The Federal Reserve's interest rate meeting is about to take place on December 18th, Eastern Time. The current market consensus for this meeting is a 25 basis points rate cut, with a 95% probability. The market has already priced this in. The key is whether the changes in the interest rate path in next year's dot plot meet expectations. Stubborn core inflation and low unemployment rate are expected to significantly reduce the number of rate cuts by the Federal Reserve. I boldly speculate that there will only be one rate cut next year, and the 10-Year T-Note yield will surpass 4.5% again. Moreover, with the new administration taking office, there will be a substantial increase in federal debt, and high interest rates will pose a dilemma for the continuous government spending by the USA.
Conclusion: The current overvaluation of the US stock market running up to the upper limit of 6100 points forward-looking to FY25 is absolutely unsustainable, and a 5-10% index-level pullback is bound to occur. (After the Christmas market, positions from January to February need to be significantly increased for protection.) The index has risen by 27% this year. I can only wish good luck to those who are looking to chase the uptrend at this point.
Individual stocks:
AMD: Falling below $129, starting to approach the 25-year forward valuation lower limit of $118-124. I will start to establish positions and sell Put options at the end of March.
NVIDIA: Retracing to the strong support zone of $121-$128, friends without positions can start to build small positions. The super strong support zone of $112-$118 can be significantly increased to do the FY25 valuation mean reversion. If the index retraces as expected, this level is highly likely to be visible, so don't rush.
Tesla: This wave has already soared, I took profit halfway at $320 and sold, currently around $440 😭 I will buy Put options after January 5th...