The stock market has experienced a challenging week, and it might also be facing a difficult year in 2025.

 

The market is on track for its worst week since March 2023 after the Federal Reserve projected a cautious outlook regarding interest rate reductions in 2025. However, examining the market's internal dynamics, it is apparent that damage was inflicted well before the Fed's meeting on Wednesday—and this is a historic indicator of challenging times ahead.

 

The number of declining stocks in the S&P 500 surpassed advancing stocks for 14 consecutive days as of Thursday.

 

The advancing/declining data helps to assess underlying participation in market movements, and the recent weakness indicates that even though the S&P 500 is only down 4% from its record high, damage exists beneath the surface of the benchmark index.

 

This is demonstrated by the equal-weighted S&P 500 index being down 7% from its record high.

 

According to Ed Clissold, chief US strategist at NDR, the S&P 500's 14-day losing streak in its advance-decline line is the worst since October 15, 1978.

 

Clissold noted that 10-day losing streaks or longer in advancing stocks relative to declining stocks can signal ominous prospects for future stock market returns.

 

Although this situation has only been triggered six times since 1972, it demonstrates lackluster forward returns for the S&P 500. The index has shown an average six-month forward return of 0.1% following these 10-day breadth losing streaks, compared to the typical 4.5% average gain observed during all periods.

 

"Studies with only six cases hardly constitute a strategy. But market tops have to originate somewhere, and many commence with breadth divergences, or widely followed averages posting gains with minimal stock participation," Clissold said.

 

Perhaps more indicative for the stock market is whether it can stage a recovery as it approaches one of the most bullish seasonal periods of the year: the Santa Claus trading window.

 

If it cannot, that would be telling, as per Clissold.

 

"A failure to see a Santa Claus Rally would be worrisome not only from a seasonal standpoint, but it would permit breadth divergences to intensify," the strategist mentioned.

 

Additionally concerning to Clissold is investor sentiment, which has exhibited signs of extreme optimism since September. According to the research firm's internal crowd sentiment measure, it is in the seventh-longest stretch in the zone of excessive optimism, based on data since 1995.

 

"Several surveys have reached potentially unsustainable levels," Clissold advised, cautioning that any sentiment reversal could serve as a warning signal for future market returns.

 

Ultimately, sustained stock market weakness, particularly in the internals, would lead Clissold to suggest that 2025 might not be as easy as 2024 for investors.

 

"If the stock market cannot address recent breadth divergences in the coming weeks, it would indicate our concerns about a more challenging 2025 could become a reality," the strategist concluded.

Investors may be underestimating the threat to the bull rally posed by wild moves in the foreign exchange market.

 

KKR wrote in its 2025 outlook this week that currency swings will become the market's "Achilles' heel" next year.

 

"Our bottom line is that this is not the time to take a lot of excess exposure risk on FX, as it may prove to be the dominant story of 2025," it said.

 

The firm said investors should brace for trade wars and widening fiscal imbalances to turbocharge foreign exchange volatility beyond recent norms.

 

Tariffs will likely upend interest rate coordination worldwide, while economic friction causes further disruptions. Monetary policy helps dictate currency levels, and big changes can spur instability.

 

Meanwhile, high levels of government debt can slash demand for a country's currency, triggering devaluations.

 

KKR urges investors to consider how the market behaved between 1994 and 2000. After interest rate hikes first rattled markets in 1994, the stock market went on to rally, similar to what has happened since 2022, KKR said.

 

"However, things became unsettled in 1998, as a combination of currency unwinds and excess leverage led to a short and sharp market correction that investors were underestimating," the outlook noted.

 

Investors can already see this taking place in some markets.

 

Debt and stock markets in Brazil have been shaken this week amid a deep plunge in the country's real. The currency has become the worst performer against the dollar, hitting a record low on Wednesday.

 

Brazilians have been dumping the real since late November after proposed austerity measures failed to satisfy investors concerned over the country's widening fiscal deficit.

 

Still, KKR is largely optimistic about 2025. The firm expects the S&P to reach 6,850 by year-end, before racing toward 7,500 in 2026.

 

"To be sure, we expect plenty of volatility, consolidations, and drawdowns along the way to our 2025-26 price targets," KKR wrote, suggesting that investors couple mega-cap tech exposure with cyclicals, as well as small and mid-cap stocks.

The challenged Chinese autonomous trucking company TuSimple has now rebranded itself as CreateAI, shifting its focus towards video games and animation, the announcement was made on Thursday.

 

This announcement follows GM's closure of its Cruise robotaxi division this month, marking a phase where the once-thriving self-driving startup industry is starting to eliminate laggards. TuSimple, operating in both U.S. and China markets, faced its own problems, including vehicle safety concerns, a $189 million settlement from a securities fraud lawsuit, and its removal from Nasdaq in February.

 

Over two years after CEO Cheng Lu rejoined the company in this role after being ousted, he now forecasts the business might reach a break-even point by 2026.

 

This optimism is tied to a video game based on popular martial arts novels by Jin Yong, planned for an initial release in that year, according to Cheng. He foresees generating "several hundred million" in revenue by 2027 when the complete version is launched.

 

Prior to its delisting, TuSimple reported a loss of $500,000 during the first three quarters of 2023 and invested $164.4 million in research and development during that time frame.

 

Company co-founder Mo Chen has a "long-standing connection" with the Jin Yong family and initiated work back in 2021 to produce an animated feature based on the novels, as Cheng explained.

 

The company touts its artificial intelligence expertise in developing autonomous driving software as providing a foundation for the development of generative AI, which is the advanced technology powering OpenAI’s ChatGPT, able to create human-like responses to user inputs.

 

In conjunction with the CreateAI rebranding, the company has launched its first significant AI model named Ruyi, an open-source visual work model available on the Hugging Face platform.

 

"Our shareholders clearly recognize the value in this transformation and are eager to progress in this new direction," Cheng expressed. "Both our management team and Board of Directors have received tremendous support from our shareholders." The company is slated to hold its annual shareholder meeting on Friday. Cheng stated the company intends to expand its workforce to around 500 next year, up from the current 300.

 

Co-founder Xiaodi Hou, claiming to be the largest individual shareholder at 29.7%, has openly questioned the shift towards gaming and animation. Hou announced his intention to withhold or oppose support at the shareholders meeting and advocated for the liquidation of the company. He has since launched his own autonomous trucking firm in Houston called Bot Auto, which secured $20 million in funding in September.

 

While still operating under the TuSimple brand, the company announced in August a collaboration with Shanghai Three Body Animation to produce the first animated feature film and video game based on the science fiction novel series "The Three-Body Problem."

 

The company mentioned at the time that it was inaugurating a new business sector dedicated to the creation of generative AI applications for video games and animation.

 

CreateAI anticipates reducing top-tier, known as triple A, game production costs by 70% within the next five to six years, according to Cheng. He did not disclose whether the company is in discussions with gaming giant Tencent.

 

When questioned about the implications of U.S. restrictions, Cheng asserted there were no difficulties, stating the company utilizes a combination of Chinese and non-Chinese cloud computing providers.

 

The U.S., under the Biden administration, has intensified restrictions on Chinese businesses’ access to advanced semiconductors necessary for powering generative AI.

 

Gold prices edged up on Thursday, erasing earlier gains after U.S. data reinforced market expectations that the Federal Reserve will take a cautious approach to policy easing in the year ahead.

 

Spot gold was up 0.2% at $2,592.39 per ounce and U.S. gold futures fell 1.7% to $2,607.50.

 

Data earlier showed the U.S. economy growing faster than expected in the third quarter, while jobless claims also fell more than anticipated.

 

"With these GDP prints and the jobless claims, it's showing that the data is fairly firm," said Bart Melek, head of commodity strategies at TD Securities, adding that a solid economy and inflationary risks, including tariffs and spending cuts, reaffirm the Fed has little reason to be aggressive, which historically has not been good for non-yielding gold.

 

Gold slipped more than 2% to a one-month low earlier in the session after Fed officials dialed back projections for future easing given stubborn inflation.

 

The drop attracted investors to buy, sending prices as much as 1.5% higher earlier in the session.

 

"The short-term dip in gold presented a good buy-in opportunity for long-term stackers. You have the looming debt problem, the potential government shutdown, and we're already seeing the posture of the new administration in terms of trying to cut the expenses and minimize the deficits," said Alex Ebkarian, chief operating officer at Allegiance Gold.

 

U.S. President-elect Donald Trump's pre-inauguration push to sway Congress threatens to complicate efforts to avoid a government shutdown, potentially disrupting services such as air travel and law enforcement ahead of the holidays.

 

Gold is considered a safe investment option during economic and geopolitical turmoil and tends to thrive in a low-interest-rate environment.

 

Investors await Friday's release of core PCE data, the Fed's preferred inflation measure, for further clues on the economic outlook.

 

Spot silver fell 1.4% to $28.95 per ounce, platinum added 0.1% at $920.55 and palladium rose 0.5% to $907.68.

The stock market's post-election surge is heating up as we approach year-end, but it's important for investors to exercise caution in pursuit of profits.

 

Some analysts view the remarkable rise since the November 5 election as a warning sign, implying that the market's record-breaking performance may lead to a downturn as early as next year.

