Upside Down

Wall Street investors had plenty to be thankful for this Thanksgiving. A shortened trading week wrapped up with all three major indices green, marking their best week since June. The standout performer was Intel ($INTC), which rallied 10% on Friday on rumours that it could become a foundry supplier for Apple ($AAPL) in 2027.

Anyone who logged off early on the eve of Thanksgiving might have caught Netflix ($NFLX) servers crashing after the widely anticipated final season of Stranger Things went live. Even with a 30% increase in bandwidth, the hype overwhelmed the system.

If there’s one lesson we can all take away from this year, it's to never underestimate hype. It’s often what kept the market moving higher and inverted narratives...not unlike the parallel dimension in Hawkins called the ‘Upside Down.’

We’re already in an alternate universe when it comes to commodities: the ‘Devil’s metal’ aka silver is outshining gold. It’s up 71% YTD versus gold’s 51%, and it hit a record US$58 this week after a CME outage jolted already-thin holiday liquidity. The iShares Silver Trust ($SLV) added 324 tonnes this week, marking the largest inflow since late July.

And while the Bank of Japan did a 180 on its negative interest rate policy in 2024, the knock on effects are still playing out today. Japan’s 10Y government bond yield surged to 1.84% – the highest level since April 2008.

Why is that relevant for global risk assets? Because Japanese investors have long funded high-yield assets abroad using cheap yen borrowing in what’s known as the yen carry trade. But higher yields narrow these spreads, prompting capital repatriation and yen appreciation, which could trigger sharp selloffs in assets like U.S. equities.

It explains why U.S. indexes started the week in red, following around US$1B in leveraged crypto positions being liquidated. Crypto-linked stocks Robinhood ($HOOD) and Coinbase ($COIN) lost ground, while the world’s largest Bitcoin holder Strategy ($MSTR) officially flipped from trading at a premium to a discount – now roughly 78% below the value of its Bitcoin treasury.

December has historically been kind to markets. Investors are still expecting the usual year-end rally and are almost certainly pricing in a Fed rate cut. But what happens this time?

One thing's for sure: even if we dip into the Upside Down, this month will have plenty of red and green.

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.