There are lots of confusing recent developments for stock investors to consider. The economic indicators are mixed, with some justifying a December 10 rate cut by the Fed, others not. President Donald Trump said he will announce his pick for the next Fed chair in January. It's not clear whether the Fed will be more or less independent as a result. The Supreme Court is likely to rule in January that Trump's tariffs are unconstitutional. Still, Treasury Secretary Scott Bessent said today that the administration has a Plan B to reimpose them immediately.
Meanwhile, investors are struggling to sort out a lot of confusion about the AI story, including whether the earnings of hyperscalers are inflated because they are depreciating their Nvidia GPU chips over six years rather than three. The introduction of Gemini-3 by Google, running on the company's TPU chips, has reminded investors that the pace of technological disruption is accelerating. AI has turned into a race among leaping frogs.
Yet despite all the confusion, both the market-cap-weighted and equal-weighted S&P 500 indexes are near their October 29 record highs (chart).
The S&P 500 is up 16.1% ytd, with the Magnificent-7 up 23.1% and the “Impressive-493” up 14.2% (chart).
The forward P/E of Nvidia has dropped sharply in recent days, while that of Google has jumped higher as investors have reconsidered which leaping frog to bet on for now (chart).