 

Among the pessimists, BCA Research recently suggested that stocks could enter a bearish phase in the first half of next year, with potential declines reaching 35%.

 

Persisting economic threats pose significant risks to stocks, the firm noted in a recent report. Consumer spending appears to be decreasing, with shoppers increasingly seeking cheaper options at retailers like Target and Walmart. Additionally, sectors like the job market are weakening, they mentioned.

 

"While we anticipate a recession in 2025 is likely, risk assets might fall short even without one, and the current valuations are not promising for future gains," the firm stated.

 

"Nevertheless, we predict a bear market in equities will manifest in the first half, and we will seek a strategic entry to short equities if our stops are breached. We intend to reduce our underweight position shortly after the 20% bear-market threshold and may aim to overweight equities at declines of around -30% to -35%, should they reach such lows."

 

Other Wall Street analysts have adopted a bearish outlook due to historically elevated valuations. According to Ned Davis Research, since 1928, in years when the S&P 500 has achieved at least 50 record highs, the median return for the following year was -6%.

 

The S&P 500 recently marked its 57th record high of 2024.

 

"The primary challenge with momentum studies is that stock prices don't rise indefinitely," analysts at the firm wrote, warning that concentrated market areas could predispose stocks to a weaker 2025. "While AI might spur another wave of productivity and profits that quell inflation and moderate Federal Reserve policies, history suggests this is the exception, not the norm."

 

Investors are advised to consider reallocating resources at the year's close, as noted by Andrew Slimmon, a senior portfolio strategist at Morgan Stanley.

 

"The stock market is being driven by speculative, low-quality growth stocks," Slimmon told CNBC this week, remarking that the current investment scenario is reminiscent of 2021. "That period didn't end well for those invested stocks. I believe December is a fitting time to reassess and declare an end. While it might persist, one should be cautious about future repercussions," he said.

 

"Numerous stocks have surged by over 50%, 60%, 70% this year. Therefore, it seems wise to exit these positions and seek out more underperforming areas."

 

Most analysts on Wall Street are broadly optimistic for 2025, though they expect a more subdued performance compared to the significant gains seen in 2023 and 2024. Barclays, Bank of America, and Goldman Sachs project a 10% return for the S&P 500 next year. The benchmark index has risen approximately 28% so far this year.

European markets experienced a downturn on Tuesday, ending an eight-session winning streak. The pan-European Stoxx 600 index closed down by 0.52%, with most sectors retreating. Among the key contributors:

• Industrials led the losses, declining 1.08%.
• Mining stocks fell 0.78% after Chinese trade data disappointed market expectations.

 

Notable Regional Performances

• Germany's DAX managed to close slightly above the flatline.
• France's CAC 40 dropped 1.14%, leading the regional losses.
• Despite Tuesday’s decline, the Stoxx 600 has risen 1.63% in December so far, maintaining its upward momentum for the month.

 

Key Developments and Stock Highlights

 

Delivery Hero

• Shares of Delivery Hero plummeted by 10% following the Dubai Stock Exchange debut of its Middle Eastern subsidiary, Talabat.
• Talabat raised $2 billion in its IPO, but shares fell from 1.7 UAE Dirham to 1.49 UAE Dirham by the session's close.

 

Commerzbank

• Germany’s Commerzbank saw its stock rise nearly 3%, ranking among the top gainers in the Stoxx 600.
• The rally came after the resignation of Jutta Dönges from the bank's supervisory board.

 

Ashtead Group

• The U.K. equipment rental firm saw its shares tumble by over 11%, the largest drop on the Stoxx 600.
• The decline followed its announcement to move its primary listing to New York and a warning of weaker-than-expected annual profits.

 

TeamViewer

• Shares of TeamViewer fell by 6% after the company announced its largest acquisition to date: a $720 million deal for employee experience software maker 1E.

 

Economic Data and Corporate News

 

U.S. Inflation Outlook

 

Investors await Wednesday's U.S. consumer price index (CPI) report, which could shape the Federal Reserve's interest rate decisions for its December 17-18 meeting.

• Forecasts: Headline inflation is expected to rise 0.3% for November and 2.7% year-on-year.

 

China Trade Data

 

Chinese trade figures underwhelmed:

• Imports contracted by 3.9% in November, marking the sharpest drop since September 2023.
• Exports grew by 6.7%, below the anticipated 8.5%.

 

U.K. Hiring Trends

 

A report by Indeed highlighted a 24% year-on-year contraction in U.K. job postings as of November 22.

• Contributing factors: New government policies, including increased National Insurance contributions, a higher minimum wage, and enhanced workers' rights legislation.

