1. The US small business optimism index surged dramatically in November.

This didn't come as a surprise. The barometer is notoriously tied to politics, thanks to the strong link between Republican leadership, loose regulatory environments, and lower taxes, which drive small business morale.

And sentiment can have real dollar effects in markets.

In his 2025 equity outlook, Goldman Sachs' chief US equity strategist David Kostin expects the improved small business outlook to “lead to the broadening of the post-election stock market ."

2. This consensus view for the magacap gains to “broaden out” has not yet materialized.

On the contrary.

Strength in the market’s largest stocks has helped drive the market-cap indexes to record highs, but the broader market edged lower as investors worried about persistent inflation and the upward move in bond yields.

Technical analysts are also flagging a growing divergence in the equal-weighted version of these indexes. Below is the S&P 500 vs. its equal-weighted counterpart, which has fallen eight of the last ten days.

3. “We’ve had a big run-up but now interest rates are pushing up and people are taking profits.”

“Inflation numbers have come in a little hotter this week and the market is starting to price in less Fed interest rate cuts next year.”

The 10-year Treasury yield finished the week one-quarter percentage point higher at 4.398%. It was the largest weekly gain since October of 2023.

Looking ahead to next week, investors will turn their attention to the Federal Reserve’s interest-rate decision. A quarter-percentage point rate cut seems to be the consensus.

4. Broadcom jumped 25% on the back of a strong AI outlook and reached the $1 trillion market cap.

It adds to the already wild year-to-date performance of the 10 largest stocks in the U.S., nine of which are technology names.

5. The European equity outlook for 2025 isn’t too bad.

The Stoxx Europe 600 Index will end next year at 535 points, Bloomberg’s survey of 20 strategists showed, indicating gains of less than 3% from wednesday’s close.

For Frederic Dodard, head of asset allocation at State Street Global Advisors, European companies have healthy balance sheets and attractive valuations in their favor. That supports modest projections of share-price gains for next year. “However, the political uncertainty and the strong performance of US equities are not helping European equities to regain momentum, so we are constructively cautious on the region,” he said.

US “exceptionalism” is likely to persist, as Trump’s policies help extend the advantage Wall Street stocks hold against the rest of the world, said Barclays strategist Emmanuel Cau.

“But Europe’s year-to-date underperformance is the highest on record, and looks overdone versus fundamentals, while political change in Germany, potential progress on a deal in Ukraine and more stimulus in China could help at some point,” Cau said.

6. A quantum leap for Google?

Alphabet has seen its stock jump nearly 12% this week, since Google announced a new in-house chip called Willow designed to power quantum computing.

In a post on the X platform, Alphabet Chief Executive Officer Sundar Pichai described Willow as “an important step in our journey to build a useful quantum computer with practical applications in areas like drug discovery, fusion energy, battery design + more.”

But quantum computing is still a long way off from any commercial use. “The next challenge for the field is to demonstrate a first ‘useful, beyond-classical’ computation on today’s quantum chips that is relevant to a real-world application,” wrote Google’s Quantum AI head, Hartmut Neven, in a blog post on Monday.

That makes the $253 billion added to the company’s market capitalization this week look speculative at best. Nevertheless, Alphabet is still the only megacap to be trading below 20 times projected earnings for the next four quarters.

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