The Current Market Overview
The current bull market remains intact. But there could be potholes in the future. The Dow Jones Industrial Average, S&P 500, NASDAQ, and Russell 2000 all posted gains, with the Russell 2000 leading the way, recording the largest percentage gain of the day.
These gains were bolstered by Nvidia’s strong earnings report. However, it seemed to trigger a “sell the news” reaction. Nvidia is now grappling with the weight of its own success. After delivering multiple quarters of 100%+ sequential revenue and earnings growth, market expectations have soared to levels that are increasingly difficult to exceed. While their most recent sequential earnings growth ranged from 33% to 50%, this appears to have left some investors disappointed.
The AI chip market remains robust and far from saturated. However, Nvidia’s days of unprecedented growth rates are likely behind it. Scaling from $18 billion in revenue last year to an estimated $35 billion this year and potentially $70 billion next year presents monumental challenges. As competition intensifies in the AI chip space, replicating such exponential growth becomes increasingly difficult—a reality that institutional investors seem to recognize, as reflected in the stock’s muted response to a strong earnings report.
The broader market responded positively overall. A notable trend was a rotation of interest from the NASDAQ to small-cap stocks. While the NASDAQ edged up modestly (+0.03%), small caps outperformed significantly, climbing by 1.65%. This shift is worth monitoring, as it could persist or reverse depending on upcoming Federal Reserve policy announcements or inflationary data.
Looking ahead, I expect mid-cap and small-cap stocks to outperform the broader market in 2025. However, the journey is unlikely to be smooth, with numerous potential market disruptions (“potholes”) to navigate. We’ll remain vigilant to identify these risks early.
Upstart Holdings Analysis
Soon you will have to log in to get the stocks I cover trading analysis. The site is free for now so take advantage of all the insights on the stocks we follow and market conditions. Upstart’s trading performance yesterday was underwhelming. Although it gained slightly over a dollar, the stock closed near its intraday low—a bearish signal. Volume was light, suggesting the initial move upward was driven by short covering rather than strong investor demand.
Investors in Upstart need to understand the stock’s tendency to move in tandem with broader market conditions. In bullish markets, Upstart may perform well, but during downturns, it often underperforms the market. With current market conditions remaining favorable, Upstart should be stable for now. However, I don’t foresee any immediate catalyst driving a significant rally in this stock over the next few weeks.
The upcoming Federal Reserve meeting on December 18 could influence market sentiment. If the Fed signals a pause in rate hikes or adopts a data-dependent month-to-month approach, this could inject uncertainty into the market. While such statements might be interpreted as dovish, markets often react unpredictably to heightened uncertainty—particularly given the evolving policy landscape under the new administration.
Market Volatility Note
Yesterday, I noticed an uptick in the VIX Index, which measures market volatility. This is unusual given the strong market rally underway. I interpret this as either institutional nervousness or a hedging of positions ahead of 2025. My inclination is to view it as a hedging activity, though it’s worth monitoring closely. Should this represent genuine institutional apprehension, it could have broader implications for the market in the short term.
Key Takeaways
- Nvidia: Strong earnings, but slowed growth may temper enthusiasm.
- Market Trends: Small-cap outperformance could continue in 2025.
- Upstart: Stable in good markets but lacks a near-term catalyst.
- VIX Watch: Possible hedging or institutional caution worth tracking.