 

SSE Investment Plans

 

SSE announced plans for its subsidiary, SSEN Transmission, to invest at least £22 billion in grid infrastructure between 2026 and 2031.

• This aligns with the U.K.’s target to decarbonize the electricity grid by 2030.

 

Other Headlines

• Shell settled a lawsuit with Greenpeace U.K., which included a £300,000 payment to the Royal National Lifeboat Institution and a legally binding agreement barring future protests near Shell’s North Sea platforms.
• Allianz raised its financial targets, promising increased shareholder returns and revenue growth across its divisions.
• Stellantis and CATL announced a joint €4.1 billion investment in a European battery factory in Spain, with production slated for late 2026.

 

Global Markets at a Glance

 

European Opening Predictions

• FTSE 100: Expected to open 38 points lower at 8,315.
• DAX: Predicted to drop 76 points to 20,274.
• CAC 40: Projected to decline 31 points to 7,454.

 

U.S. Market Snapshot

• The S&P 500 and Nasdaq Composite saw slight gains, rising 0.1% and 0.3%, respectively, while the Dow Jones dropped by 0.2%.

The Walt Disney Company has launched a new unit, the Office of Technology Enablement, to oversee its integration of artificial intelligence (AI) and mixed reality (XR) across its diverse business areas, including film, television, and theme parks. This new division will be led by Jamie Voris, former Chief Technology Officer (CTO) of Disney's film studio and the driving force behind the development of Disney’s app for Apple’s Vision Pro mixed reality headset. Voris will report to Disney Entertainment Co-Chairman Alan Bergman.

 

Disney aims to harness fast-evolving technologies like AI and XR to enhance consumer experiences, drive creativity, and innovate within its business operations. Bergman emphasized that the creation of this unit underscores Disney’s commitment to exploring both the potential benefits and risks associated with these technologies. Unlike traditional centralized approaches, the Office of Technology Enablement will serve as a coordinating body, ensuring that various AI and XR initiatives align with Disney’s broader strategic goals without directly controlling individual projects.

 

The Office of Technology Enablement launches with a core leadership team and plans to expand to around 100 employees, according to a source close to the matter. The move follows Disney’s earlier decision to form a dedicated task force to investigate how AI might be applied throughout its entertainment empire. Disney is also actively pursuing expertise in augmented reality (AR), virtual reality (VR), and mixed reality (MR), each of which offers unique opportunities for innovation. AR overlays digital elements onto the physical world, VR immerses users in entirely simulated environments, and MR combines aspects of both, creating immersive, interactive experiences that blend physical and digital realms.

 

Several Disney divisions are already exploring applications for these technologies. Notably, Kyle Laughlin, a longtime Disney executive with experience in AR, VR, and AI, returned to the company in March as Senior Vice President of Research and Development for Walt Disney Imagineering, the creative team behind Disney’s theme park attractions. Laughlin’s return, after a brief departure to lead Amazon’s Alexa Gadgets division, highlights Disney’s focus on infusing cutting-edge technology into its renowned theme park experiences.

 

Disney’s interest in leveraging AI and XR also aligns with broader trends in the technology market, as companies like Meta and Snap have introduced a new generation of sleeker, lightweight AR glasses that offer a stylish alternative to bulkier VR headsets. Seven sources familiar with Disney’s strategy confirmed that the company is quietly building a team to explore how best to utilize these emerging technologies to create unique, immersive experiences in its theme parks and consumer products.

 

The augmented and virtual reality market has shown significant growth, with market research firm IDC reporting that approximately 1.7 million AR and VR headsets have been sold this year. Meta currently dominates the market with a 60.5% share but faces increasing competition from companies like Sony, Apple, and ByteDance. Additionally, Google has signaled intentions to reenter the AR/VR space, indicating that competition within the market is likely to intensify.

 

Disney’s focus on advanced technologies extends beyond hardware, encompassing AI applications as well. With AI-driven tools increasingly being integrated into creative workflows, Disney is actively examining how machine learning and other AI innovations can support its storytelling, animation, and interactive experiences. The new Office of Technology Enablement is tasked with coordinating these efforts, helping Disney not only to create innovative content but also to streamline operations across its multifaceted entertainment ecosystem.

 

As Disney leverages technology to enhance its offerings, the company is positioning itself at the forefront of a technological revolution that promises to reshape the entertainment landscape. With AI and mixed reality as central components of its future strategy, Disney is preparing to lead the way in delivering next-generation experiences to audiences around the world, both within its iconic theme parks and through digital platforms that bring Disney magic directly into consumers' homes.

