Each year from roughly the end of the second week of December through the second week in January the stock market rises most of the time. This year, expect a similar occurrence.

 

There are plenty of explanations for why this occurs. Many believe it is simply the good cheer the holidays bring to the markets. Others point to the additional spending triggered by holiday shopping, while some argue it is because institutional investors buy stocks before going on their Christmas break. 

 

For me, it comes down to the flow of funds in and out of financial markets. Every year, for many reasons the flow of funds into the financial markets increases at the end and the beginning of each year, especially when the stock market delivers outsized gains like they have this year.

 

Think about it. Money managers saw gains of 20 percent-25 percent in 2024 in equity markets worldwide worth roughly $100 trillion or more. That means that there is now another $25 trillion-plus in gains that are available for investment. Where does that money go?

 

Unless you and everyone else cash in all your chips and put them under your pillow, you would expect your investment adviser to reinvest that money into the stock market. If, as many believe, the future looks rosy, at least in the U.S., managers would like to put that money to work sooner rather than later.

 

But that is just the beginning. In December and January, the lion's share of bonuses are paid to employees worldwide. Most of that money will go straight into bank accounts, savings accounts, investment accounts, etc. That flow of funds will also find its way into financial markets.

 

Then, there are those contributions to all those tax-deferred accounts: (401)Ks, 403(B)s, IRAs — held by 50 percent of the American workforce. Much of these money flows hit the financial markets in the next month or so.

 

Many other pools of capital that are a bit more exotic also expire at the end of the year and begin again in January. These instruments like structured products, equity derivatives, yearly, long-dated options expirations, credit spreads and more have one thing in common — leverage. Every year, you take your winnings from last year, borrow money against them, and buy even more of whatever instrument you decide will make the most profits. This creates even greater flows of capital.

 

In a matter of weeks, this river of electronic capital flows into the financial system and washes up on the shores of various markets. A large portion will end up in the stock market. These flows should continue until the middle of January before ebbing once again.

 

This does not happen every year, but since 1950 December has been an up year 74 percent of the time as measured by the S&P 500 Index. That number climbs to 83 percent (in election years 100 percent) when the S&P 500 Index is up more than 10 percent in the first half. Many simply chalk the gains up to "seasonality" without recognizing the powerful underlying currents that create this holiday phenomenon.

 

In any case, last week the S&P 500 tacked on another 50 points reaching the 6,100 level. Bitcoin finally passed the $100,000 mark before backsliding. And November's non-farm payrolls bounced back from a flood and strike-depressed performance in October.

 

This coming week all eyes will be on the last Consumer Price Index data before the Fed's Dec.18 meeting. I expect a hotter number which may (or may not) convince the Fed to pause before cutting interest rates again. I believe it won't matter in the broader context of money flows to a market that seems destined to continue to climb.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

More than 40 percent of Americans are now classified as obese while 75 percent of adults are either overweight or obese. A new group of drugs called GLP-1 receptor agonists have come on the scene to help in the battle to lose weight. Are they as good as we think?

 

You may have heard about them or some of their brand names like Zepbound, Wegovy, and Ozempic. The use of these drugs has exploded in popularity to the point where companies like Lilly and Novo Nordisk have had problems keeping up with demand. 

 

There is nothing magical about the science behind these drugs. GLP-1 mimics a protein naturally produced by our small intestines. The receptors for these medicines are located across the body. They help us lose weight because receptors in the gastrointestinal tract slow down and send signals to the brain that give us a sense of feeling full.

 

There are some side effects but nothing too serious for most patients. We are still learning how these medications impact the body. They are currently approved for treating diabetes, obesity, and those with a history of cardiovascular disease in people who are overweight. There are a few drawbacks to these drugs at present.

 

Typically, GLP-1 agonists are administered as injections in the abdomen, upper arms, outer thighs, or upper buttocks via a syringe and needle or a pre-filled dosing pen. The shots are generally taken once a day or once a week.

 

For many, this is a big turn-off. Fortunately, you will be able to take tablets soon. The typical weight loss is from 5-15 percent of body weight over at least 12 months. But GLP-1 is no quick fix. Like exercise, you must stick with it. If you stop taking it, most people regain the weight they lost. And you can't expect to magically lose weight while you continue to eat all that junk food you get.

 

The second drawback is the expense. These medications' list price is around $1,000 to $1,400 a month. Without insurance, we are talking $12,000-plus per year for these drugs. Many insurance plans cover some portion of GLP-1 costs, but the extent of coverage can vary significantly. 

