Source: Guotai Junan International Research Department
Since mid-November, the U.S. stock market has experienced a significant “V-shaped” trend. Initially, following hawkish signals from Federal Reserve officials, expectations for a December rate cut cooled, and with the concentrated release of tech company earnings reports, high-valuation enterprises faced scrutiny, causing market sentiment to decline under pressure.
However, sentiment shifted dramatically in late November as economic data showed signs of weakness, quickly rekindling expectations of interest rate cuts. Additionally, the Trump administration unveiled a major national AI initiative, along with easing geopolitical risks, acting as multiple positive catalysts for a strong rebound in U.S. equities. The communication services and healthcare sectors emerged as the leading performers.
As the macro environment turned, policy-level positives became a key catalyst for the rise in U.S. stocks. On November 24, U.S. President Trump signed an executive order officially launching a national artificial intelligence strategy named the “Genesis Initiative.” The “Genesis Initiative” provided new momentum to the AI narrative, quickly interpreted by the market as a significant long-term fundamental boost for AI, leading to renewed investor interest in AI-related stocks.
Furthermore, Alphabet (Google) shares hit a record high, becoming the core force driving the broader market rebound, as Meta is reportedly in advanced negotiations with Google to procure its self-developed TPU chips on a large scale. If the deal materializes, Meta plans to rent TPU computing power via Google Cloud starting in 2026 and deploy Google TPUs in its own data centers by 2027, with a potential transaction size reaching billions of dollars. This development not only validates the sustained high demand for AI infrastructure but also highlights a new trend of ecosystem collaboration among tech giants.
Significant easing of geopolitical tensions also injected confidence into the market. On one hand, the Trump administration actively promoted peace talks between Russia and Ukraine. On the other hand, relations between China and the U.S. improved, with leaders exchanging phone calls to discuss issues including the Ukraine situation, fentanyl control, and agricultural trade. Against this backdrop, market risk aversion significantly receded, with the VIX volatility index retreating from elevated levels to near its long-term average, as capital flowed back into risk assets.
Looking ahead, we believe that the market’s focus will remain centered on the commercialization progress of AI and the Federal Reserve’s policy trajectory. Driven by policy support, technological iteration, and an improving macro environment, U.S. equities, particularly the technology sector, are poised to sustain their upward trend. Tech leaders with clear pathways to convert AI capabilities into tangible revenue streams and those demonstrating high capital expenditure efficiency warrant close attention. Additionally, benefiting from expectations of lower interest rates, the “Genesis Initiative” could spur a new wave of scientific computing demand, favoring companies in high-performance computing, quantum simulation, and bioinformatics.
Since mid-November, the U.S. stock market has experienced a significant “V-shaped” trend. Initially, following hawkish signals from Federal Reserve officials, expectations for a December rate cut cooled, and with the concentrated release of tech company earnings reports, high-valuation enterprises faced scrutiny, causing market sentiment to decline under pressure; however, sentiment shifted dramatically in late November as economic data showed signs of weakness, quickly rekindling expectations of interest rate cuts. Additionally, the Trump administration unveiled a major national AI initiative, along with easing geopolitical risks, acting as multiple positive catalysts for a strong rebound in U.S. equities. The communication services and healthcare sectors emerged as the leading performers.
Hawkish comments weighed on the market, pressuring tech valuations. In mid-November, several Fed officials delivered consecutive hawkish remarks, clearly stating that inflationary pressures were not yet fully under control, and a December rate cut was not guaranteed. Market expectations for a December rate cut rapidly retreated from previous highs to about 30%. Meanwhile, the so-called “Magnificent Seven” tech giants successively released Q3 earnings reports. While most companies reported solid revenue and profit figures, investors began to worry whether their elevated valuations had overly discounted future growth potential. Particularly in the AI space, market focus shifted from “technological narratives” to “monetization pathways.” A wave of new bond issuances by large tech firms to fund AI infrastructure investments raised questions about the sustainability of their capital expenditures and return timelines. Amid these concerns, the Nasdaq index declined for several consecutive days, reflecting a noticeable cooling of market risk appetite.
However, entering late November, several weak economic indicators reignited market expectations of a potential Fed policy pivot. U.S. retail sales rose 0.2% month-over-month in September, marking the fourth consecutive monthly gain but showing a significant slowdown and falling short of market expectations. Notably, auto sales declined for the first time in four months, signaling waning consumer momentum. Simultaneously, preliminary durable goods orders grew 0.5% month-over-month in September, far below the revised 3% increase from the prior period, reflecting cooling business investment appetite. More critically, ADP employment data revealed that the private sector averaged a weekly loss of 13,500 jobs over the past four weeks, deteriorating sharply from a weekly loss of 2,500 jobs the week before, indicating labor market weakness. Additionally, the Conference Board’s November consumer confidence index plunged 6.8 points to 88.7, marking the steepest drop in seven months, as consumer confidence in job prospects and the overall economy notably declined.