In a significant shift that reflects the evolving dynamics of the semiconductor industry, Intel is set to be replaced by Nvidia on the Dow Jones Industrial Average (DJIA), bringing an end to Intel’s 25-year presence on the blue-chip index. This change, announced by S&P Dow Jones Indices on Friday, signals the impact of Nvidia’s rise in the booming artificial intelligence (AI) market and the challenges faced by Intel as it struggles to adapt to new industry demands. Alongside Nvidia, paint manufacturer Sherwin-Williams will join the DJIA, taking the place of Dow Inc., further reshaping the 30-member index.

 

Intel's removal from the DJIA marks a setback for the once-dominant chipmaker, which has seen its stock value fall dramatically this year, down 54% year-to-date. The decline has made Intel the worst-performing company on the DJIA, with the lowest share price on the price-weighted index. Following the announcement, Intel’s shares dropped 1.6% in extended trading, while Nvidia’s stock gained 2.2%, reflecting investors’ optimism about Nvidia's future as it joins the Dow.

 

Intel's downfall can be attributed to a series of strategic missteps that have allowed competitors, particularly Taiwan Semiconductor Manufacturing Company (TSMC), to surpass it in the global semiconductor market. Once a leader in chip manufacturing, Intel has lost its technological edge over TSMC, which has taken a commanding position in producing advanced chips. Intel also missed the opportunity to invest in generative AI early on, passing up a potential stake in ChatGPT-owner OpenAI, a decision that has since proven costly as AI demand surged.

 

For Nvidia, however, the story is quite different. The company has emerged as a leader in the AI chip market, with its graphics processing units (GPUs) now widely recognized as essential for AI data centers and machine learning applications. Once known primarily for its role in producing high-performance GPUs for gaming, Nvidia has successfully expanded its influence to become a key player in powering the global AI industry. This expansion has fueled a seven-fold increase in Nvidia’s stock over the past two years, propelling its valuation to a staggering $3.32 trillion. As of 2024, Nvidia stands as the world’s second-most valuable company, underscoring its importance in the technology sector.

 

In addition to Nvidia’s AI-driven success, the company's recent 10-for-1 stock split in June made its shares more accessible to retail investors. This move not only broadened Nvidia’s shareholder base but also helped pave the way for its inclusion in the DJIA, which traditionally favors companies with a higher price-per-share. Nvidia's entry into the DJIA is thus both a recognition of its technological achievements and a testament to its widespread appeal among investors, particularly those looking to capitalize on the AI revolution.

 

Intel’s removal from the DJIA could have broader implications for the company’s stock. Being excluded from the DJIA means Intel will no longer be part of the exchange-traded funds (ETFs) that track the index, which could potentially put additional downward pressure on its share price. Losing its place on the DJIA also presents a reputational setback for Intel, as it works to regain investor confidence amidst a challenging restructuring process.

 

“Losing the status of Dow Jones inclusion would be another reputational blow for Intel, as it grapples with a painful transformation and loss of confidence,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. She also noted that Intel’s exclusion from index-tracking ETFs could affect its stock performance, as fewer investors will now have exposure to Intel through these funds.

 

Once a Silicon Valley icon, Intel played a pioneering role in the chip industry, starting with memory chips before shifting to processors that powered the personal computer revolution. In the 1990s, Intel's "Intel Inside" campaign turned its chips into premium products and made the brand a household name. However, Intel’s struggles over the past decade have been evident in its financial performance. The company’s revenue in 2023 stood at $54 billion, nearly a third lower than in 2021 when Pat Gelsinger took over as CEO. Despite some recent positive projections for its PC and server businesses, Intel is expected to report its first annual net loss this year since 1986. Intel’s market value, now below $100 billion for the first time in three decades, pales in comparison to Nvidia’s massive valuation.

 

As Nvidia steps into Intel's former role on the DJIA, its influence in the semiconductor industry is expected to grow further. Nvidia’s dominance in the AI chip market has placed it at the forefront of the sector, with its chips often viewed as irreplaceable for high-performance computing and AI applications. Nvidia’s technology advantage, along with the high cost of replacing its AI chips, makes it difficult for rivals to compete in this space. Many experts consider Nvidia’s stock a barometer for the broader AI market, reflecting investor sentiment about the sector's long-term growth prospects.

 

U.S. stocks climbed on Friday, led by a surge in Amazon shares after the company reported robust earnings. Meanwhile, 10-year Treasury yields reached a four-month high as investors hesitated to buy bonds ahead of Tuesday's U.S. presidential election.

 

Initially, Treasury yields dropped following October's U.S. employment report, which showed minimal job growth due to industrial actions and hurricanes. However, the unemployment rate remained steady at 4.1%, indicating a stable labor market.

 

After the U.S. market closed, S&P Dow Jones Indices announced that Nvidia would replace Intel in the Dow Jones Industrial Average. Nvidia's shares rose 1.9% in after-hours trading, while Intel dropped 1.4%.

 

With four days until Election Day, polls show a tight race between Republican Donald Trump and Democratic Vice President Kamala Harris. Some analysts predict that U.S. fiscal conditions may worsen regardless of the election outcome.

 

The benchmark 10-year yield increased by 7.7 basis points to 4.361%, the highest since July, after a significant 48 basis point rise in October.

 

On Wall Street, Amazon shares surged 6.2% after forecasting strong holiday quarter results. This gain helped counterbalance a 1.2% drop in Apple shares following the company's conservative growth outlook. “We’ve seen mixed results from Big Tech, but it wasn't as bad as expected,” said Rick Meckler of Cherry Lane Investments.

 

The Dow rose 288.73 points (0.69%) to 42,052.19, the S&P 500 gained 23.35 points (0.41%) to 5,728.80, and the Nasdaq rose 144.77 points (0.80%) to 18,239.92. However, the S&P 500 finished the week down 1.4%.

 

Globally, the MSCI index rose 0.34%, while Europe’s STOXX 600 had its best day in five weeks, boosted by bank stocks.

 

The dollar strengthened against the euro and other major currencies after the U.S. jobs report. The euro fell 0.40% to $1.084, while the dollar index gained 0.36%. Against the yen, the dollar rose 0.60% to 152.94 ahead of Japan’s long weekend.

 

Bitcoin saw a modest rise of 0.57%, trading at $69,531.

 

In commodities, oil prices rose amid reports that Iran was preparing a retaliatory strike on Israel from Iraq. Brent crude futures gained 29 cents to $73.10 per barrel, and WTI crude rose 23 cents to $69.49. Gold edged down, pressured by the stronger dollar.

A stock market signal closely followed by Wall Street pros suggests Kamala Harris will win the Presidential election next week, but commentators warn that the historically accurate signal could fail this time.

 

History shows that when the S&P 500 has been higher in the three months leading up to the election, the incumbent party has won 80% of the time.

 

On the flipside, when the S&P 500 has been lower in the three months leading up to the election, the opposing party has won the election 89% of the time.

 

It's been a highly accurate signal in every election since 1928, and assuming the index doesn't erase its 8% gain since August in a day, commentators have said there's a good chance Kamala Harris will win.

 

Yet, market experts speaking with Business Insider note that the backdrop for both the market and the political landscape is highly unique, mirroring one of the only years that the signal has failed to point to the outcome of the vote.

 

Sam Stovall of CFRA Research said there are some uncanny similarities between today's election cycle and 1968, a year when the stock market election signal failed.

 

In 1968, former President Lyndon Johnson chose not to run for reelection and was replaced at the top of the ticket by Vice President Hubert Humphrey. Similarly, President Joe Biden dropped out and was replaced by his Vice President.

 

Also in 1968, the Federal Reserve cut interest rates between July 31 and October 31, which ultimately did not help the incumbent party. The Fed cut interest rates by 50 basis points last month for the first time since 2020.

 

Stovall said the final similarity is that Democrats in 1968 faced a restless populace clamoring for change. Back then, the issue was the unpopular Vietnam War. Now, rising prices and immigration issues could hurt Democrats' chances.

 

"Therefore, like 1968, the market's advance may be a reflection of 'replacement relief' not 'reelection," Stovall told Business Insider.

 

Others on Wall Street say the market in 2024 has distinct factors driving the gains — notably, artificial intelligence — that preclude it from hinting at political outcomes.

 

"We do not think that the market is a good predictor of the election outcome as the market has become more concentrated and the AI boom is distorting equity returns," Jay Hatfield, CEO at Infrastructure Capital Advisors told Business Insider.

 

What's more, there may be more accurate indicators than the moves of the broader S&P 500, and those indicators have been pointing to a Trump victory.

 

Assets tied to the "Trump trade" have gained in recent months, with bitcoin, shares of Trump Media and Technology Group, and the dollar all rallying on an expected boost from a second Trump presidency. Billionaire investor Stanley Druckenmiller told Bloomberg last month that the market is "very convinced Trump is going to win."

 

A notable miss for the signal in recent history is the 2020 election. That year, the S&P 500 rose 2.3% leading up to the November vote, suggesting a Trump win, but Biden ultimately won.

Election Day is fast approaching, and no matter who wins, you'll probably see changes to your tax bill in 2025.

 

In the fourth installment of BI's five-part series in the final stretch before the election, Business Insider is looking at the ways each candidate's policies could affect how much you pay in taxes. (Read part one about investments, part two about costs, and part three about housing.)

