Stocks held their ground this past week. However, the rotation that started at the beginning of November continued as once again, the laggards since the April rally began led while the leaders lagged. Since the end of November, the three best performing sectors have been Health Care, Energy and Materials and the worst Technology, Consumer Discretionary and Communication Services. Despite the angst, before giving up on the leaders (see Buffett Below), we believe it is wise to let this play out a bit as there have been too numerous head fakes to count over the years. Eventually the smart money has returned to tech centric companies, and we think it will once again. We will stick with what we noted last week in that “at this time our expectations are for the pullback will have run its course sometime soon. However, a broadening of the market leaders is probably in the cards and warranted as we enter the new year. A resolution to the government shutdown will be the catalyst to a year-end rally.”
· The longest government shutdown in history mercifully ended this past week at 43 days as enough Democrats crossed the aisle to allow a bill to be passed and then signed by President Trump. Unfortunately, the bill only funds the government until January 30, 2026, setting up the potential for another showdown. This comes amidst a recent survey by the Pew Research Center that found 61% of Republicans and 57% of Democrats view their party as too extreme in their positions. The days of governing to the center are over.
· Shares of Advanced Micro Devices (AMD) Spiked midweek before settling down a bit after CEO Lisa Su told reporters on CNBC that the amount they are spending on artificial intelligence is the “right gamble.” Su was addressing investors’ concerns that AI was becoming a bubble and came a day after she called the chip demand in this sector “insatiable.” In our opinion, for investors the concern is not whether or not this is a bubble as they are negative connotations surrounding this term given the internet bubble during the late 1990’s but rather whether or not the demand projection is unrealistic and at this point, we don’t think it is.
· According to the National Association of Realtors (NAR), “the share of first-time homebuyers dropped to a record low of 21%, while the typical age of first-time homebuyers climbed to an all-time high of 40 years” according to the group’s 2025 Profile of Home Buyers and Sellers. The report went on to state that “prior to 2008, the share of first-time buyers had an historic norm of 40%. At the same time, the share of first-time buyers is at its lowest level, and the age of first-time buyers has risen to the highest recorded. The median age of first-time buyers is now 40. In the 1980s, the typical first-time buyer was in their late 20s. first-time buyers who are successful cite high rent and student loans as two foremost costs that hold them back from saving.”
· In a recent government filing Warren Buffett’s Berkshire Hathaway announced that they initiated a $4.3 billion stake in Alphabet (GOOGL) at the end of the third quarter. During the quarter Berkshire also increased its stake in insurer Chubb (CB) while reducing Apple (AAPL). The largest five positions for the conglomerate include Apple at $60.7 billion, American Express (AXP) $50.4 billion, Bank of America (BAC) $29.3 billion, Coca-Cola (KO) $26.5 billion and Chevron (CVX) $19.0 billion.
It’s The Economy…”
· The Institute for Supply Management’s composite index of non-manufacturing (service) sector activity rose to 52.4% during October from 50.0% in September. Of note were New Orders (56.2% v 50.4%), Employment (48.2% v 47.2%), Backlog of Orders (40.8% v 47.3%) and Business Activity (54.3% v. 49.9%). The Prices Paid Component rose to 70.0% during October from 69.4% during September. (Source, Institute for Supply Management)
· The Institute for Supply Management’s composite index of manufacturing sector activity slipped to 48.7 during October compared to 49.1 in September. Generally, a reading above 50% indicates that the manufacturing economy is expanding, below indicates one in contraction. Of note were the changes in New Orders (49.4% v. 48.9%), Production (48.2% v. 51.0%), Supplier Deliveries (inverse, higher number indicates slower delivery times) (54.2% v. 52.6%), Inventories (45.8% v. 47.7%) and Employment (46.0% v. 45.3%). The Prices Paid Component fell to 58.0% during October from 61.9% during September.
Economic Reports scheduled to be released this week, include the following – on Tuesday, October Industrial Production and Capacity Utilization; on Wednesday, October Housing Starts; on Thursday, October Index of Leading Economic Indicators (LEI) along with the Weekly Report of Initial Claims for Unemployment Benefits; and, on Friday, November Consumer Sentiment from the University of Michigan.
Q3 Earnings Season is ramping up. Companies expected to report quarterly earnings this week, to include Home Depot (HD), Medtronic (MDT), Target (TGT), TJX (TJX), Palo Alto Networks (PANW), Deere (DE), Lowe’s (LOW), Nvidia (NVDA), Walmart (WMT), Intuit (INTU), Ross Stores (ROST) and Veeva Systems (VEEV).