 

You probably are wondering whether Medicare covers GLP-1 medications. They do for certain medically accepted indications such as heart attack or cardiovascular disease but not for weight management. To qualify, you must have a BMI of 30 or higher, or 27 or higher with comorbidities like high blood pressure, high cholesterol, or type 2 diabetes. They are currently covered through Part D plans.

 

Coinsurance amounts are pegged to the list price of drugs. As such, Medicare beneficiaries who qualify could still face monthly costs of $250 to $430 before they reach the annual out-of-pocket drug spending established by the Inflation Reduction Act (IRA). The IRA  cap for out-of-pocket expenses was around $3,300 in 2024 and will be $2,000 in 2025. Most retirees living on modest incomes would still find the cost of GLP-1 prohibitive.

 

In November 2024, the Biden administration proposed that Medicare and Medicaid cover obesity medications. In doing so, they sidestepped a 20-year-old piece of legislation that prevented Medicare from covering drugs for "weight loss." The new proposal specifies that the drugs would be covered to treat the disease of obesity and prevent related conditions. Those conditions are serious and include diabetes, high blood pressure, cardiovascular disease, sleep apnea, fatty liver disease, and arthritis.

 

The classification would also mean that every state Medicaid program would be required to cover the drugs starting in 2026. Between the two programs, an additional 7.4 million Americans would gain coverage. The price tag would be high, at least $36 billion over a decade. However, there are more obesity drugs in the pipeline and prices should fall as competition heats up. Starting in 2025, Medicare will also be able to negotiate a lower price for Wegovy as well as many other popular drugs. 

 

As for the future, the costs and usage of GLP-1 medications could change significantly under the second Trump administration. An entirely new team of individuals, including a retired congressman, a surgeon, and a talk-show host could play pivotal roles in how the government goes about safeguarding America's health.

 

Under Robert F. Kennedy Jr., an environmental lawyer, politician, and anti-vaccine organizer, we can expect radically different views and actions in health care, medicine, food safety, and science research. Early indications are that Kennedy, who has been picked to run the Department of Health and Human Services, is not a big fan of Ozempic. He does not believe that using popular GLP-1 drugs is ever going to make America healthy again. His remedy would be to provide good food to Americans. He believes that providing three nutritious meals a day to all Americans would solve obesity and diabetes overnight. 

 

The problem is that for many Americans the admonition to change your diet, eat less, and exercise more has failed to dent the problem. Why not give the country an avenue that shows a much better chance of success over the long term?

 

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

Scott Bessant at Treasury, threats of day-one tariffs on trading partners, and calls for another end-of-year rally buoyed markets. It is a seasonally bullish time for the equity markets with Christmas around the corner.

 

By now, you have probably heard that hedge fund manager Bessant will take the reins at the U.S. Treasury in January. Markets cheered that news. Most market participants believe Bessant is the man best suited for that post. Investors hope he will be market-friendly and a voice of moderation in the new Trump administration.

 

But before Bessant or anyone else gets carried away with the idea that Trump has lost that loving feeling he has for tariff diplomacy, think again. The president-to-be fired a broadside at China, Mexico, and Canada on Monday threatening 25 percent on all products from Mexico and Canada as one of his first executive orders. That is a big deal since exports to the U.S. account for 27 percent of Mexico's economy and 21 percent of Canada's.

 

And just for good measure, he will slap an additional 10 percent tariff on Chinese goods above any additional tariffs he puts in place. I found it interesting that he seemed to go easy on America's number one bashing boy, Xi Jinping, in his broadside. There are rumors that negotiations over tariffs and other issues are already underway with China. If so, I suspect it would be at the urging of  Trump's unofficial everything buddy, Elon Musk. 

 

Musk's EV company, Tesla, has its largest and most productive factory in China and would lose big time if relations go any further south between the two countries.

 

As for Mexico and Canada, Trump's threats were not just about economics. He is promising new tariffs on both nations unless they curb the flow of illegal drugs into the U.S., especially fentanyl. China is the main producer of fentanyl, while America's closest trading partners, Canada and Mexico, have become major conduits for the distribution of this drug into the U.S. He also insists that illegal immigrants are turned back before crossing our borders.

 

Two days later, after a conversation with the new Mexican President, Claudio Sheinbaum Pardo, which Trump described as a "very productive conversation," the problem was solved. "She has agreed to stop Migration through Mexico, and in the United States, effectively closing our Southern border," wrote Trump in a social media post. They also discussed illegal drugs as well. We await the response from Canada.

 

If these announcements evoke a certain amount of deja vu among readers, get used to it. In the Trump 1.0 version, the markets were treated to a daily diet of new tariffs, restrictions, exemptions, threats, bluster, temper tantrums, etc. Trump 2.0 should be even more entertaining. Trump will be Trump, that's for sure.

