Since the start of the current US equity bull market, there have been 5 lulls where the S&P churned for 34 – 88 trading days (7-18 calendar weeks). We are in another such period now, with 25 days since the last highs. Past instances have been punctuated by geopolitical, interest rate, and financial system stresses. The current churn has elements of all three, as well as uncertainty related to the incoming administration. Some days present real opportunity and others are, in the words of our recently departed Art Cashin, a waste of a clean shirt. Knowing the difference is key to successful trading and investing. The Trump administration’s new policies are a fresh wild card. Executed with care, they could be quite beneficial to the US economy. Details matter, however, and markets simply do not have much to analyze just yet. Inauguration Day is next Monday, so the wait is almost over. The US stock market will be closed on Monday in honor of Dr. Martin Luther King’s birthday. The civil rights leader would have been 96 years old. Outside of earnings, there’s not much in the way of economic news for next week. We remain positive on US stocks but recognize history says the current market environment requires a bit of patience. When there’s nothing to do, don’t do anything.
Should you have any questions or concerns, please feel free to reach out.
Portfolio Notes
(+) indicates a positive development, (-) indicates negative, and (~) indicates neutral
(-) Eli Lilly (LLY-US) fell after they released Q4 guidance below market expectations. Analysts were expecting revenue of $13.95 billion, but the company thinks it will only achieve $13.5 billion, which is still 45% higher than last year. If a company has high expectations, even a small miss can spook traders. It is worth noting that the long-term growth forecasts are still on track. In the short term, supply chain and production delays have lead and lag impacts that are quite unpredictable. Owned in Cash Flow and US Portfolios.
(+) Goldman Sachs (GS-US) Shares climbed after the bank blew past fourth-quarter expectations, benefitting from a rebound in Wall Street deals and stronger-than-expected trading revenue. Goldman posted earnings of $11.95 a share on revenue of $13.87 billion for the period. Earnings of $11.95 topped estimates of $8.22. Global banking and markets revenue exceeded estimates thanks to strong FICC and equities trading. Investing banking was a little better than expected but advisory was a slight miss. Asset and wealth management revenue increased 8% year-over-year in the fourth quarter. Owned in US Portfolio.
(+) Intuitive Surgical (ISRG-US) surged to record highs after guiding Q4 revenue above expectations. Following a banner year in 2024 in which shares rocketed higher by 55%, the bullish trend is continuing in 2025. The robotic surgery leader, which had been contending with supply chain issues and COVID-related headwinds, especially in China, has put those issues in the rearview mirror and is now capitalizing on some key growth catalysts, most notably including strong demand for its new da Vinci 5 system. We increased our exposure this week. Owned in Opportunity Portfolio.
(+) JPMorgan Chase & Co. (JPM-US) reported a good quarter with a beat on revenues and EPS due to higher investment banking fees (+49% Y/Y) and markets revenue (+21% Y/Y) as deal activity picked up. Net interest income, however, was down 2% Y/Y, driven by lower rates and deposit margin compression, as well as lower deposit balances. The provision for credit losses to cover future losses was $2.6 billion, reflecting net charge-offs of $2.4 billion primarily driven by card services and a net reserve build of $267 million. The company’s capital and liquidity position remain solid with a CET1 ratio of 15.7%. JPM’s ROE was 17% and is towards the high end relative to its peers. Tangible book value per share was $97.30, up 13% Y/Y. JPM’s stock price is up 50% over the past 52-weeks, outperforming the S&P 500. The stock trades at a forward P/BV of ~2.0x, a premium to its historical long-term average of ~1.4x. Owned in US Portfolio.
(+) lululemon athletica (LULU-US) were stretching higher in early action after the activewear company raised its Q4 revenue and EPS guidance following a stronger-than-expected holiday shopping season. In 2024, sluggish consumer spending trends, rising competition, and some product and merchandising missteps in the spring made for an especially challenging year, as illustrated by the stock's 25% dive lower. However, LULU's upside Q3 earnings report on December 5 indicated that a turnaround was underway, bolstered by ongoing strength in the international business, as well as some improvement in the struggling Americas business, which now has a new reporting structure within the product team. Owned in US Portfolio.
(+) Shopify (SHOP-T) It looks like US eCommerce spending continued to grow nicely in Q4, up 8.7%compared to 7.1% in Q3. They typically well exceed overall eCommerce market growth and the setup into Q4 reporting looks promising. As a reminder, SHOP also guided to strong Q4 operating margins (19.8%-20.7%), and a better-than-expected top line growth/scale should help the company in achieving this target. We remain constructive on SHOP’s business fundamentals, including strong GMV and GPV growth, along with revenue and margin benefits we expect from its investments in GenAI. Owned in Core Portfolio.
(+) Taiwan Semiconductor (TSM-US) The chip manufacturing behemoth is flirting with all-time highs reached earlier this month after delivering energetic Q4 results, including healthy top and bottom-line beats and bullish Q1 revenue guidance. TSM, which supplies the chips used by most tech giants, from Apple to NVIDIA, has consistently benefited from an unwavering demand for AI. In 2024, revenue from AI accelerators (including AI GPUs, AI ASICs, and HBM controllers for training) more than tripled. For 2025, TSM anticipates much of the same, forecasting revenue from AI accelerators to double off an excellent 2024 base year, reflecting a continuous appetite for the technology this year. TSM is confident that the headwinds in 2025 will be short-lived, citing a shortened replacement cycle and increased silicon content as PCs and smartphones contain more AI functionality. As such, TSM is poised for steady upward momentum this year, barring economic deterioration, growing geopolitical tensions, or cracks in AI. Owned in Cash Flow Portfolio.
(~) Target (TGT-US) At first glance, Target's upwardly revised Q4 comparable sales guidance, which now calls for growth of approximately 1.5% compared to its prior forecast of flat comps, looks quite bullish for the big box retailer. Indeed, there are some positive takeaways from the improved comp guidance, especially after TGT reported weak Q3 results in November that also included downside Q4 EPS guidance of $1.85-$2.45. However, it's the company's EPS outlook that's once again causing disappointment. The main takeaway is that TGT's updated guidance for Q4 reveals a mixed picture for the struggling retailer. On the one hand, the improvement in sales for discretionary categories is a meaningful development, but on the other hand, relying more heavily on promotions and markdowns to drive those sales doesn't bode well for TGT's margins and profitability. Owned in US Portfolio.
Weekend Reading
We Are Headed Towards a System of National Capitalism Market strategist and historian Russell Napier outlines a future in which governments mandate where investors should deploy their capital. The global monetary system that has existed since 1994 is being radically restructured. THE MARKET
The 4th Agricultural Revolution Agriculture is a high-tech industry from genetic engineering to robotic laser weeding to satellite based based crop monitoring. YOUTUBE
Has Canada Become a Jamaican Bobsled Team? Canada is a complex country. It’s gigantic, yet sparsely populated. We are a landmass larger than the United States, but with a population equivalent to California. Economically, we are facing significant challenges. Although nobody should take the “51st state” argument seriously, if Canada were to become a state, it would be the third poorest in the country, right behind Alabama. JAY MARTIN
Ranked: AI Models With the Lowest Hallucination Rates Hallucination rate is the frequency that an LLM generates false or unsupported information in its outputs. Which models have the lowest rates? VISUAL CAPITALIST
How Netflix Changed Cinema “Several screenwriters who’ve worked for the streamer told me a common note from company executives is ‘have this character announce what they’re doing so that viewers who have this program on in the background can follow along." N+1 MAG
America in 1929 An interesting history lesson and look at tax inequality in America. SCOTT SUMNER
Map of Canada’s “Defense Scheme No. 1” From The 1920s & 30s BRILLIANT MAPS
The Ten-Minute Take, S3 E1: The Loonie Slump – What’s behind it and where it’s headed Podcast: The 10-Minute Take - RBC Thought Leadership
Diversions
“The Night Agent” (Jan. 23) returns for its second season. NETFLIX
“Prime Target” (Jan. 22), a conspiracy thriller series about a math whiz and the NSA agent who is protecting him. APPLE TV+
"Putin's Journey" (now) Charting the authoritarian’s rise to power. CBC
“Night Call” (now) French-language thriller about a locksmith by night. YOUTUBE TRAILER

"The best investors I’ve seen all have an above-average ability to change their mind."
- Joel Tillinghast