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.

After several years of price increases, consumers have come to expect that the typical Turkey Day dinner will cost more this year. Depending on how astute a shopper you are, you could get away with paying less this year.

 

Some items on your dinner agenda may be more expensive than in 2023 but others may have dropped in price. The price may also depend on where you shop and whether you insist on buying only name brands or are willing to buy store brands instead.

 

Every year since the COVID pandemic, grocery store prices and costs have been going up with the largest contributors to the cost being transportation, labor, and climate change. In 2020 (plus-3.5 percent), 2022 (plus-9.9 percent), and 2023 (5.8 percent) food prices rose and continue to go up. Overall, food prices are expected to increase by 2.3 percent in 2024.

 

And while the trend of rising prices still has not changed, what has changed is the consumer's willingness to pay higher and higher prices. To rein in food costs, shoppers are buying cheaper store brands over the last few years instead of name-brand food items.

 

You have probably noticed how store brands now have as much a share of shelf space as name-brand items. The trend has been a boon for supermarkets and the brightest light in the grocery food and nonfood business. Last year sales of store brands rose to $152 billion from $142.4 billion a year earlier, a 6.7 percent increase. The share of grocery shelves for store brands versus national brands rose to 26 percent from 25 percent last year. That is a historical record.

 

What does that have to do with the price of turkey? Plenty. A Thanksgiving dinner for 10, including turkey, stuffing, salad, cranberries, dinner rolls, and pumpkin pie would cost you $90 if using only name-brand labels. That is down 0.5 percent from last year. But if you only bought store-brand products, the total cost for the same dinner would be $73.

 

However, like everything, there is a catch. Store brands have done so well over the recent past, that grocers have started increasing prices. The Wells Fargo Agri-Food Institute which tracks prices of Thanksgiving dinner staples, discovered that the gap between the cost of a full meal using generic brands and one prepared with national brands is narrowing. In several categories, the report found that name brands are less expensive or almost the same.

 

Fresh turkey prices, for example, are largely unchanged since last year, but name-brand birds (that still account for three out of four turkeys sold), fell in price by 2 percent since 2023. Store-brand turkeys, although still cheaper, have increased in price by almost 5 percent over the same time.

 

And yet name-brand stuffing is up 9 percent, compared to only 3 percent for store-brand versions. Name-brand cranberries fell by 3 percent, while store brands rose by 6 percent. In every category of the typical Thanksgiving dinner, there were substantial price differences between the two brands. That means shoppers need to compare prices closely.

 

In further good news for consumers, price wars have developed among grocers and others providing turkey dinner deals. Walmart, for example, is offering a 29-item dinner for eight for $55. Target has one that feeds four people for $20, while Aldi has a dinner for $47. Around here, one grocery chain offers a meal similar to Walmart's at twice the price. Most of these promotions are substantially less than last year's price tag.

 

My dog, Atreyu, and I love the holiday season. I just finished cooking my second 99 cents/pound turkey of the season. My wife, Barbara, only likes the drumsticks and wings, so I eat some of the white meat, freeze the rest, save the carcasses, and make turkey soup. The rest becomes healthy dog food for Atreyu.

 

Go ahead and laugh but consider this. The price range for a pound of popular healthy dog food at Walmart ranges from $1.92/pound to $5.67/pound.  Turkey is healthy and the cheapest protein around. It is on sale during the holidays for dogs and humans. The promotions are kicking in at this point. I intend to buy another turkey this week  (only 49 cents/pound) plus a large ham/shank at 79 pounds (pea and bean soup) and maybe a big spiral sliced ham (at 99 cents/pound). Bon appetit! 

 

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.

A 5 percent gain in nine days on the benchmark S&P 500 Index was met by profit-taking. Traders booked gains in Trump trades as some had second thoughts about continued upside. Who can blame them?

 

The conviction by many that happy days are here again (or will be by next year) sent markets through the roof in a frenzy of FOMO-generated trades. Technology took a back seat for a change as small-cap stocks soared on the belief that tariffs would force consumers to buy made-in-America products from American companies.

 

Smaller capitalization companies are distinctly American and are listed on the Russell 2,000 Index. Traders know that a good 40 percent of these companies make no money and bought them anyway. Hope springs eternal when it comes to the future economic prospects of the economy under a second Trump administration.

 

Semiconductors stocks which have led the markets higher for a long time did not participate. Poor earnings guidance from several big companies, plus fears that tariffs and China bashing could reduce prospects even further, triggered a wave of selling. Even Nvidia, the poster child of AI, felt some of this cold downside draft.

 

That may change next week, however, when the company is scheduled to report earnings.   Most analysts believe it will be another stellar quarter for this semiconductor darling. It had better deliver or things could get ugly in Stockville.

