Inauguration marks start pro-biz regime. ISM expected to recover to 50 in 2025, reversing longest ever stretch below 50 (26 months) = higher EPS = higher stocks.

VIDEO: The inauguration of the 47th President marks a focus on a pro-biz environment, and this is a bigger deal than many realize.

Please click below to view our Macro Minute (duration: 4:45).

The inauguration of the 47th President of the U.S., we believe, marks the inflection point higher for business confidence. Today’s recovery of the S&P 500 to 6,040 (above the key technical level of 6,021), confirms the “buy the dip” regime is back — last week, we noted that we expected markets to bottom by mid-week (Wed), which indeed now proves to be the case.

• The turbulence in equities seen from Dec 6th to Jan 15th was a test of the “resolve of the bulls,” something we discussed multiple times. And that shakeout indeed led to a collapse of investor sentiment:
  – last week, AAII % bulls fell -15 points
  – we highlighted last week this is the largest drop since Nov 2023
  – and typically only seen at “capitulation lows”
• Thus, even though equities were essentially range-bound for a month, this caused investor sentiment to collapse. And another signal was the boldness of the inflation-hawks, proclaiming 6% yields were on the horizon.
• But the bigger point to make is that we believe CEO and business confidence will recover visibly in 2025. In fact, the ISM manufacturing, which has been below 50 for 26 months, could move above 50 in January:
  – since 1950, this is the longest stretch the ISM has been below 50
  – the second longest was April 1989 to May 1991, 25 months
• The prior longest instances below 50 are below:
  Period # of Months
  – Oct 22 – Present: 26 months
  – Apr 89 – May 91: 25
  -Jun 81 – Jan 83: 19
  -Jan 08 – Jul 09: 18
  – Jul 00 – Jan 02: 18
  – Feb 48 – Aug 49: 18
  – Apr 95 – Jul 96: 15
  – Feb 57 – May 58: 15
  – May 51 – Jul 52: 14
  – Jul 79 – Aug 80: 13
  – Dec 69 – Jan 71: 13
  – Feb 60 – Mar 61 : 13
  – Apr 53 – Apr 54: 12
• Stan Druckenmiller, on CNBC Squawk Box, on Monday said:
  “I’ve been doing this for 49 years, and we’re probably going from the most anti-business administration to the opposite…We do a lot of talking to CEOs and companies on the ground. And I’d say CEOs are somewhere between relieved and giddy. So we’re a believer in animal spirits.”
• This is a validation that the turning point in the ISM above 50 is near. And as we highlighted many times in the past, this leads cyclical EPS by 4 months. In other words, as the chart below highlights, S&P 500 EPS in 2025 probably sees accelerated earnings growth, from the cyclical groups:
  – Industrials
  – Financials
  – Discretionary
  – Technology
• Moreover, if we look at the 12 longest instances of ISM below 50, the S&P 500 has strong forward returns 3M and 6M after crossing above 50:
  – 3M median gain +6%, 92% win-ratio
  – 6M median gain +9%, 92% win-ratio
• This validates our base case for S&P 500 to rise towards 7,000 by mid-year. And this view remains intact.
• As for Bitcoin, this is the leading edge of risk-on and remains one of our favorite ideas. Polymarket shows markets assign 63% probability of the US creating a strategic reserve in 2025. This is up from 40% at the start of the year. And this would strengthen the case for Bitcoin to reach $250,000 in 2025.
• This week is light on macro. The key events are on Friday:
  – 1/20 Mon: Martin Luther King Jr. Day Holiday
  – 1/24 Fri 9:45 AM ET: Jan P S&P Global Manufacturing PMI
  – 1/24 Fri 9:45 AM ET: Jan P S&P Global Services PMI
  – 1/24 Fri 10:00 AM ET: Jan F U. Mich. 1yr Inf Exp
  – 1/24 Fri 10:00 AM ET: Dec Existing Home Sales    4.2me

Bottom line: Buy the dip is back

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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 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
• 1/24 9:45 AM ET: Jan P S&P Global Services PMI
• 1/24 10:00 AM ET: Jan F U. Mich. Sentiment and Inflation Expectation
• 1/24 10:00 AM ET: Dec Existing Home Sales
• 1/27 8:30 AM ET: Dec Chicago Fed Nat Activity Index
• 1/27 10:00 AM ET: Dec New Home Sales
• 1/27 10:30 AM ET: Jan Dallas Fed Manuf. Activity Survey
• 1/28 9:00 AM ET: Nov S&P CoreLogic CS home price
• 1/28 10:00 AM ET: Jan Conference Board Consumer Confidence
• 1/28 10:00 AM ET: Dec P Durable Goods Orders
• 1/29 2:00 PM ET: Jan FOMC Decision
• 1/30 8:30 AM ET: 4Q A 2024 GDP
• 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: