The Fed Put is ‘Alive And Well’ Array ( [cookie] => 72ef2d-cdba1a-6f30dd-2a839b-5e4564 [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
Our Views
- Equity markets continue to grapple with persistent uncertainties, but there are still several constructive forces in play.
- One area of particular focus is the potential for equities to rally despite the looming tariff announcement, echoing patterns seen in past cycles including Trump 1.0.
- Historically, tariff-related drawdowns have not been long-lasting and have presented buying opportunities. In 2018, markets were rattled by Trump’s initial tariff threats at Davos, leading to a 12% decline in the S&P 500 over 10 days.
- This was followed by another 9% pullback after the formal tariff announcement in March.
- However, by September, the S&P 500 had not only fully recovered but was up 9% year-to-date.
- Markets are growing closer to tradable lows in this orderly and concentrated decline. I continue to view this selloff as a cyclical correction within an ongoing secular bull market that should resume its upward ascent after bottoming in March.
- At present, trends are down, and it will take time to be able to form attractive setups and achieve some base-building following this recent damage.
- It’s expected that lows to this selloff could be achieved within the next two weeks from a timing perspective, and prices are nearing possible support.
- At present, it will be helpful to watch for evidence of downtrend lines being broken, which might give some optimism from a structural perspective of a bottom that is currently lacking. Overall, we’re growing closer.
- While some of the risks prompting our cautious stance in early February have been partially mitigated, most still persist—with the ongoing trade war being most pertinent.
- Thus, we believe it’s prudent to remain patient. However, reading between the lines, there is a non-zero possibility that next week, we will receive material information regarding potential “budget-neutral” methods the US government could employ to acquire BTC.
- Given the renewed optimism trickling back into the market, we figured it would once again be appropriate to review our assessment of ongoing risks to prices and reevaluate the near-term prospects of a revisit to all-time highs.
- The FOMC meeting featured Federal Reserve Chair Jerome Powell choosing his words carefully and expressing similar sentiments with senior Trump administration officials.
- Nevertheless, the issue of tariffs will likely create headline risk, at least in the near term.
- While the federal budget for this fiscal year has largely been decided, both houses of Congress will need to complete some final steps next week to implement the required budgetary approval for Trump’s agenda.
Wall Street Debrief — Weekly Roundup
Key Takeaways
- The S&P 500 added 0.5% this week to close at 5,667.56 points, while the Nasdaq Composite gained 0.2% to 17,784.05, while Bitcoin was at USD 83,986 on Friday afternoon.
- Fundstrat Head of Research Tom Lee interprets the most recent Fed meeting as dovish, citing that the Fed put is “alive and well.”
- Head of Technical Strategy Mark Newton sees signs of capitulation in the market.
“War is the continuation of politics by other means.” — Karl von Clausewitz
Good evening,
Market declines took a breather this week, after the Federal Reserve extended its wait-and-see stance on interest rates.
The S&P 500 rose 0.5% this week, snapping a four-week losing streak. The gains were led by defensive areas of the market including energy, financials, and healthcare. The Nasdaq Composite edged 0.2% higher, also breaking free from four straight weeks of losses.
The broad-based index is off roughly 7.3% from its all-time highs, while the tech-focused index is down about 11% from records. Both indexes remain in correction territory.
“I mean there’s been weakness, but the broader market has held up,” said Fundstrat Head of Technical Strategy Mark Newton. “You don’t see the kind of capitulation readings that everybody’s looking for.”
The biggest focus of this week was the Federal Reserve keeping its benchmark federal funds rate steady at around 4.3%. The latest dot plot showed that 11 of 19 policymakers expect the central bank to cut rates at least twice this year. In December, 15 officials had penciled in at least two cuts this year. The impact from tariffs led the central bank to increase its inflation forecast to 2.7% from 2.5%.
One of the more positive developments from the meeting, according to Head of Research Tom Lee, was that Fed Chair Jerome Powell acknowledged “financial conditions” are material to the policy outlook. Lee highlighted that Powell said, “financial conditions are the main channel to the real economy through which our policy has effects.”