 

Each of the three sections below represents a key segment of the taxpaying population: low- and middle-income earners, high-income earners, and businesses. BI will unpack how a Trump or Harris presidency is expected to affect all three groups.

 

Under Trump's proposal, lower- and middle-income Americans could see some tax reductions, especially if they're trying to pay off a car or have a job that relies primarily on tips. Trump has proposed extending his slew of tax cuts from the Tax Cuts and Jobs Act of 2017 — also known as the "Trump tax cut." He's also seeking to eliminate taxes on tips, overtime, and Social Security benefits, as well as making car interest payments tax deductible.

 

Based on an analysis from the left-leaning Institute on Taxation and Economic Policy, keeping the income-tax cuts from the TCJA alone could mean a tax reduction of just over $1,000 for the middle 20% of Americans.

 

But another part of Trump's tax policy — his plan to levy universal tariffs on all US imports — could end up undercutting this positive impact. Economic analyses have found that those tariffs could offset the tax benefits and then some for lower-earning Americans.

 

Factoring in the cost of tariffs, Trump's tax package could result in higher tax bills for everyone but the top 5%, the Institute on Taxation and Economic Policy found.

 

"A lot of those tariffs do end up harming lower-income families and taxpayers who buy goods from abroad," Garrett Watson, a senior policy analyst at the right-leaning Tax Foundation, said.

 

Harris has proposed an expanded earned-income tax credit aimed at lower-income earners, and she wants to restore and expand upon a more generous child tax credit, similar to the one implemented under Biden's pandemic-relief bill in 2021. The Tax Policy Center estimates that Harris' proposals could bring down household taxes by an average of $750 — with the lowest-income earners seeing their after-tax incomes grow the most.

 

Harris' and Trump's proposals share some key similarities: Both have proposed some version of eliminating taxes on tips. While Harris hasn't outlined specifically what she'd preserve from the TCJA, she's maintained Biden's promise not to raise taxes on those making below $400,000. The Trump campaign has also shown interest in bolstering the child tax credit.

 

If Trump makes all the TCJA's income-tax provisions permanent, middle-income Americans would get a tax break of about $1,000, while the top 0.1% of earners would see a cut of nearly $280,000, a Tax Policy Center analysis found.

 

Another boon for wealthy Americans would be an extension of the break in estate taxes. The TCJA doubled the amount of inherited wealth that could be considered tax-exempt, from around $5.5 million in 2017 to around $11.2 million in 2018.

 

Trump has floated lifting the $10,000 cap on the State and Local Tax deduction, known as SALT, from his 2017 tax bill. SALT mostly impacts affluent taxpayers in blue states with high local taxes, and a repeal of the cap would restore a tax break mostly enjoyed by higher earners in places like California, New Jersey, and New York, said Benjamin Page, a senior fellow at the Urban-Brookings Tax Policy Center.

 

Harris' tax proposals target higher earners to help offset costs — if the TCJA were to expire for taxpayers making over $400,000, the top marginal rate would increase from 37% to 39.6%. She also supports two measures that have gained traction during the Biden administration: targeting ultrawealthy investors' capital gains and imposing a minimum income tax on billionaires.

 

"Unlike the Trump campaign, the other shoe for the Harris-Walz campaign comes on the high end," Ernie Tedeschi, the director of economics at the Yale Budget Lab and the former chief economist at the White House Council of Economic Advisers, said.

 

Harris has proposed bumping the tax on capital gains for Americans making $1 million or more from 20% to 28%. That would mean a higher tax rate on the money wealthy Americans make when they sell off assets like real estate or stocks — a key source of income for more affluent taxpayers.

 

Harris also supports a minimum income tax for billionaires, a proposal Biden has touted. She hasn't released specifics on what that would look like.

 

Harris wants to bump up the corporate tax rate from 21% to 28%, while Trump has proposed lowering it from 21% to 15% for firms that make their products in the US.

 

Harris has proposed some specific breaks for small businesses. Her key proposals include beefing up the startup deduction for new businesses from $5,000 to $50,000, creating a standard deduction for small businesses, and incentivizing local governments to ease up red tape, such as doing away with barriers to licensing and making it easier to recognize credentials across states.

 

"Many startups may be able to deduct the cost of those startup expenses more quickly and more fully, which could encourage, at least on that margin, a little bit more startup activity," Watson said.

 

Meanwhile, Tedeschi said Trump's tariffs could weigh on small businesses. Importers might have to choose between raising prices or absorbing the cost through lower margins.

 

But Tedeschi said both candidates' proposals to eliminate taxes on tips could ultimately be a boon for small businesses.

 

"The employer's going to be able to pay a little bit less for those jobs, given the demand for them," he said. "The tipped workers are probably going to end up fine because again, their tips are tax-free."

