Market Pulse With Dan Sheehan

Good morning investors,

Markets demonstrate meaningful momentum as Wall Street welcomes President-elect Trump's selection of Scott Bessent as Treasury Secretary. His anticipated framework of gradual tariff implementation and fiscal discipline creates compelling implications across sectors, while technology evolution continues accelerating beyond initial AI beneficiaries toward broader software and quantum opportunities.

Weekly Market Review

Major indices posted strong gains last week with the Dow advancing 2% to reach record levels while S&P 500 and Nasdaq each gained 1.7%. The Russell 2000's impressive 4.5% surge suggests broadening market strength beyond large-cap leadership. This morning, futures indicate continued enthusiasm with Dow futures rising 310 points (0.7%), S&P 500 gaining 0.5%, and Nasdaq advancing 0.5%.

Policy Evolution

Bessent's nomination creates meaningful framework implications given his macro investing background and balanced policy approach. His emphasis on gradual tariff implementation while supporting growth initiatives suggests sophisticated economic management ahead. Markets particularly appreciate his focus on maintaining inflation below 2% amid complex policy shifts.

Technology Framework

Magnificent Seven Evolution

Google's compelling valuation among mega-cap technology leaders warrants particular attention. Trading at 19.4x forward earnings versus peers' 30-35x multiples, the company's AI leadership potential appears underappreciated. With $57B projected 2025 capital expenditure supporting continued innovation and $164B estimated EBITDA, Google's risk/reward appears especially attractive at current levels.

Software Sector Transformation

The AI revolution is entering a crucial new phase as focus shifts from infrastructure providers to enterprise software adoption. While Nvidia remains the crucial foundation, the next wave of value creation centers on companies enabling practical AI implementation. This evolution creates compelling opportunities among third and fourth derivative beneficiaries as enterprise consumption accelerates into 2025.

Snowflake's recent outperformance ($942M revenue vs expectations) demonstrates this transition, with management highlighting exploding AI use cases. The company's sweet spot at the intersection of data management and AI positions it ideally for the next 12-18 months of enterprise adoption. Similarly, Elastic's strong results and 25.1% weekly gain validate expanding platform demand for AI-enabled search and analytics capabilities.

This framework extends to established enterprise leaders like Salesforce incorporating AI capabilities, while Palantir's recent momentum reflects accelerating commercial adoption. The key distinction in this phase centers on companies enabling practical AI implementation rather than pure infrastructure plays.

Quantum Computing Evolution

I remain bullish on Rigetti Computing due to its potential to transform quantum computing through innovative technology and strategic milestones. The company is on track to deliver key advancements, starting with the launch of its 84-qubit Ankaa 3 system by the end of 2024. This milestone could solidify Rigetti’s progress in achieving scalable, high-fidelity quantum systems—a critical factor for commercial adoption. Beyond that, the roadmap includes modular architecture validation in 2025 and a 100+ qubit system by the end of that year, both of which could position Rigetti to compete at a higher level. These developments, combined with ongoing collaborations with NVIDIA, Fermilab, and the UK’s National Quantum Computing Centre, highlight the company’s growing influence within the sector. Rigetti also stands to benefit from increased government funding, with potential opportunities from DARPA and expanded U.S. quantum research initiatives.

While Rigetti's financial challenges, including revenue instability and liquidity concerns, are significant, its progress on technical innovation and partnerships justifies my long-term optimism. The ability to successfully tile smaller quantum chips without degrading performance is a pivotal achievement, enabling Rigetti to bypass limitations in traditional monolithic chip designs. With plans to address real-world problems at scale through its future 336-qubit Lyra system, Rigetti’s vision aligns with the growing demand for quantum solutions in AI, finance, and defense. Although risks such as technological hurdles, competition from larger players like IBM, and potential stock dilution remain, I believe the speculative upside outweighs these concerns. Rigetti’s upcoming catalysts and its position in a rapidly advancing industry make it an intriguing, high-risk, high-reward opportunity for those with a long-term perspective.

Economic Calendar

Today's releases warrant attention:

This week's shortened calendar includes crucial inflation data:

Markets close Thursday for Thanksgiving and early Friday.

Corporate Calendar

Key earnings this week:

Strategic Outlook

Current market structure suggests expanding opportunities beyond initial AI beneficiaries. While semiconductor leadership remains crucial, software sector evolution and quantum computing development create sophisticated positioning requirements. The combination of compelling mega-cap valuations, accelerating enterprise adoption, and emerging technology platforms suggests sustained transformation potential.

The distinction between near-term trading dynamics and long-term framework development grows increasingly important. Careful security selection within this expanding opportunity set remains essential for long-term success.

As always, feel free to reach out with questions about positioning for these evolving market dynamics.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.