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It looks like the “Trump Trade” is continuing as the market shook off last week’s decline to post another solid performance.
Major Index Performances (as of Thursday Close):
- S&P 500: The benchmark index rose 1.32%
- Dow Jones Industrial Average: The Dow increased .98%
- Nasdaq Composite: The index wert up 1.56%
- Gold: The Precious metal rebounded 3.9%
The Trump Effect:
Donald Trump’s victory in the US presidential election has sent the overall stock market higher. But it’s been a different story for healthcare stocks. Several stocks in the Healthcare sector are lower, led by AbbVie ABBV and Eli Lilly’s LLY. The bulk of the declines came between Nov. 8 and Nov. 19. Healthcare stocks recovered some of those losses on Wednesday. In addition, some industries escaped the carnage, most notably medical device makers and insurers.
This latest healthcare selloff extends losses that started in August. While the first eight months of the year were strong, the sector has lost nearly 10% since the beginning of September. Analysts say heightened uncertainty about a range of policies from the new administration is responsible for deterioration. On the plus side, the selloff means many healthcare stocks are trading at discounted prices.
Drugmakers Suffer Losses:
Since the election, the biggest drags on the US Healthcare Index have been drugmakers AbbVie and Lilly. AbbVie has fallen an eyewatering 17% since the election, while Lilly is down 6.3%. Vaccine maker Pfizer PFE has also seen major losses, with shares down more than 9% since the election. Drugmaker Amgen AMGN and life science supplier Thermo Fisher Scientific TMO could not avoid the selloff.
Nvidia Reports Earnings:
Nvidia just reported results for the third quarter of its fiscal year 2025, and its business is booming thanks to the insatiable demand for its AI-enabling GPU chips from cloud “hyperscalers” like Amazon, Microsoft, and Alphabet. The company reported revenue of $35.08 billion in the quarter, representing a 94% year-over-year surge and a 492% increase from its third quarter in fiscal year 2023. Put another way, Nvidia just recorded more revenue in a single quarter than it did in its entire fiscal year 2023. The company is on track to register total revenue of nearly $130 billion this year, and analysts at Goldman Sachs expect that number to jump above the $200 billion milestone next year.
Despite such a strong report, Nvidia is trading down 3% since it reported. The euphoria for Artificial Intelligence could be waning. Insiders (stockholders that are employed by the company) have been selling Nvidia at massive rates, while institutional holders have been lowering their exposure as well.
Diversification:
The increased volatility in healthcare stocks, Nvidia and precious metals demonstrates the importance of diversification. Our portfolios are purposely designed to spread the risk across several sectors and individual equites. We don’t want to allow extreme moves in a sector or stock to drive the return of a portfolio. This risk adverse approach has allowed us to participate in the upward move of the market, while limiting the overall risk in a down market.
Have a wonderful Weekend
Your portfolio management team.