In Lee's view, this was “a reminder that the Fed put is alive and well.” Our Chart of the Week has more details:
He also mentioned that while hard data has maintained its strength, “soft data, such as surveys, has weakened.” He liked that Powell said hard data is “something they are watching, and they don’t want to dismiss it.”
Regarding inflation, which is arguably on top of everyone’s minds, Lee was reassured to hear that even Powell signaled that tariff-led inflation could be transitory. He said, “Powell indicated that if tariff-driven inflation is short-lived, the Fed could look through it and refrain from tightening.”
Regarding the stock market, Head of Technical Strategy Mark Newton said during the weekly huddle that, “if you look at QQQ for example, you haven’t really seen significant damage. We’ve had severe short-term corrections, but the intermediate term really has not shown any real deterioration, and QQQ is at a decent area where it likely should bottom.”
Newton said there’s two signs of capitulation, which could drive a low. The equity put-to-call ratio is near 1, which is considered to be a contrarian indicator. In addition, the fear gauge – the VIX – is inverted.
He likes that market breadth has improved, referring to the fact that advance-decline readings have recently been above 90%, and 20-day and 50-day moving averages have held up, too.
“We’ve seen a pretty good thrust and breadth off the lows, which helps suggest that a bottom is here,” Newton said.
Newton recommends defensive areas of the market such as utilities, healthcare, and precious metals.
“I’m encouraged by what I’ve seen in the last week, and for me, that’s a good sign. It still feels bad, and I get it, but we’re going to get past this and be able to rally,” he said.
Elsewhere
The housing market showed signs of perking up this week. Sales of existing homes rose in February, driven by an increase in shopping activity and in the number of homes for sale. U.S. existing-home sales rose 4.2% in February from the prior month to a seasonally adjusted annual rate of 4.26 million, the National Association of Realtors said Thursday, coming in better than expectations of a monthly decrease of 3.2%.
The much-awaited Kennedy files were a snoozefest. As promised, President Donald Trump released some 64,000 pages, but instead of shedding light on if Kennedy was assassinated by a lone gunman in Dallas, it revealed details about Cold War spycraft. Of course, its contents are still being reviewed, so there may be bombshells in the coming weeks. Historians generally consider that highly unlikely.
Two stuck NASA astronauts—Suni Williams and Butch Wilmore—have finally returned to Earth. Their flight time was supposed to be a mere week, but ended up becoming a nine-month long stay due to problems with the Boeing vessel that brought them to the space station . The bizarre situation invited remarks from even the president. They were able to make their way back thanks to a SpaceX Dragon capsule. Wilmore and Williams will now have to spend 45 days re-acclimatizing to Earth’s gravity, NPR reports.
Nvidia’s had a tough start to the year, and that means investors are glued to their seats to hear what chief executive Jensen Huang has to say. Nvidia this week unveiled plans for more powerful chips, an artificial intelligence model for humanoid robots, and “personal AI supercomputers.” In a CNBC interview later in the week, Huang discussed the impact of Chinese startup DeepSeek’s new AI model, saying it will actually require more computation than many in the industry thought.
Gaza has once again been plunged into war. Israeli Prime Minister Benjamin Netanyahu said the country had “resumed combat in full force.” The IDF says the reason behind it is to “expand the security zone and create a partial buffer between northern and southern Gaza,” including the Netzarim Corridor, which splits Gaza in half. Many in Israel support a negotiated ceasefire, according to a Wall Street Journal survey.
And finally: New Yorkers’ treasured (sarcasm) MTA Metrocards will soon be celebrating their final moments. Introduced in 1993, the MTA card was a point of flex for New Yorkers who could swipe their card correctly in one try compared to tourists who fumbled through it. Subway and bus riders will use the authority’s new tap and go system, allowing customers to pay with digital wallets on their smartphones or their NFC-enabled credit cards.
Important Events
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Stock List Performance
Small Cap Stock List Performance
| Strategy | YTD | YTD vs Russell 2500 | Inception vs Russell 2500 | |
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SMID Granny Shots
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-10.64%
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-4.31%
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+13.57%
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