| Homepage / Portfolio / Special Reports The Liftoff Just Started It's been one heck of a week with the one-two punch of a presidential election and an interest rate cut – two market-moving events within days of each other.
And move the market did, especially after the election.
Quite honestly, I really dislike politics. I try not to get involved. But I must when it comes to understanding the impact on our investments.
Over the last few months, we've talked about how stocks were primed to rise into the end of the year no matter which candidate won. The only real questions were timing and where money would flow the most.
The timing question was answered immediately. We knew by early Wednesday morning that Donald Trump had won both the popular vote and the electoral college vote. Any uncertainty about a drawn-out vote count, contested election, or questions of fraud vanished.
The S&P 500 and NASDAQ were up big, 4.1% and 2.7%, respectively. The small-cap heavy Russell 2000 index blasted 5.8% higher – a monstrous move.
Our TradeSmith Investment Report stocks surged as well, up 4.5% on average just the last three trading days.
I think there's a lot more where that came from for multiple reasons.
Again, I'm not political, but it's important to note that one party controlling Congress and the White House is bullish. In particular, Republicans controlling the presidency, Senate, and House is particularly good for stocks going all the way back to the 1930s. In those prior "red sweeps," stocks flew higher one, three, six, 12, and 24 months later.
In addition, interest rates will continue to fall. The Federal Reserve cut another quarter-point today, making it three-quarters of a point in total since September.
Politics again aside, whether you love or loathe Trump, he is good for stocks because he generally favors lower taxes, is pro small business, pro real estate, and wants less regulation.
He will also urge the Fed to keep lowering rates – perhaps even faster than currently – for multiple reasons: - Lower rates will fuel a growing economy and encourage discretionary spending as well as corporate and consumer borrowing.
- Our national debt is out of control at $35.88 trillion. Just the interest payments are north of $1.5 trillion per year, which is more than the entire defense budget.
No one wants the USA to go bankrupt, so expect government spending to fall, and those lower rates will also reduce the amount spent on debt payments.
All these things are headwinds for businesses. Removing them – even if partially – is highly bullish for stocks.
My proprietary Big Money Index is the best gauge I know for tracking where the largest investors on Earth are putting their money. The BMI fell from Oct. 21 through Nov. 4, the day before the election. Stocks weakened as Big Money got a little cautious ahead of what everyone thought would be an extremely close election.
Then, I saw more Big Money buy signals (unusually large money flows) on Election Day itself – which is interesting – and then yesterday we saw the most buy signals in nearly a year. Here's what it looks like in my system: 
Source: MAPsignals.com Big Money buy signals (green bars) on Wednesday outnumbered sell signals (red bars) 491 to 99 – nearly 5 buys for every 1 sell. That's huge, and it tells me that the BMI will rise as money charges back into stocks after a fairly brief rest when the outcome was uncertain.
With the election settled and rates continuing to fall, market seasonality is about to take over. And that's great because November is the strongest and most predictable month of the year.
Stocks are higher in November 73.5% of the time since 1990, with the S&P 500 averaging roughly 2.5% gains. I expect we'll get a lift through that continues through December – the second strongest month of the year – and into 2025.
We enter this exciting stretch with our portfolio in phenomenal shape, and we're well positioned to build on already big profits. We're making money in 21 of our 24 current stocks (87.4% win rate), with our average return now 25.8%. Our winners are also much bigger than our losers.
There's more to come. I'm surveying the post-election landscape now, looking for fundamentally strong stocks with solid technicals and evidence that Big Money is coming in.
That's our proven formula that has worked so well so far, and it should help us outperform even more in a potentially big and long run for stocks. The cream always rises to the top. I expect to add at least one new stock and maybe more within the next week or so. I'll have details for you in the new Monthly Issue next Thursday, or I'll be in touch sooner if we need to act right away.
Here's a look at the portfolio, and then I'll update you on our companies that recently reported quarterly results below. 
The Latest on Earnings: Vertex Pharmaceuticals (VRTX) reported strong results Monday after the close, beating sales and earnings estimates and raising its sales outlook for the year.
Revenue grew 12% to $2.77 billion, while earnings increase 7% to $4.38 per share. That was well ahead of estimates for $4.08. Sales of the company's blockbuster drug, Tikafta, a cystic fibrosis treatment, grew more than 13% and topped $2.5 billion (also ahead of expectations).
Management raised its sales outlook for the full year to $10.8 billion to $10.9 billion, all of which was above analysts' estimates for $10.76 billion.
In addition to growth, the company has a couple of potential new approvals coming in January. One is the next-generation cystic fibrosis treatment, and the other is a non-opioid pain treatment, which clearly has immense potential. There may be additional clinical results before the end of the year on the pain medication.
Investors liked the report. Shares jumped 6% the next day, and my Quantum Edge system also picked up a Big Money buy signal that day. We're up more than 20%, and I see bigger profits ahead for this biopharmaceutical leader with a strong pipeline that also includes innovative gene therapy.
Novo Nordisk (NVO) is mostly about sales of its blockbuster drugs for diabetes and weight loss, Ozempic and Wegovy. Both have the same active ingredient in semaglutide, but one beat expectations in Wednesday morning's report and the other didn't.
Overall growth was strong, but results were mixed relative to expectations. Earnings increased 25% to 89 cents a share, beating estimates by a penny. Sales also increased 25% to $10.42 billion, but that missed estimates for $10.57 billion.
Wegovy sales increased 84% to $2.53 billion, ahead of analysts. Ozempic, which was approved four years earlier than Wegovy, grew sales 28% to $4.36 billion, below forecasts.
Management expects overall sales for the full year to grow 23% to 27%, which lifts the bottom end of the previous range and lowers the top end by 1% each.
That's strong growth by any measure, but it's not quite as off the charts as it used to be. That's an inevitable path for companies that go through a phase of super high growth, but they are usually still leaders we want to own.
At the same time, I'm well aware that shares have been under pressure the last couple of months, and I have seen some Big Money sell signals in my system. That doesn't mean upside potential has vanished, but it is something I'm watching. Its fundamentals remain strong with a 70.9 rating, which increases the probability of higher prices.
Continue to hold NVO. I will keep you posted as I monitor the technicals and Big Money flows.
Arista Networks (ANET) just released results a little bit ago after the market closed. I'll be digging into the report more, but Arista's earnings of $2.40 per share were 31% higher than last year and topped estimates for $2.08. Sales grew 7% to $1.81 billion, also ahead of analysts' forecasts.
Revenue guidance for the current quarter also beat expectations, with management projecting $1.85 to $1.90 billion versus the Street at $1.81 billion.
The company also announced a 4-for-1 stock split, which should take effect on Dec. 4.
Shares are down after hours, possibly because the company will not host an investor day later this month like it did last year. Analysts like those events for updates and even guidance for next year.
After-hours action doesn't always translate into next-day action. It's still a great company, and we were smart to bank those 143% gains on one-third of the shares.
The Trade Desk (TTD) also just reported after today's close. The advertising tech company earned 41 cents a share, up from 33 cents last year and two cents better than estimates. Sales grew 27% to $628 million, topping the consensus at $620 million.
Shares jumped 6% today before the report but are also down after hours as I write this. Management guided for sales of $756 million in the current quarter, which is actually better than current estimates for $752.2 million. But when expectations are high, sometimes even better-than-expected results cause a temporary slide.
We're still up nearly 10% in a little over a month, and barring anything surprising on the call, TTD has what it takes to continue marching higher, even if it hits a post-earnings bump.
Talk soon,   Jason Bodner
Editor, TradeSmith Investment Report |
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