Weak economic data, coupled with dovish remarks from some Federal Reserve officials, have driven the market’s expectations for a Fed rate cut in December to climb rapidly above 80%. Notably, Kevin Hassett, former Chairman of the White House Council of Economic Advisers, is widely regarded as a leading candidate for the next Fed Chair. His dovish stance has further strengthened market expectations for an easing of monetary policy. The interest rate futures market has significantly widened its pricing of cumulative rate cuts expected by the first half of 2026, while the U.S. stock market has stabilized and rebounded.
Amid a shift in the macro environment, favorable policies have become a key catalyst for the rise in U.S. equities. On November 24, U.S. President Trump signed an executive order officially launching the national artificial intelligence (AI) strategy named the ‘Genesis Initiative.’ The plan aims to integrate federal government resources, particularly the supercomputing capabilities and research data assets under the Department of Energy, to build an AI foundational model platform tailored for scientific research, while also supporting the development of automated robotic laboratories. The order mandates coordination led by the Assistant to the President for Science and Technology, in collaboration with the Department of Energy, academia, and private enterprises.
This move not only demonstrates the United States’ strategic determination to maintain global leadership in the AI field but also substantively enhances collaboration channels between the public sector and private tech giants. The ‘Genesis Initiative’ provides fresh momentum for the AI narrative. The market quickly interpreted it as a significant long-term fundamental boost for AI, causing AI-related stocks to regain investor favor.
In addition, Alphabet (Google) shares hit a record high, becoming a core driving force behind the broader market rebound, as Meta is in advanced negotiations with Google to procure its self-developed Tensor Processing Unit (TPU) chips on a large scale. If the agreement materializes, Meta plans to lease TPU computing power through Google Cloud starting in 2026 and deploy Google TPUs in its own data centers by 2027, with the potential transaction size reaching several billion dollars. This move not only validates the sustained high demand for AI infrastructure but also highlights a new trend of ecosystem cooperation among tech giants.
Beyond macroeconomic and industry factors, a notable easing of geopolitical tensions has also bolstered market confidence. On one hand, the Trump administration is actively promoting peace talks between Russia and Ukraine. Its envoy, Steve Witkoff, has traveled to Moscow to consult with senior Russian officials on a revised peace proposal. While the Kremlin emphasized that “reaching an agreement will take time,” Russian officials welcomed parts of the U.S. proposal and acknowledged that negotiations are proceeding “seriously,” sending a positive signal. If a ceasefire achieves substantial progress, it would significantly reduce disruptions to global supply chains and further boost market risk appetite.
On the other hand, U.S.-China relations have improved. On November 24, the leaders of the U.S. and China held a phone conversation, exchanging views on issues such as the Ukraine conflict, fentanyl control, and agricultural trade. Trump stated on social media that “U.S.-China relations are extremely strong” and revealed that the two leaders will meet in Beijing in April 2026. Both sides are currently implementing the consensus reached during the October meeting in Busan: the U.S. has agreed to reduce tariffs on certain Chinese goods, while China has suspended new export controls on rare earths. These measures have effectively eased trade friction tensions, providing support for global supply chain stability and multinational corporate earnings expectations. Against this backdrop, market risk aversion has significantly receded, with the VIX volatility index falling from elevated levels to near its long-term average, prompting capital to flow back into risk assets.
Overall, the recent ‘V-shaped’ rebound in U.S. equities is the result of multiple favorable factors converging: a certain level of support for U.S. equity fundamentals amid expanding capital expenditures, weak economic data fueling expectations of rate cuts, a national AI strategy boosting industry confidence, and easing geopolitical risks improving sentiment in the U.S. equity market.
Looking ahead, we believe that market dynamics will continue to revolve around the commercialization of AI and the Federal Reserve’s policy trajectory. Driven by policy support, technological iteration, and improvements in the macro environment, U.S. equities, particularly the technology sector, are likely to sustain their upward trend. Companies with clear pathways to convert AI capabilities into tangible revenue and high capital expenditure efficiency deserve close attention. Additionally, benefiting from expectations of lower interest rates, the ‘Genesis Initiative’ could spur a new generation of scientific computing demand, benefiting companies in areas such as high-performance computing, quantum simulation, and bioinformatics.
Editor/Stephen
