During the holiday-shortened Thanksgiving week on Wall Street, tariffs and inflation took center stage. Despite lingering concerns over both issues, US stocks recorded their second consecutive weekly gain, with the S&P 500 hitting a new record closing high. 

Tariffs Announcements Add Uncertainty 

Investors were given insight into potential trade policies under President-elect Donald Trump’s second term. He announced plans to: 

• Impose 25% tariffs on imports from Mexico and Canada, and 
• Implement an additional 10% tax on Chinese products, on top of existing tariffs. 

Economic Data Highlights Challenges for the Fed  

Ahead of the Thanksgiving holiday, investors digested a wave of economic data, including: 

1. US Q3 GDP Growth: Updated to 2.8%, slightly above expectations. 

2. October Core PCE Price Index: A key inflation gauge favored by the Federal Reserve, which came in higher than anticipated, signaling persistent inflationary pressures. 

The minutes from the Fed’s November meeting revealed that policymakers are considering pausing interest rate cuts if inflation remains stubbornly high. 

Weekly Market Performance  

For the week: 

• S&P 500 (SP500) rose +1.1% 

• Nasdaq Composite (COMP:IND) gained +1.1% 

• Dow Jones Industrial Average (DJI) saw a stronger increase of +1.4% 

Friday’s Closing Levels 

Santa Claus Rally on the Horizon? 

Although holiday-shortened trading weeks like Thanksgiving are often influenced by lower participation, it’s hard to overlook the S&P 500 hitting all-time highs. Many analysts believe the market is positioning itself for a Santa Claus rally, historically characterized by gains during the last week of December and early January. 

However, it is worth noting that statistics suggest Thanksgiving week tends to be positive, while the week following often sees weaker performance.  

November’s Stellar Performance  

November has been a standout month for US equities: 

• S&P 500 rose +5.7%, its best monthly performance of the year. 

• Investors poured $141 billion into US equities during the month, marking the heaviest four-week inflow on record, according to EPFR Global data.  

Market Resilience  

Despite persistent concerns about tariffs, inflation, and potential rate hikes, the market has demonstrated impressive resilience in the face of negative news. 

For now, the trend remains bullish, and as the saying goes, “the trend is your friend.”  

Source: CBOE, Bloomberg 

This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable US bank exceeding 20 years.

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