 

This latest tariff announcement had Wall Street, the media, as well as economists throughout the globe, immediately singing from their same old song sheet: higher inflation and slower growth. The first reaction to the news was a drop of more than 2.3 percent by the Mexican peso against the dollar. The Canadian dollar dropped by 1.4 percent. Since Trump's election, the peso year-to-date has fallen more than 4 percent and the Canadian dollar almost 3 percent. How does that goose inflation? It doesn't.

 

Think about it. If a country's currency adjusts downward to offset a tariff increase (as most of the world's currencies are attempting to do this year against the dollar), there are no meaningful inflation consequences at the macroeconomic level. If the price of a Mexican imported T-shirt at Walmart drops 10 percent because the peso is cheaper against the dollar, a 10 percent tariff on that T-shirt ends up at the same price to holders of dollars.

 

Of course, I am describing a perfect economic world. Real-life tariffs, currency devaluations, and their impact on imported goods and products could spell inflation in some areas and deflation in others.

 

Tariff threats are one of the main reasons why the U.S. dollar keeps rising. It is part and parcel of what happens on the economic front in an era of populism. Tariffs make other countries poorer and ours richer. It is how to make America great again, or at least wealthier, through a beggar-thy-neighbor mercantilist approach. 

 

The problem, however, is that over the last eight years, many of our trading partners have also been swept up in populist movements. Foreign voters have created their versions of MAGA and will not take our new government's threats lying down. Tariffs levied by us will immediately be met by tariffs by them.

 

There is no right and wrong in Trump's approach, especially when you consider the number of deaths (75,000 deaths per year) due to fentanyl in the nation. Our drug policies to date have failed to stem the rise of this drug addiction or convince foreign exporters to find another market for their product.

 

The same could be said for stemming the flow of illegal immigrants. Democrats, Republicans, and independents alike have decided that illegal immigration is one of their top grievances. As such, this populist generation says that doing something is a far sight better than wringing hands while hoping that the bankrupt policies of the past will somehow begin to magically work. For better or worse, we as a nation are past that.

 

Hitting countries where it hurts (in their pocketbooks) is not a new approach. It is quite old. History will tell you it was the economic name of the game in Western Europe from the 16th to the 18th centuries. It is called mercantilism. Mercantilist policies included tariffs, subsidies, import quotas, and restrictions on foreign labor. They were designed to accumulate wealth, protect domestic industries, maintain employment, and bolster state power. At the time, it increased conflict among nations. Sound familiar?

 

As for the markets, most participants were unfazed by the tariff threats. During Trump's first term, those statements would send markets into a swoon. But stocks stayed firm and traders focused on other things. After the first four years, we have been there and done that.

 

We enter December at record highs. We could see a minor decline over the next week or two. It would be just profit-taking and a chance to buy the dip.  At that point I expect the year-end rally to take over into January.

 

As the cost to attend several Ivy League colleges approaches $90,000 per year, applications to obtain a college degree below the Mason-Dixon line have skyrocketed.

 

But let's not focus on the most expensive schools like Princeton and Harvard. The average tuition price across all the Ivy League colleges is almost $65,000 annually. Many Southern colleges charge substantially less with pricing ranging from $30,000 to $49,999 per year.

 

However, college costs go beyond the tuition and fees charged at schools. The costs are increased by several additional factors such as living expenses, graduate outcomes, and financial aid.

 

In these areas, southern schools also win since southern states offer a lower cost of living and housing costs in particular. Financial aid is a great leveler among colleges. The top elite schools have no-loan policies that allow some students to attend for free. Federal financial aid for those who can qualify brings down the cost per year to an average of $22,968, according to the U.S. Department of Education, in an Ivy League school. Of course, the same financial aid applies to all colleges and can drastically reduce the cost of a Southern college.

 

As for graduate outcomes, Ivy Leaguers generally still have higher average salaries and employment rates compared to their Southern brethren overall. However, it depends on the individual college and its programs and the student's chosen career path.

 

Times are changing, however. A Forbes magazine survey this year found that employers were less likely to hire Ivy League graduates than they were five years ago, while only 7 percent said they were more likely to. The survey also found that 42 percent of managers are more likely to hire public university graduates. Managers questioned were three times as likely to believe that public universities have improved in preparing students for jobs.

 

How much of the present hiring mood of managers has to do with last year's student protests over the war in Gaza at many Northeast colleges remains to be seen. Many student applicants have been turned off by the political polarization of campuses over abortion, diversity, and antisemitic activities. Southern schools seem to have a better track record on free speech, according to the Foundation for Individual Rights and Expression, with 25 of the top schools in the South and six of the worst institutions in the Northeast.

