Momentum Monday - Themes Working Post Election

There have been three distinct themes after the elections. Anything crypto-related has been the clear market leader. Financials is the second best-performing group. Some might say that crypto is part of the financial sector. Lastly, mega-cap companies are notably underperforming, with Tesla being the exception.

Bitcoin reached 100k. MSTR, COIN, HOOD, BITX, and MARA had another strong week. If you don’t own any crypto directly, those five have been the main ways to have some exposure. Some say MSTR is in its parabolic phase. I’m not so sure about it. It will have its violent 30-50% weekly or even daily moves for the rest of the year. This will only make it a more popular trading vehicle among short-term speculators.

Financials had the biggest gap after the elections. Then, they went sideways for a couple of weeks. They finally followed through last week. The market expects deregulation which is good news for an industry that likes to take excessive risks with other people’s money. We are not here to judge. We are here to trade what’s working.

For the first time in a while, tech megacaps are underperforming. Nvidia had its best quarter in history and it still pulled back slightly because of soft guidance. It’s somewhat logical. The best-case scenario has already been priced in. It’ll take a huge earnings surprise to change expectations. I’m not saying this is the top for Nvidia, far from it. Higher prices are coming but the rate of ascent will not be anywhere close to what we saw in the past two years. I’m not even sure it will be much better than the S&P 500. It’s natural to see some of the hot money leave the stock and seek higher returns in more speculative areas of the market. Full disclosure – I still own some NVDA. 

Google had a tough week, dropping about 5%. The odds of splitting the company into two are high. I don’t know why the market thinks this deserves a lower valuation. It has been under pressure and we have to acknowledge that. Amazon, Microsoft, Apple, and Meta haven’t fared much better. The only mega-cap that has done exceptionally well after the elections is Tesla. It added to its gains last week. If it clears 360, it is likely to test 400.