 

Trump's proposal to eliminate taxes on overtime pay could also benefit small businesses by allowing them to reconfigure how they schedule and pay workers.

 

One question mark for both campaigns is a TCJA provision that allows some business owners to deduct their business income from their taxable income. Democrats in Congress are hoping to preserve the deduction for business owners making under $400,000 but change it for those above that threshold, a Senate Finance Committee aide told BI.

Tech giants' earnings results, as well as those of other large names, are influencing the stock market.

 

However, a hit or a miss in a single quarter shouldn't form the basis for a long-term investment thesis.

 

Top Wall Street analysts closely follow the key details of a company's quarterly results. However, they establish their recommendations based on that company's ability to navigate short-term headwinds and deliver attractive returns over the long term through strong execution.

 

Bearing that in mind, here are three stocks favored by the Street's top pros, according to TipRanks, a platform that ranks analysts based on their past performance.

 

This week's first stock pick is financial services technology company Fiserv (FI). The company recently impressed investors with its upbeat third-quarter results, with adjusted earnings per share rising 17% year-over-year on organic revenue growth of 15%.

 

On Oct. 29, Tigress Financial analyst Ivan Feinseth boosted his price target for FI stock to $244 from $190 and reiterated a buy rating. The analyst expects the company to continue to gain from the ongoing transition to digital payments and growing adoption of digital transaction solutions.

 

Feinseth noted the robust Q3 revenue growth, fueled by Fiserv's integrated financial services solutions and solid customer relationships. He stated that the company is expanding its customer base and grabbing market share, thanks to the scalability of its financial product distribution platform and continued innovation.

 

The analyst also highlighted Fiserv's other strategic initiatives, such as expanding its Clover portfolio, offering services to enterprise merchants, extending more real-time payments, expanding into new verticals and markets, as well as partnering with major clients.

 

Feinseth ranks No. 183 among more than 9,100 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, delivering an average return of 13.8%. 

 

We now move to Boot Barn (BOOT), a retailer of western and work-related footwear, apparel and accessories. The company reported better-than-expected results for the second quarter of fiscal 2025. Also, Boot Barn raised its full-year guidance.

 

Despite the beat-and-raise quarter, BOOT stock plunged as investors reacted unfavorably to the company's announcement about the planned departure of CEO Jim Conroy in November. Conroy will assume the role of CEO at off-price retailer Ross Stores.

 

Following the print, Baird analyst Jonathan Komp upgraded his rating for Boot Barn stock to buy from hold, while maintaining the price target at $167. The analyst thinks that the post-earnings pullback in the stock offers a more compelling risk/reward setup. He is surprised by the market's reaction to the CEO's departure, given the strength of the remaining management team.

 

Komp highlighted that Boot Barn is on track to maintain more than 15% annual growth in its store count for the third consecutive year in fiscal 2025 with its plan to open 60 new stores. He also noted the robust momentum in the company's comparable store sales across all regions and categories.

 

"We remain confident in BOOT's ability to deliver attractive relative earnings growth supported by compelling unit expansion opportunity," said Komp.

 

Komp ranks No. 424 among more than 9,100 analysts tracked by TipRanks. His ratings have been profitable 54% of the time, delivering an average return of 13.5%. 

 

Finally, let's look at this week's third stock, restaurant chain Chipotle (CMG). The company recently reported better-than-anticipated adjusted earnings for the third quarter but lagged sales expectations despite a 3.3% rise in traffic amid a tough business backdrop.

 

Following the mixed results, Stifel analyst Chris O'Cull reaffirmed a buy rating on CMG stock with a price target of $70. The analyst noted that Chipotle's comparable restaurant sales growth of 6% was almost in line with the Wall Street's mean estimate of 6.2%. He added that the company experienced accelerated transaction growth in September and into the fourth quarter, indicating Q4 comps estimate of about 5.5%.

 

O'Cull added that the Q4 comps expectations imply full-year comps in the 7.5% range. In particular, he expects Chipotle's Q4 top line to gain from the company's smoked brisket offering, which has fueled incremental transactions and spending by existing customers and helped win new customers.

 

The analyst highlighted the company's focus on enhancing its throughput, an indicator of how fast a restaurant can execute an order. He noted Chipotle's aim to drive its throughput back into the mid-30s (serving over 30 entrées per 15 minutes) range from the mid-20s today. The analyst thinks that the company can improve its throughput, given its multiple initiatives, including equipment upgrades, enhanced operational procedures and transformational technology.

 

O'Cull ranks No. 415 among more than 9,100 analysts tracked by TipRanks. His ratings have been successful 59% of the time, delivering an average return of 12.6%.