 

Thanks to the great migration southward by Americans and corporations over the last decade, many smaller cities in the south are looking for college-educated, entry-level job candidates. Cities such as Atlanta, North Carolina's Charlotte and Raleigh, and Austin, Texas, offer good salaries and benefits plus affordability on housing and living expenses.

 

In a happy, if rare, meeting of the minds between parents and their college-bound children, high school students have long been advocates of attending southern schools. Teens on social media rave about the warm weather, football Saturdays, lively campuses, and school spirit they have found on southern campuses.

 

Over the past two decades, there has been an 84 percent increase in the number of kids in the Northeast who have flocked to colleges such as Duke, Tulane, Emory, and Vanderbilt, according to the Wall Street Journal. The University of Alabama saw three times the number of applications received by Harvard University over that same time.

 

There is some good news for some Northeast colleges. Forbes recently named 20 colleges — 10 private and 10 public schools — as their "new Ivies." The average tuition at the 10 most affordable new Ivies is $42,233. Some of these schools are in the Northeast, although not many.

 

Overall, the facts are that college tuition in Ivy League colleges is not going down anytime soon. The number of applicants to top schools continues to surge regardless of the new interest in all things Southern. If anything, over time Southern schools will probably close the gap with the Northern competitors. For parents, a college education will still be an investment wherever your child chooses to go.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Last week, traders made profits from the Trump trade. This week they reversed their positions. I expect further upside into the Thanksgiving holiday.

 

The market's performance was even more impressive considering the disappointing earnings from the number one AI player, Nvidia. The semiconductor giant reported stellar third-quarter earnings this week, but they were just not good enough to keep the stock's upside price momentum going.

 

Company management said supply chain issues reduced the growth rate in sales to the slowest in seven quarters. All that means, in my opinion, is that revenue will be boosted down the road when the bottlenecks are resolved. But in this market, no one is willing to wait around for that. The damage to the stock price was minor.

 

However, Alphabet did tumble more than 6 percent after the Department of Justice (DOJ) moved to break up its vast technological empire. The DOJ asked a judge to force Google to sell off its Chrome browser. Short-term traders dumped the stock.

 

To me, the chances that anything will come of this action anytime soon is just about zero. There is even a question of whether the incoming administration will pursue the case at all. Yet, it continues to sell off. This is the world of short-term equity markets that we live in. Long-term investors can profit from some of these trader temper tantrums.

 

The biggest story in financial markets this week has been the steady climb in Bitcoin and everything crypto. Last week I mentioned that Bitcoin should see $100,000 in short order. Early Friday morning it topped $99,452. Bitcoin has turned out to be the Trump Trade.

 

A prominent crypto lawyer is evaluating potential candidates to succeed Gary Gensler as Chair of the U.S. Securities and Exchange Commission. This added fuel to the fires that have lighted up all things crypto. Gensler, who has been the main impediment to the further development of the cryptocurrency market,  announced he will be resigning on January 20th even though his tenure runs through 2026,

 

 Two of the strongest candidates, Brian Brooks and Paul Atkins, are leading crypto advocates. Appointing the right candidate could convince many more economic actors that the time has come to get involved in this area.

 

Gold has also reversed from a near 10 percent pullback since the election results although other metals have not fared as well. The Biden Administration's pivot in allowing Ukraine to use US missiles in Russia has caused a surge in geopolitical risk and a rush into gold as a safe-haven asset. Russian President Vladimir Putin has long said that using long-range, Army Tactical Missiles (AT-ACMS) would represent the crossing of a red line.

 

Traders have also begun to have second thoughts about the chances for further interest rate cuts by the Fed. The odds are no better than 50/50 at this point that the Fed will cut rates again in their December meeting. Worries that inflation may worsen under the new administration have convinced the bond market and possibly some members of the Federal Open Market Committee that holding off for the moment on rate cuts may be the wise move.

 

I have been warning readers that I expect the Consumer Price Index to show further gains in inflation this quarter. That turned out to be true in the last month, and I suspect we will see the same again in the next report.

 

 Momentum, rotation, and volatility; there was something for everyone over the last few days. I expect that to continue. Technology is no longer the only game in town and this week's top gainers — energy, crypto, gold, industrials, and financials — are proof in the pudding.

 

Markets are stretched but have been in that condition for a while now. Thanksgiving week is usually a good time for equities, so we could see stocks grind higher until the beginning of December. At that point, a pull-back wouldn't surprise me. Happy Thanksgiving to one and all.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.