 

The precious metal and commodity areas have also seen a wave of selling as both the US dollar and interest rate yields have climbed just about every day since the election. That combination of higher rates and the dollar has historically acted like kryptonite to gold and silver.  You might say a strong dollar is the result of Trump's election, and you would be correct, but it may not be for the reason you think.

 

As I wrote last week, foreign countries are devaluing their currencies against the dollar as fast as possible. They are doing so in anticipation of across-the-board tariffs that Trump has promised to levy on their exports into the U.S. They do so to lessen the impact of this policy on their exports.

 

The cheaper their currency, the cheaper their imports will cost American buyers. So, when tariffs are tacked onto these rock-bottom prices, it will simply mean prices return to where they were before his election. No harm no foul.

 

Bond prices are falling, and yields are climbing higher as the dollar strengthens. Two reasons come to mind. Trump's stated policies (tariffs, immigration, spending) will be inflationary. Second, economic growth may be stronger as well. That combination of higher growth and inflation will typically mean that bond buyers demand more returns to stay with bonds when they could get higher returns in the stock market.

 

Both the Consumer Price Index and the Producer Price Index came in slightly hotter than the consensus estimates for last month. Readers may recall that was my forecast given a few weeks ago. I believe the next data points in December could also show higher inflation. It may be the reason Fed Chair Jerome Powell said Thursday that the central bank saw no need to hurry to cut rates further.

 

Of all the great gains among asset classes since the election, Bitcoin has been the big winner, in my opinion. It is the gold standard of the now dominant generation, the Millennials. As an alternative to the dollar and the political/economic system of their parents, it is the preferred currency of populism. As a first stop in its climb to new heights, my target is $98,700, which is not unique. Wall Street overall is forecasting $100,000 for bitcoin by the end of the year. It could go higher, and probably will if you believe in cryptocurrency and are willing to wait for further developments sometime next year. Bitcoin has come of age, as have its owners.

 

I noticed that there is a small but growing army of crypto bulls who are upping their price targets over the next two quarters. This always happens in parabolic moves like this.  What I have learned over the years is if you are making money rapidly and it seems so easy (as it does right now in crypto) that is the time to be most on guard for an abrupt reversal  If that happens, just remember that you could easily see $83,000-$80,000 on a pullback in the blink of an eye.

 

My advice is to beware what may be false narratives. The stories that are being spun about the impact of future policies on certain industries and sectors should be taken with an ocean full of salt. On Friday, for example, health-care stocks were decimated because Robert F. Kennedy Jr., who holds unorthodox views on healthcare, was appointed to head the Department of Health and Human Services. Earlier in the week, defense stocks were sold because of fears that the newly created Department of Government Efficiency will hurt the profitability of government contractors. Do not get caught up in this frenzy both good and bad.

 

As for the overall market, I counseled that election results could fuel both upside and downside. In other words — high volatility. We have experienced the upside and now we get to experience a little of the opposite. Over the next two weeks, we could see further declines. If so, I would put money to work on dips. 

 

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.

Investors appear to be "dancin' to the Jailhouse Rock" ever since the election of President-elect Donald Trump. Private prison stocks have roared back to life as the deportation of immigrants becomes a reality.

 

Day One, according to the Trump team, the new administration will launch its promised plan to deport millions of illegal immigrants. Criticisms that the cost of such an endeavor would bankrupt the country have gone largely unheeded. Trump has responded that he has "no choice" and "no price tag" when it comes to what the media terms as the largest deportation in U.S. history. 

 

Wall Street believes that the appointment of hardliner Tom Homan as Trump's "border czar," could mean expanded contracts on the back of increased US Immigration and Customers Enforcement (ICE) enforcement combined with partnerships with U.S. Marshals and the Federal Bureau of Prisons.

 

Some policy groups that specialize in immigration have predicted GDP could shrink by $1.1 trillion to $1.7 trillion but according to most voters that would be a small price to pay to rid the country of the estimated 11 million plus illegals in the country. As a result, with investors' belief that the sky's the limit in spending, it is no wonder that the shares of the two largest prison stocks, GEO Group and Core Civic, have gained more than 80 percent in a matter of days.

 

These companies own and operate a nationwide network of prisons, immigration detention centers, and correctional facilities under government contracts. The latest figures (2022) of those incarcerated were just under 91,000 U.S. residents and upwards of 55,000 migrants. That was during Trump's first four years.

 

Thanks to lobbying efforts by both firms, there exists a hand-in-glove connection between the industry and federal policy decisions. That was worth $1.05 billion in sales (43 percent of revenue) from ICE for the Geo Group in 2022.

 

Core Civic received $552.2 million from ICE during the same period equaling 30 percent of total revenue. Both companies have been working with the Trump transition team to expand their capacity. Pro-private prison government benefactors argue that these companies, structured to generate profit while operating like public institutions, reduce overcrowding throughout the penal system. They reduce costs and offer specialized management expertise as well.

