “big pharma”. Although, a history of controversial commentary and anti-establishment views have put into question what effects these drives will have, RFK Jr. largely seeks positive change to create a healthier version of America. What this means to him is, opposed to the current status quo of a population suffering from a variety of chronic diseases, anticompetitive and monopolistic behavior must be rooted out at a government level to stop the unintended consequences of toxins and carcinogens in our daily lives.
The concerns brought up with his past commentary, many of the most controversial of which RFK Jr. has seemed to walk back on or deny, also paint a clearer picture of where he sees conflicts of interest.
Taking a conservative view on the distribution of vaccines, RFK Jr. has stated that every American should have the right to choose which compounds they put into their bodies. He has blamed the polio vaccine for causing an increase in soft tissue cancers in the 98 million Americans who received it and criticized the regulatory review process around vaccines for a lack of scientific evidence prior to commercialization. This also fits with his past commentary that the rise of autism in our population could be tied to the rise in vaccination rates.
With various media outlets and prominent figures taking issue with these statements, potentially the most impactful criticism has come from an OpEd penned by his sister, brother, and niece arguing that RFK Jr.’s negative commentary creates more societal risks than the risks of vaccinations themselves.
RFK Jr.’s Policy Stances
While RFK Jr.’s history of controversial statements has drawn media attention, it seems that his true policy proposals are targeted at increasing food regulation and minimizing the population’s exposure to environmental toxins.
“Make America Healthy Again” (MAHA) is the slogan RFK Jr. has penned for his policy pursuits, which call for “cleaning up” agencies such as the CDC, NIH, FDA, and the Department of Agriculture. What this means is that the “corrupt industry-captured officials” need to be removed in favor of true public servants who will help cure chronic disease. Harmful food additives and pesticide residues are some of those specifically called out in his videos, where the U.S. will need to implement stricter regulation in line with other European nations in order to restore population health.
Another industry RFK Jr. has in his sights for reform is the pharmaceutical industry, which he characterizes as opponents to population health in favor of addicting Americans to more and more drugs in order to drive sales. Although he has been less specific about which parts of the pharmaceutical industry are causing his concern, he cites a desire to prohibit pharmaceutical advertisements on television as part of the solution. He believes that the marker of the problem is the high percentage of healthcare spending as a percent of government spending but lower lifespan of Americans compared to Italians, for example.
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