Market RecapThe second full day of trading following Monday’s inauguration didn’t seem to bring too many surprises, for investors at least. Trump’s announcement of the Stargate program injected new life into the AI strategy and with it, Cloud Computing, Digital Infrastructure, as well as what seems to be on track for another strong year, Nuclear Energy & Uranium. With this announcement, Technology (2.26%) and Communication Services (1.00%) names posted the only sector gains for the day. The hardest hit yesterday was Utilities (-2.16%), as one of the many executive orders signed on Monday was a very long titled one that effectively shuts down any further offshore wind energy development.Those two positive sectors were enough to push most broad market equity indexes higher with the Nasdaq Composite gaining 1.28%, the S&P 500 rising 0.61% and the Dow adding 0.30%. The Russell 2000 was the only broad index to falter, dropping 1.61%. To give you an idea of just how distorting mega-cap names can be to an index like the S&P 500, the top 3 contributors to the index’s performance yesterday were Nvidia (NVDA), Microsoft (MSFT), and Amazon (AMZN) but they show up in 12th, 15th, and 39th place in terms of absolute return. Further proof of this is that those top 3 names contributed to just over 110% of S&P 500 index returns yesterday.While technology-focused strategies fared well yesterday, the Tematica Select Model Suite also saw modest gains from EPS Diplomats, Luxury Buying Boom, Safety & Security, and Rebuilding America. Month-to-date results for the suite show Nuclear Energy & Uranium, EPS Diplomats, CHIPs Act, Luxury Buying Boom, and Rebuilding America as early first-quarter favorites.
Trump’s WEF Address, Earnings Season Continues, Jan Flash PMI Coming SoonFollowing the stock market chugging higher over the last three trading sessions, with the S&P 500 setting a new intra-day high yesterday, equity futures point to a mixed market open. We have no Fed speakers ahead of next week’s policy meeting and little in the way of fresh economic data until Friday’s Flash January PMI report from S&P Global (SPGI). This means the two forces that have been responsible for the market over the last few days will continue to dictate the market’s action. We’re referring to December quarter earnings and the unveiling of Trump policies and other actions.In that regard, Trump has started to talk more about tariffs, including those for Canada, Mexico, China, and now Russia. Those comments were ahead of Trump’s address to the World Economic Forum at 11 AM ET. During that address, we and other market watchers will be listening for indications and conditions for tariffs on goods imported into the US, the new administration’s stance on Russia-Ukraine, Israel-Palestine, and relations with the EU and China. How Trump walks the tightrope between his pledge to put America first while continuing to foster economic and geopolitical relations with its allies will be in focus.Our thinking is the response during the remainder of the WEF to Trump’s address is likely to be as important as the address itself. So too will be the comments from management teams that have yet to report their December quarter results. The odds of Trump injecting uncertainty into the geopolitical equation are high, after all the president is rather comfortable in the grey, but as we know from history the stock market is not.When we dissect tomorrow’s Flash January PMI report, which will give us a hint as to the speed of the US economy starting the new year, we’ll be focused on its insights for inflation, job creation, and new order strength. Should those findings show the economy remaining on vibrant footing, barring a dramatic drop in inflation, which is unlikely, it will give the Fed that much more of a reason to reiterate its cautious stance on further rate cuts. Our suspicion is that will reignite the public second-guessing of the Fed by Trump, adding another layer of uncertainty into the mix.More By This Author:Digesting Trump’s Early Actions, Earnings Season Comments
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