History Is Useless for Wall Street Pros Betting on Stocks Rally

(Bloomberg) -- Hedge fund chief Scott Bessent’s Friday nomination to become the US Treasury Secretary is offering bond investors a glimpse into the incoming administration’s sweeping economic agenda after an extended search that included multiple prominent contenders.

The $28 trillion market for US Treasuries was already closed for the week when Bessent, who runs macro hedge fund Key Square Group, was officially nominated by President-elect Donald Trump. Until trading resumes early in Asia’s Monday session, investors and strategists are awaiting more details on Bessent’s views on fiscal policy and his next steps.

Here’s what investors and strategists on Wall Street are saying:

Glen Capelo, who spent more than three decades on Wall Street bond-trading desks and is now a managing director at Mischler Financial Group

“Scott is a fiscal hawk and he definitely will be positive overall for the economy and the markets.”

“He wants to rein in spending. Bessent wants to get the Secretary of the Treasury back in line with the markets.” The gist of tariff policy under Bessent is that companies may have a certain amount of time to ensure they are fueling the US economy or else face tariffs, Capelo said.

“It’s not the sky-is-falling inflation-is-coming tariff philosophy that many talk about. So I think it’s going to be great for America.”

John Fagan, principal at Markets Policy Partners

Fagan, who ran the US Treasury’s markets monitoring group from 2014 to 2018, said Bessent’s past comments and views stand to shift once he’s faced with the reality of the Treasury secretary role. “When people are in the markets, their commentary on markets is indelibly tinged by what their book is.”

However, “when decisions are made about Treasury issuance, those are extremely consequential decisions that are made with large groups of people around the table and enormous amounts of data and considerations that really spring from the stable and predictable.”

Priya Misra, a portfolio manager at JPMorgan Asset Management

“While the Treasury Secretary ultimately implements the administration’s fiscal policy, I’m encouraged that the person in charge is very familiar with markets.”

“Bessent has talked about a phased-in approach to tariffs and has been vocal about the need to control the deficit. It suggests that Bessent wants to prevent a market reaction that would constrain the administration’s goals on trade and fiscal policy.”

(Bloomberg) -- The buy-everything mania that greeted Donald Trump’s election is cooling in the tried-and-tested world of stocks and corporate credit. Yet on Wall Street’s speculative fringes, the risk-taking frenzy is only getting bigger by the day.

Heavy trading — and big price moves — in everything from crypto to leveraged exchange-traded funds was the story in a week where swings in the S&P 500 and Nasdaq 100 finally started to abate.

Ground zero for the casino crowd: The $140 billion complex of amped-up exchange-traded funds tracking the likes of Big Tech stocks, Michael Saylor’s Bitcoin proxy MicroStrategy Inc., and more. Gamblers are flocking to vehicles that boost gains and losses across indexes and companies including the Magnificent Seven darlings. Single-name leveraged products have been trading $86 billion this week — a record.

It’s the latest frothy chapter in a marquee year for risky assets, courtesy of the booming economy and Trump’s election pledges — no matter how long the Federal Reserve is taking to cut interest rates.

The gains have fattened brokerage accounts just in time for the holiday shopping season. Yet at this rate, the gambling spirits are running high enough to give market pros pause.

“This euphoria is rampant speculation on par with the 2000 peak,” said Michael O’Rourke, chief market strategist at JonesTrading. “These levels of momentum and turnover are hard to maintain for an extended period of time.”

Gyrations are slowing down in the less-exotic assets. While the S&P 500 gained at a healthy clip — 1.7% this week — it was the smallest move since before election day. Daily changes in 10-year Treasury yields have averaged less than 2 basis points since Nov. 14, compared with more than 7 basis points in the two weeks prior.

No corner of the juiced-up ETF world saw more action this week than funds centered on MicroStrategy, the software firm Saylor has transformed into what amounts to a pure-play bet on Bitcoin. Two leveraged funds based on the company saw a combined $420 million inflow amid a 24% surge for the underlying stock this week.

The popularity of the two funds has led some market-observers to point to a leveraged-loop buying frenzy. It goes like this: Investor demand for the ETFs pushes up the price of MicroStrategy, allowing it to raise more money and further prop up Bitcoin itself. The world’s biggest digital token is up more than 40% in November alone and climbed each day this week to get within a few hundred dollars of $100,000.

(Bloomberg) -- HCA Healthcare Inc., Tenet Healthcare Corp. and Community Health Systems Inc. shares slid Friday after Raymond James downgraded its ratings on the hospital chains, saying that an upcoming expiration of insurance subsidies could weigh on earnings into 2026.

Analyst John Ransom said there is a risk that enhanced subsidies — provided to those getting health insurance through individual marketplace — will be allowed to expire in 2025 under the incoming presidential administration. That will in turn, reduce the number of patients with insurance in 2026. Growing investor concerns about other risks to hospital funding, such as state-directed payments and Medicaid reimbursements, are also likely to weigh on the stock.

“There is potential downside risk to 2026 numbers should the aforementioned risks materialize,” Ransom wrote in a Friday note to clients, downgrading HCA to market perform from outperform, Tenet to outperform from strong buy and Community Health to underperform from market perform.

HCA, the largest publicly-traded hospital chain in the US, fell 2.2% — extending its selloff for the ninth day. Tenet also extended losses, dropping 2.9% while Community Health declined 2.7%. The S&P Composite 1500 Health Care Facilities index also slumped for the ninth-straight session as the index notched its longest losing streak since July 2012.

Separately, Leerink Partners analyst Whit Mayo sees hospitals facing a 4-7% Ebitda headwind in 2026 from the loss of the enhanced subsidies on the exchanges.

“This places approximately $1 billion of earnings at risk for HCA,” Mayo wrote in a note to clients Friday. “The stocks, in our view, are pricing in a material probability subsidies are gone.”

Shares of health-care providers have been under pressure since former US President Donald Trump won the 2024 election. The broader health-care sector has also seen shakeups after Trump’s nominations of Robert F. Kennedy Jr. and celebrity doctor Mehmet Oz to top health positions in his administration.

With an incoming administration that’s “not shy to shake things up and very focused on reducing government spending, hospitals are at risk over the near-term,” according to Jared Holz, a health care specialist at Mizuho.

(Bloomberg) -- Negotiators at the COP29 climate summit in Azerbaijan are close to landing a carbon credits agreement after almost a decade of deliberation. The decision, if adopted, will pave the way for more trading activity under a new market overseen by the United Nations.

Securing a deal on the latest set of rules for Article 6 was a top priority for the Azeri COP29 Presidency. On day one of the summit, negotiators rushed through a deal advancing rules on how a new UN-backed global crediting mechanism will function. Late Friday, texts were published that revealed further details for Article 6.4, as well as the rules for how countries can trade credits they plan to use to meet their national emissions reductions goals under the Paris climate agreement in Article 6.2.

The rulebook allows for countries to trade carbon credits with each other, as well as companies. Critically, it details an accounting system for how a country selling a credit can deduct that off its national carbon inventory to prevent the same credit from being used twice.

Lambert Schneider, research coordinator for international climate policy at Oeko-Institut, called the latest texts an “important achievement” because negotiators have managed to iron out a number of unaddressed issues.

That includes provisions for a robust accounting of credits that countries can use against their climate targets, so-called internationally transferred mitigation outcomes or ITMOs, as well as for more detailed information from countries on how the credits they trade meet general market standards around environmental integrity.

But there also remains a number of “shortcomings,” Schneider said. This includes a lack of consequences for countries where there’s inconsistencies in reporting. Instead of a requirement to halt trading, the discrepancy will simply be flagged in the system.

A number of countries, including Singapore, Switzerland, Thailand and Japan, have already struck agreements to trade ITMOs before finalization of the rulebook. In practice, the rules will almost certainly evolve in the coming years.