 

On conference calls last week, the management of both companies used words such as "unprecedented opportunity" and, in the case of Damon Hininger, CEO of CoreCivic, "It feels like with this election this year, we're heading into an era that we really haven't seen, maybe once or twice in the company's history." That was music to the ears of traders and investors alike.

 

Building prisons, especially given the number of illegal immigrants targeted by the incoming Trump administration, will not be built overnight. A 500-bed facility in San Diego, for example, costs $118 million to build. And running a 1,000-bed prison can cost as much as $143 million a year. However, the plan is to deport illegals, not just throw them in jail where taxpayers will be required to foot the bill for their incarceration.

 

As such, behind the scenes, there is much discussion among planners of "soft-sided" detention facilities ( tents with jail cells in them) as an interim step. That could reduce costs considerably. How this could be accomplished and still provide basic humanitarian treatment is another discussion. Given the present mood of the country, many might not even care.

 

Before you decide to buy into this jailhouse rock as well, know that there was a similar mood of euphoria surrounding these stocks back in the early days of Trump's first term. At that time both companies' stocks traded at or near long-term highs. Today, however, despite their gains, they are still trading far below those 2017 gains.  

 

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.

Now that the election is over and a clear winner has emerged, it is time to take a closer look at how investors perceive the winners and losers in the weeks and months ahead. It appears that the economy was the top concern of voters and therefore Trump's future actions within the economy will be important.

 

In the last month, there was speculation on Wall Street that Donald Trump would win the presidency. Certain areas of the financial markets nicknamed the "Trump trade" started gaining momentum.

 

Certain sectors saw gains while others experienced losses. Investors base their decisions on the actions of his past presidency and his statements and promises while on the campaign trail. The changes he plans to make within the economy could be substantial if Congress supports his economic programs.

 

The key to implementing his many promises and translating his electoral mandate into policy will be the caliber of people he appoints to key positions. He will also need a red wave in the House to complement  the Republican majority he will now command in the U.S. Senate. The Trump Tax Plan expires next year, for example, so a red sweep would raise the chances that most of that program would be extended.

 

If so, the financial sector, especially regional banks, is one sector that would stand to benefit. The banking industry often complains that regulatory authorities are the bane of their existence. A decades-long increase in reporting requirements while abiding by hundreds of rules and regulations is time-consuming and expensive. It is doubly so for regional banks.

 

During his stump speeches, Trump has vowed to cut the corporate tax rate to 15 percent and eliminate 10 regulations for every new one. He also promised to overhaul key regulatory bodies and fire the head of the U.S. Securities and Exchange Commission. For bankers and investors alike, this would be a dream come true.

 

Another area that would benefit from a Trump win was the crypto industry. The crypto money that supported Trump surpassed all other corporate donations during the 2024 elections. Trump has promised to make America the leading nation in the global crypto industry and fire their implacable enemy, Gary Gensler, the head of the SEC.

 

Cyclical companies, especially those whose business is largely confined to the United States, and small-cap stocks are thought to be beneficiaries of Trump's upcoming tariff policies. Tariffs during his first administration were part of the daily diet of the financial markets. This time, his entire presidency, from an economic viewpoint, will revolve around his tariff policies. Tariffs will be different and more stringent.

 

However, there are other areas where tax cuts, deficit spending, tariffs, and possibly a change in how the Federal Reserve Bank conducts policy could have a negative impact on interest rates and in the inflation fight.

 

During his last tour of the Oval Office, Trump was an advocate of lower interest rates and higher spending. At the same time, he made clear his unhappiness with the leadership of the Fed members, starting with the chairman. The bond market remains convinced that he will do much the same in his second term. As such, the nation's debt and deficit will climb. That means higher long-term interest rates. The yield on the U.S. Ten-year, U.S. Treasury bond spiked higher by more than 3.6 percent to 4.44 percent on the election outcome.

 

China and most emerging markets also suffered as the prospect of crippling tariffs will slow their export growth to the U.S. Gold and other commodities also fell as bond yields spiked and the U.S. dollar gained almost 2 percent.

 

On a longer-term view, I wonder how Trump's promise of a draconian immigration policy, combined with tax cuts and increased spending and the impact on tariffs will affect the inflation rate. Fewer immigrants will mean higher wages for Americans, which will mean higher inflation. Tariffs will be inflationary, raising prices on a wide spectrum of goods and services as it did the last time.

 

Increased spending and supply chain issues propelled inflation to 9 percent over the last few years and lost the Democrats this election. Tariffs could cause supply chain issues once again, and we all know how government spending impacted inflation. However, markets are ignoring longer-term issues in favor of chasing the Trump trade higher, at least for now.  

 

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.