This powerful bull market is defying the market’s weakness

Listen to the audio version of this article (generated by AI).

Today’s issue in preview:

• This powerful bull market is defying the market’s weakness

• While you were reading about election results, the stock market made this big breakthrough

• AI infrastructure stocks just suffered a major hit. Here’s how to trade them from here.

• Learn our Top Themes to buy now

This powerful bull market is defying the market’s weakness

Credit: alfexe

This morning, the major stock averages suffered steep declines amid worries that a Democrat-controlled Congress will regulate AI data center construction with a heavy hand.

The benchmark S&P 500 sank 3.2% in morning trading. The tech-heavy Nasdaq 100 dropped 5.5%. Mining, defense, homebuilder, industrial, and financial stocks all declined.

This widespread weakness makes today’s new all-time highs among healthcare leaders Pfizer (PFE), Eli Lilly (LLY), Becton Dickinson (BDX), AbbVie (ABBV), and McKesson (MCK) all the more impressive.

The “Boomer healthcare” megatrend proved to be one of the few ports in the stock market storm. Large money managers are betting that Democratic control of Congress will lead to policies that support healthcare spending, including efforts to delay planned Medicaid cuts and restore Affordable Care Act subsidies.

McKesson gave the healthcare complex a favorable shot in the arm last night when it reported outstanding third-quarter business results and issued a positive outlook. Revenue increased 8% year over year. Adjusted EPS grew by 18%.

McKesson is a $127 billion healthcare distribution giant and one of America’s largest suppliers of prescription drugs, medical supplies, and healthcare technology.

The company is a major beneficiary of the Boomer Healthcare megatrend. As America’s 65-and-older population grows, demand for prescription medications, cancer treatments, and medical services rises. McKesson benefits from the expansion of healthcare spending through its enormous pharmaceutical distribution network and oncology services business.

Thanks to its excellent third-quarter report, McKesson shares climbed 3% to reach a new all-time high.

And for now, the Boomer healthcare megatrend rolls on.

Over the past year, we have published more than two dozen pieces on opportunities in drug development, biotechnology, senior living facilities, genomics, cardiology, diagnostics, and more.

Our bullish stance has produced a parade of home runs, with the healthcare industry dominating the stock market’s list of new highs over the past year.

Healthcare stocks are generating extraordinary returns because they are benefiting from several megatrends simultaneously. One is the enormous Baby Boom generation entering the phase of life when healthcare spending skyrockets.

And two: extraordinary innovation in the healthcare sector. Thanks to advances in genomic sequencing, AI-powered analytics, imaging technology, and preventive treatments, healthcare is becoming much better and more personalized. This is driving strong demand for all kinds of new tests, tools, and treatments.

After all, when a useful and important service you buy gets much better, you typically buy more of it.

I’ve devoted so much attention to healthcare because it has paid off like a broken slot machine for us. It’s a trend that is paying us. The sector’s strong performance on a terrible day for the broad market indicates this megatrend has further to run.

While you were reading about the election, the stock market made this major breakthrough

Credit: Marian Vejcik

On an industry-by-industry basis, the big Democratic Party win has produced a mixed bag of large stock market moves.

But after the market placed this diversified group of stocks and industries in a bag and shook it up on Wednesday, at the end of the day, the Invesco S&P 500 Equal Weight ETF (RSP) reached its highest-ever closing price.

This is a very big, very positive deal for investors… and today’s decline does nothing to diminish it.

Of all the big sector-wide moves that powered the equal-weight S&P 500 to a new all-time high yesterday, perhaps the most impressive one was made by consumer spending stocks.

Yesterday, as the world was occupied with processing the big Democrat win, the SPDR S&P Retail ETF (XRT) reached its highest level in five years.

The SPDR S&P Retail ETF is a diversified ETF that provides investors with exposure to a broad range of American retail stocks. It includes department stores, discount chains, specialty retailers, and online retailers.

The fund’s policies prevent it from being dominated by a handful of giant firms like Amazon (AMZN) and Walmart (WMT).

This means the fund’s trend gives us a good read on American consumer health… rather than simply showing us that Amazon or Walmart is hammering the competition.

XRT’s holdings include Best Buy (BBY), Dick’s Sporting Goods (DKS), Target (TGT), Ulta Beauty (ULTA), Etsy (ETSY), Macy’s (M), BJ’s Wholesale Club (BJ), Ollie’s Bargain Outlet (OLLI), Bath & Body Works (BBWI), eBay (EBAY), Dollar Tree (DLTR), Gap (GAP), and American Eagle Outfitters (AEO).

Over the past month, we have published a series of research notes on bull markets in Visa (V), Mastercard (MA), and hotel operators, including Marriott International (MAR).

In each one, we concluded that the American consumer and the economy it powers are not in the dumps as the mainstream media tries to make us believe, but are actually doing quite well.

This week, we can XRT to this growing list of key indicators that say the American economy is doing much better than most people give it credit for.

I’ve been investing and reading financial research for 28 years. During all that time, I’ve heard many widely followed pessimists forecast the death of the American consumer. They have been consistently wrong for decades. The consumer and the economy it powers continue their upward trajectory.

This is why I say that in the event of global thermonuclear war, two things will survive. Cockroaches and the American consumer.

This week’s big Democratic victory and the seismic shift it represents in U.S. politics have analysts and commentators working overtime to provide “takes” and forecasts in response. But in my mind, the market has delivered what is by far the most important “take,” which I will attempt to translate as follows…

The stock market was going up before the election. As demonstrated by soaring credit card and hotel stocks, the American consumer was doing fine before the election. The forces that were driving stocks higher before the election are still in place… and they are more important than the election’s results.

Surging consumer stocks say that despite today’s market weakness, we are in the confines of a bipartisan bull market. Manage your financial affairs accordingly!

AI infrastructure stocks just suffered a major hit. Here’s how to trade them from here.

Credit: Khanchit Khirisutchalual

The market may approve of the American consumer’s health (see above), but the same cannot be said for the AI infrastructure trade.

This morning, the VanEck Semiconductor ETF (SMH) declined by 8% and reached its lowest level since April.

This decline represents an important downside breakout of the sideways consolidation period SMH has been locked inside over the past six months. This downside breakout has dealt serious damage to the trend in AI infrastructure stocks.

Here’s why that is important for your portfolio…

Over the past three months, we’ve published a special series of research notes analyzing the AI infrastructure boom… which we’ve called “the world’s most important trend.”

The status of this critical trend has become one of the great sagas of the business and investment world… a source of intense disagreement among industry bulls and bears. It’s a trend whose outcome could have large effects on your portfolio.

Given AI’s enormous promise, large tech firms such as Alphabet (GOOG) and Microsoft (MSFT) have invested over $1 trillion in AI infrastructure. They are on pace to invest over $700 billion this year alone and more than $3 trillion after that.

Both the scale and the velocity of this investment boom are unprecedented. It is the largest collective investment effort in history.

Big Tech’s historic investment boom has made the entire “AI infrastructure” trend responsible for a large share of America’s GDP growth and stock market returns over the past two years. It has also drawn the skeptical scrutiny of many widely followed investment analysts who claim the trend is a bubble… one that will soon explode and cause tremendous damage to stock prices and the global economy.

If this hugely consequential trend isn’t the most important trend in the stock market, then it is certainly in the top three.

I believe the AI infrastructure trend has years to run. I believe the world’s smartest, most connected tech insiders who know the true state of bleeding-edge AI development and have real-time stats on AI investment ROI, such as Elon Musk, Jensen Huang (Nvidia), Satya Nadella (Microsoft) and Andy Jassy (Amazon), perhaps maybe… just might… know far more about AI and their businesses than outsiders know about it.

As much press as AI gets, let’s remember that less than 1% of the global population pays for top-tier AI programs. And I estimate less than 10% of large companies believe AI has made a meaningful impact on their businesses.

This revolutionary technology hasn’t yet proliferated, achieved mass adoption, or had mass impact. However, the Agent Supernova is coming.

I like to know the bull and the bear case for any trend. But regular readers know I care a lot more about what the market thinks of any stock, trend or theme than what any one person thinks of it, including me. You can be bullish or bearish on a trend all you like, but if that trend is moving strongly against you, then your idea isn’t worth a hell of a lot in my book.

One of the best ways to gauge what the market thinks of AI infrastructure is analyzing the VanEck Semiconductor ETF (SMH).

This fund is full of key semiconductor firms whose fortunes rise and fall with AI infrastructure spending trends. Major holdings include Nvidia (NVDA), Taiwan Semiconductor (TSM), AMD (AMD), Texas Instruments (TXN), ASML Holding (ASML) and Micron (MU).

As you can see in the two-year chart below, SMH enjoyed a gigantic run from June 2025 to June 2026. The fund gained 176%. After reaching a high in June 2026, however, the fund corrected and moved in a volatile, sideways pattern. Enormous selling pressure this week has sent SMH out of its consolidation pattern and into meaningful new short-term lows. Virtually every other facet of the AI infrastructure trade looks the same.

We cannot say if these new lows portend a “blow up” of the AI trade. But we can say they have dealt serious damage to the AI infrastructure stock trend.

How do things look going forward? I’ll offer a take you won’t see much in the mainstream media, which always looks to share “extreme” points of view to drive clicks and viewership.

Much to the disappointment of the passionate AI bears and the passionate AI “accelerationists,” the new Democrat controlled Congress could end up presiding over an AI industry that progresses at a “speedy-but-not-breakneck” pace… and produces neither a big boom in AI infrastructure stocks nor a bust in them.

The Democrats could end up regularly tapping the brakes on the AI industry rather than slamming on the brakes. (Think more red tape and higher fees and more concessions related to data centers rather than outright bans on them.)

This would create an economic climate in which AI applications and our ability to service them via data centers advance at a brisk, world-leading pace, not at an unrestrained “breakneck” pace that AI maximalists would like to see. In summary, we could see a very positive “muddle through” business climate for AI.

While positive for AI proliferation overall, this climate could see AI infrastructure stocks trend sideways or lower for a long time.

That’s one guy’s forecast. But I care much more about what the market says about the AI infrastructure stock trend than what I or anyone else says. We are closely tracking this volatile situation and will provide frequent trading guidance as it unfolds.

Market Notes

• Insurance giants Chubb (CB), Progressive (PGR), Travelers (TRV), Allstate (ALL), and Everest Group (EG) all hit new highs.

• Canadian banking giants Toronto-Dominion (TD) and Bank of Nova Scotia (BNS), along with India’s ICICI Bank (IBN), reached new highs today.

• Outdoor decking giant Trex (TREX) reached a new one-year high today.

• Consumer staples giants Coca-Cola (KO), Procter & Gamble (PG), Colgate-Palmolive (CL), Church & Dwight (CHD), Mondelez (MDLZ), and Brown-Forman (BF.A) reached new highs today.

• Brazilian e-commerce giant MercadoLibre (MELI) reached a new one-year low today.

• Neoclouds continue to selloff as CoreWeave (CRWV), IREN (IREN), and TeraWulf (WULF) are all at new lows today.

Regards,

Brian Hunt
Editor, Money & Megatrends

An urgent message from our colleagues:

“AI Bank” pays 6% APY

Your bank has been ripping you off for years with low interest rates, high fees, bad customer service. Well now you have an alternative – an “AI Bank” that pays 6% interest and gives you full control of your money.

See the details here… and why this is striking fear into Wall Street bankers.