Still, the extra clarity from a decision will provide a “good signal” for further market development, said Andrea Bonzanni, international policy director at the International Emissions Trading Association, an industry body.

(Bloomberg) -- The municipal bond market is headed for its seventh-straight November of gains, with the US presidential election and a Federal Reserve meeting keeping issuers on the sidelines, while strong investor demand has boosted prices.

Municipal issuance, usually slow in the 11th month, was more muted than usual because state and local governments sought to avoid election-related volatility. Long-term muni bond issuance through Nov. 22 was $23.4 billion, down 6% year-over-year.

Meanwhile, investors typically have more cash on hand from principal and coupon payments than available debt to purchase. This November, demand exceeds supply by $12 billion, according to PGIM. The upshot is that over the past decade, November has tended to be the strongest month of the year, returning 1.1% on average, data compiled by Bloomberg show.

“In November, there’s a healthy amount of reinvestment,” said Jason Appleson, head of municipals at PGIM. “You have technicals that are back in your favor.”

Municipal bonds have posted positive returns in eight of the last 10 Novembers, according to the Bloomberg Municipal Bond Index. December has been even better, with munis gaining 10 years in a row.

This month, long-dated muni bonds have become the most expensive relative to Treasuries in almost three years. Donald Trump’s victory in the presidential election, combined with a Republican sweep in Congress, drove a selloff of US Treasuries, with investors anticipating an inflationary agenda that would likely limit the Federal Reserve’s need cut interest rates much further.

Since mid-September, yields on 30-year US Treasuries have increased about 70 basis points, compared with 14 basis points for 30-year AAA rated municipal bonds with the same maturity. On Thursday, the ratio of 30-year muni-to-Treasury yields fell to 80.4%, its lowest since January 2022.

Barclays Plc analysts led by Mikhail Foux say muni-to-Treasury ratios will likely fall further by the end of the year, meaning munis will get even more expensive relative to US government debt. The market’s favorable dynamics — limited supply coupled with strong reinvestment demand — should support munis in December as it has for the last 10 years in a row.

(Bloomberg) — The municipal bond market is headed for its seventh-straight November of gains, with the US presidential election and a Federal Reserve meeting keeping issuers on the sidelines, while strong investor demand has boosted prices.

Municipal issuance, usually slow in the 11th month, was more muted than usual because state and local governments sought to avoid election-related volatility. Long-term muni bond issuance through Nov. 22 was $23.4 billion, down 6% year-over-year.

Meanwhile, investors typically have more cash on hand from principal and coupon payments than available debt to purchase. This November, demand exceeds supply by $12 billion, according to PGIM. The upshot is that over the past decade, November has tended to be the strongest month of the year, returning 1.1% on average, data compiled by Bloomberg show.

“In November, there’s a healthy amount of reinvestment,” said Jason Appleson, head of municipals at PGIM. “You have technicals that are back in your favor.”

Municipal bonds have posted positive returns in eight of the last 10 Novembers, according to the Bloomberg Municipal Bond Index. December has been even better, with munis gaining 10 years in a row.

This month, long-dated muni bonds have become the most expensive relative to Treasuries in almost three years. Donald Trump’s victory in the presidential election, combined with a Republican sweep in Congress, drove a selloff of US Treasuries, with investors anticipating an inflationary agenda that would likely limit the Federal Reserve’s need cut interest rates much further.

Since mid-September, yields on 30-year US Treasuries have increased about 70 basis points, compared with 14 basis points for 30-year AAA rated municipal bonds with the same maturity. On Thursday, the ratio of 30-year muni-to-Treasury yields fell to 80.4%, its lowest since January 2022.

Barclays Plc analysts led by Mikhail Foux say muni-to-Treasury ratios will likely fall further by the end of the year, meaning munis will get even more expensive relative to US government debt. The market’s favorable dynamics — limited supply coupled with strong reinvestment demand — should support munis in December as it has for the last 10 years in a row.