Top-Heavy
Truths: Signals From the Magnificent Seven
By Victor Sperandeo with the
Curmudgeon
Market
Dynamics:
In Victor’s
six decades of trading and investing, one principle has consistently held true:
market movements are ultimately driven by fundamentals, and price action
anticipates those fundamentals and the events that shape them. This remains an
essential axiom of market behavior.
With
that in mind, I will focus on a technical assessment of the Magnificent
Seven (Apple, Microsoft, Amazon, Alphabet (Google), Meta, Nvidia, Tesla)
and other large-cap equities, analyzing what current trends suggest
about their prospective trajectories.
Collectively,
the weightings of those mega-cap stocks are so large that they comprise over
40% of the S&P 500’s market cap, which most people think of as “the U.S.
equity market.”
The
weightings of each stock in the S&P 500 are shown below in parenthesis
(..):
Down
Trends: TESLA
(2.19%), META (2.52%,) MICROSOFT (5.90%), AMAZON (3.96%), and NETFLIX (0.74%).
Up
Trends:
APPLE (6.74%) ALPHABET-C (3.15%), NVIDIA (7.31%), WALMART (1.41%), ELI LILLY
(1.59%), BROADCOM (2.70%);
The
equal weighted S&P 500 YTD return is +6.32% (as of Friday, November 21st ) vs. the cap weighted
S&P 500 (SPY ETF) at +12.72% and the NDX 100 (QQQ ETF) at +15.85%.
Victor’s
Market Outlook:
I
have previously suggested the U.S equity market is topping, as the
economy is weak and getting weaker. The reason I’m not short stocks is that I
strongly believe that the Fed will again cut rates on December 10th
and the Supreme Court will vote to nullify Trump’s tariffs.
Tariffs
are essentially taxes and are controlled by the legislature (Congress). That’s as per Article 1 of the U.S.
Constitution, which establishes the legislature and their taxation authority.
Therefore, tariffs are not under the domain of the Executive branch, as per
Article 2.
-->I
think the Supreme Court will vote 9:0 to nullify Trump’s tariffs, but at least
5:4 is a 99% guarantee.
The
initial market response to the Supreme Court decision will likely be bullish.
However, what comes next must be carefully analyzed.
For
example, foreign investment commitments in the U.S., which were made in return
for lower tariffs or trade concessions, may shift depending on the Supreme
Court’s upcoming tariff legality decision. That would affect the U.S. economy
and financial markets.
Victor
on Bitcoin:
Bitcoin
has entered a bear market. Its decline reflects economic conditions and the
absence of the monetary expansion required to sustain stronger growth.
For
example, the M2 money supply has been increasing at an annualized rate of only
3.4% since September 2023, a level typically associated with recessionary
conditions, whereas approximately 6% money supply growth would be needed to
support a healthier economic environment.
In
contrast, mega cap stocks have benefited from increased earnings, whereas
bitcoin is solely dependent on money supply and lack of austerity.
The
primary rationale for buying Bitcoin has been the expectation that the Fed will
resume significant money printing. Without such expansion, recession risk
rises, making Bitcoin appear substantially overvalued.
Furthermore,
forthcoming loan-loss write-downs—many of which have not yet been marked to
market—may expose the speculative nature of certain “concept-driven” assets,
revealing their lack of current economic substance or viability.
Importance
of Mid-Term Elections:
if
the midterm elections (November 3, 2026) were held today, the Republican Party
would likely face substantial losses due to the dramatic shift in the political
environment surrounding the U.S. President. Many “MAGA” voters are in open
revolt, as much of what Trump campaigned for has not been enacted. To many
within his base, the administration’s priorities increasingly resemble an
“America Last” agenda, with “war first” policies reflected in continued funding
for Ukraine.
Representative
Marjorie Taylor Greene—an influential and popular free-market conservative from
Georgia—resigned after President Trump labeled her a traitor for voting to
release the Epstein files. Four House members broke with Trump on this issue,
and the measure ultimately passed the House by a vote of 427 to 1.
Ms.
Greene had been one of Trump’s strongest supporters, and many Republican voters
view his attack on her as a betrayal of a principled and morally grounded vote.
As a result, the GOP’s standing as a governing party has weakened significantly
in the eyes of its loyal base of supporters.
To
many, Trump appears to have shifted from “Dr. Jekyll” to “Mr. Hyde,” leaving
the country’s direction—toward liberty or toward greater statism—uncertain.
This uncertainty is likely to cause many Americans to delay investment and
spending decisions, and a meaningful share of Republican voters, at present,
may choose not to vote.
End
Quote (emphasis added):
“China
is not a superpower, nor will she ever seek to be one... If one day China
should change her color and turn into a superpower, if she too should play the
tyrant in the world, and everywhere subject others to her BULLYING,
aggression and exploitation, the people of the world should identify her as
social-imperialist, expose it, oppose it and work together with the Chinese
people to overthrow it.”
Deng
Xiaoping.
leader of the People’s Republic of China said that in 1979. Does the “BULLYING others” remark, which Deng
criticizes, remind you of Trump today?
….………………………………………………………..
Wishing
you good health, peace of mind, success and good luck. Till next time……
The Curmudgeon
ajwdct@gmail.com
Follow the Curmudgeon on Twitter @ajwdct247
Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever-changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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