This past week as a successful test of "resolve of bulls." Fri Dec Core PCE likely benign = good Array ( [cookie] => 868161-b37f34-8d3e83-20e1cf-e3d2f8 [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 0 [reason] => Usage under limits [method] => ) 1 and can accesss 1

VIDEO: While the S&P 500 is down slightly for the week, we believe this is a successful positive test of “resolve of bulls” given there are multiple excuses for a large sell-off including DeepSeek and tariff wars and AAPL miss

Please click below to view our Macro Minute (duration: 5:01).

The S&P 500 is down modestly this past week (-0.77%) which is a pretty solid outcome given the panic selling seen Monday post-DeepSeek R1 release. We view this week’s turbulence as a further test of the “resolve of bulls” and one that shows equity markets remain fairly resilient.

• Why was this week a test? Consider this:
  – Week of 1/27/25: successful test “resolve of bulls”
  – DeepSeek R1 sinks AI-related stocks
  – Jan FOMC shows Fed “dovish” vs Dec FOMC
  – 4Q24 Earnings strong: META 0.37%  TSLA 1.35%  = Good, MSFT 0.17%  = eh
  – This Friday Dec Core PCE likely to show inflation tracking towards 2%, we believe
• Overall, there were several opportunities for stocks to see extended weakness, but instead, equities managed to climb higher after that fierce sell-off Monday. In fact, near the close Thursday, headlines crossed that President Trump would follow through on tariffs for Mexico and Canada on February 1.
• While equities finished a bit softer after those headlines, the VIX and yields both moved lower. And this is showing markets are more measured in their reaction to the tariff news. Thus, while there is some technical damage that needs to be repaired (per Mark Newton), particularly with large-cap technology, we see this week’s price recovery as constructive for stocks.
• On Friday, the BEA will release December Core PCE (personal consumption expenditures) which is the Fed’s preferred measure of inflation.
  – Street consensus for Core is +0.18%
  – this would be continuing a string of tame inflation measures
  – similar to the comments made by Fed Chair Powell at the Jan FOMC
• This would reinforce the relatively dovish message from the Fed seen on the Wed press conference post-FOMC. Perhaps the best evidence for this is the drop in market probabilities of a rate hike in 2025:
  – per Polymarket
  – pre-FOMC, odds of a rate hike in 2025 as high as 29%
  – post-FOMC press conference, odds dropped to 14%
• To us, those odds are still too high. We think the probability of a hike is 0% in 2025. But the 14% reflects the “hawkish” tilt of financial markets — that many still expect inflation to make a resurgence. This is in contrast to our view that inflation is set to “fall like a rock” (see prior notes on this).
• As for 4Q24 EPS from MAG7 (FAANG), 3 of 5 had good results:
  Regarding earnings, two things are our focus:
  – AI Update from Mag7/FAANG
  – Wed (close)
• Regarding earnings, the following companies are our focus:
  – TSLA 1.35%  –> good
  – META 0.37%  –> good
  – MSFT 0.17%  –> eh
  – Thu (close)
  – AAPL -1.57%  –> good
  – overall, good enough in our view

• Finally, we are watching the January 31 close for S&P 500 (Friday) and the key is a positive close for the month. This is the January barometer “as January goes, so goes the year”:
  – and The January barometer is as follows:
  – If January positive:
  – Median FY +19%, 89% win-ratio
  – If January negative:
  – Median FY +0%, 50% win-ratio
• The Dec 31 closing level was 5,881.31, so closing above that is key. The S&P 500 closed at 6,071.17 on Thursday. So there is 200 points of cushion, for now.
• If we get that positive close, this is a 6th reason 2025 tracking better than expected.
• There are six reasons (if Jan 31 close positive) that show 2025 tracking better than our base case:
  – Barometer “first 5 days” positive = 82% win-ratio
  – Sentiment capitulation on Dec to Jan chop = good
  – Inflation tracking “softer” than consensus view
  – Fears of “day 1 tariffs” overblown = USD weaker
  – Cyclicals leading YTD = risk-on signal
  – January barometer “positive” = 89% win-ratio

Bottom line, 2025 is tracking better than our base case. We remain constructive and now see 2025 as less turbulent than we expected. The top sector ideas remain:

• Bitcoin
• Small-caps
• Financials
• Industrials
• Technology

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44 SMID Granny Shot Ideas: We performed our quarterly rebalance on 11/25. Full stock list here -> Click here

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Key incoming data February:

• 2/3 9:45 AM ET: Jan F S&P Global Manufacturing PMI
• 2/3 10:00 AM ET: Jan ISM Manufacturing PMI
• 2/4 10:00 AM ET: Dec JOLTS Job Openings
• 2/4 10:00 AM ET: Dec F Durable Goods Orders
• 2/5 8:30 AM ET: Dec Trade Balance
• 2/5 9:45 AM ET: Jan F S&P Global Services PMI
• 2/5 10:00 AM ET: Jan ISM Services PMI
• 2/6 8:30 AM ET: 4Q P Non-Farm Productivity
• 2/6 8:30 AM ET: 4Q P Unit Labor Costs
• 2/7 8:30 AM ET: Jan Non-Farm Payrolls
• 2/7 9:00 AM ET: Dec F Manheim Used Vehicle index
• 2/7 10:00 AM ET: Feb P U. Mich. Sentiment and Inflation Expectation
• 2/10 11:00 AM ET: Jan NY Fed 1yr Inf Exp
• 2/11 6:00 AM ET: Jan Small Business Optimism Survey
• 2/12 8:30 AM ET: Jan CPI
• 2/13 8:30 AM ET: Jan PPI
• 2/14 8:30 AM ET: Jan Retail Sales Data
• 2/18 8:30 AM ET: Feb Empire Manufacturing Survey
• 2/18 10:00 AM ET: Feb NAHB Housing Market Index
• 2/18 4:00 PM ET: Dec Net TIC Flows
• 2/19 9:00 AM ET: Jan M Manheim Used Vehicle index
• 2/19 2:00 PM ET: Jan FOMC Meeting Minutes
• 2/20 8:30 AM ET: Feb Philly Fed Business Outlook
• 2/21 9:45 AM ET: Feb P S&P Global Manufacturing PMI
• 2/21 9:45 AM ET: Feb P S&P Global Services PMI
• 2/21 10:00 AM ET: Feb F U. Mich. Sentiment and Inflation Expectation
• 2/21 10:00 AM ET: Jan Existing Home Sales
• 2/24 8:30 AM ET: Jan Chicago Fed Nat Activity Index
• 2/24 10:30 AM ET: Feb Dallas Fed Manuf. Activity Survey
• 2/25 9:00 AM ET: Dec S&P CoreLogic CS home price
• 2/25 10:00 AM ET: Feb Conference Board Consumer Confidence
• 2/26 10:00 AM ET: Jan New Home Sales
• 2/27 8:30 AM ET: 4Q S GDP
• 2/27 10:00 AM ET: Jan P Durable Goods Orders
• 2/28 8:30 AM ET: Jan PCE Deflator

Key incoming data January:

• 1/2 9:45 AM ET: Dec F S&P Global Manufacturing PMI Tame
• 1/3 10:00 AM ET: Dec ISM Manufacturing PMI Tame
• 1/6 9:45 AM ET: Dec F S&P Global Services PMI Tame
• 1/6 10:00 AM ET: Nov F Durable Goods Orders Tame
• 1/7 8:30 AM ET: Nov Trade Balance Tame
• 1/7 10:00 AM ET: Dec ISM Services PMI Tame
• 1/7 10:00 AM ET: Nov JOLTS Job Openings Tame
• 1/8 9:00 AM ET: Dec F Manheim Used vehicle index Tame
• 1/8 2:00 PM ET: Dec FOMC Meeting Minutes Tame
• 1/10 8:30 AM ET: Dec Non-Farm Payrolls Hot
• 1/10 10:00 AM ET: Jan P U. Mich. Sentiment and Inflation Expectation Hot
• 1/13 11:00 AM ET: Dec NY Fed 1yr Inf Exp Tame
• 1/14 6:00 AM ET: Dec Small Business Optimism Survey Tame
• 1/14 8:30 AM ET: Dec PPI Tame
• 1/15 8:30 AM ET: Dec CPI Tame
• 1/15 8:30 AM ET: Jan Empire Manufacturing Survey Tame
• 1/15 2:00 PM ET: Jan Fed Releases Beige Book Tame
• 1/16 8:30 AM ET: Dec Retail Sales Data Tame
• 1/16 8:30 AM ET: Jan Philly Fed Business Outlook Mixed
• 1/16 10:00 AM ET: Jan NAHB Housing Market Index Tame
• 1/17 9:00 AM ET: Jan M Manheim Used vehicle index Tame
• 1/17 4:00 PM ET: Nov Net TIC Flows Tame
• 1/24 9:45 AM ET: Jan P S&P Global Manufacturing PMI Tame
• 1/24 9:45 AM ET: Jan P S&P Global Services PMI Tame
• 1/24 10:00 AM ET: Jan F U. Mich. Sentiment and Inflation Expectation Hot
• 1/24 10:00 AM ET: Dec Existing Home Sales Tame
• 1/27 8:30 AM ET: Dec Chicago Fed Nat Activity Index Tame
• 1/27 10:00 AM ET: Dec New Home Sales Tame
• 1/27 10:30 AM ET: Jan Dallas Fed Manuf. Activity Survey Tame
• 1/28 9:00 AM ET: Nov S&P CoreLogic CS home price Tame
• 1/28 10:00 AM ET: Jan Conference Board Consumer Confidence Tame
• 1/28 10:00 AM ET: Dec P Durable Goods Orders Tame
• 1/29 2:00 PM ET: Jan FOMC Decision Tame
• 1/30 8:30 AM ET: 4Q A 2024 GDP Tame
• 1/31 8:30 AM ET: Dec PCE Deflator
• 1/31 8:30 AM ET: 4Q Employment Cost Index

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: