Jan FOMC and 4 Mag7 EPS reports likely support "buy the dip" post-DeepSeek AI panic. Watch the S&P 500 close on 1/31. Array ( [cookie] => 847994-1a3cfc-02171b-08a9c3-8d6874 [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: Wed is an important day to reinforce the “buy the dip” with 4 MAG7 set to report and Jan FOMC, which we expect to be marginally dovish.

Please click below to view our Macro Minute (duration: 5:17).

This past Monday, equity markets saw a full-blown panic on AI and Technology stocks following the release of the DeepSeek R1 AI product. The primary driver of the panic was the reported 97% lower cost to develop R1 and its ability to run on lower powered devices.

• The stock hit hardest was Nvidia NVDA 0.90%  which fell -17% Monday, its 9th largest ever single day percentage decline. Of those prior 8 larger declines, only 3 were outside of a US equity bear market/recession:
  – Aug 8, 2003 -19.7%
  – Aug 6, 2004 -35.2%
  – March 16, 2020 -18.5% <– pandemic
• 3 of 3 times (below), this single day panic was the bottom tick — meaning, NVDA posted its low for the day and the stock staged a massive recovery. In our Macro VIDEO on Monday, we highlighted why we believed this would be the 4th time this marked the low as well.

• We understand there are now new concerns for AI and the current model and thesis. Investors like visibility and moats, so R1 undermines this to an extent. And we understand there are lingering questions for markets on AI-related thesis stemming from DeepSeek:
  – Impact lower cost AI?
  – Demand for GPU?
  – Demand for AI apps?
  – AI spending plans?
  – American leadership?
  – What benefits from lower costs?
• But Wednesday, a lot of this will be addressed. This is a busy week for macro data and on Wednesday, we are watching earnings and FOMC:
  – Busy week for 4Q24 Earnings
  – 1/27 Mon 8:30 AM ET: Dec Chicago Fed Nat Activity Index    0.15 vs -0.06e
  – 1/27 Mon 10:00 AM ET: Dec New Home Sales    698k vs 672ke
  – 1/27 Mon 10:30 AM ET: Jan Dallas Fed Manuf. Activity Survey   14.1 vs 0.0e
  -1/28 Tue 9:00 AM ET: Nov S&P CS home price 20-City MoM   0.41% vs 0.30%e
  -1/28 Tue 10:00 AM ET: Jan Conference Board Consumer Confidence 104 vs 105e
  – 1/29 Wed 2:00 PM ET: Jan FOMC Decision    Hold
  – 1/30 Thu 8:30 AM ET: 4Q A 2024 GDP QoQ    2.7%e   
  – 1/31 Fri 8:30 AM ET: Dec Core PCE MoM    0.19%e
  – 1/31 Fri 8:30 AM ET: 4Q ECI QoQ    0.9%e
  – Friday 1/31 is last trading day of January

• Regarding earnings, the following companies are our focus: Regarding earnings, two things are our focus:
  – Tuesday (close) / Wed (am) Insurance EPS from Chubb CB -0.72% and Progressive PGR 0.08%
  – due to Hurricane Helene and wildfires in CA
  – as well as auto insurance rate rise cooling
  – AI Update from Mag7/FAANG
  – Wed (close) TSLA 0.02%  META 0.44%  MSFT -0.21%  
  – Thu (close) AAPL -0.50%  
• As for the FOMC, we think markets have become too “hawkish” post-Dec FOMC, best evidenced by the fact that the odds of a hike in 2025 still seem too high at 27% (below). Fed officials, in the FOMC minutes, discussed the fact that inflation and its drivers are tracking towards a 2% target as core goods, greedflation and even core services tracking what they expect. But it is the unknown impact of tariffs keeping Fed expectations towards higher than previously expected inflation.
• We think given the softer Dec CPI and the BLS report showing new tenant rent costs falling, the Fed is likely leaning more dovish post-Jan FOMC. And given there has not been “day 1 tariffs” as many warned. This would be positive for stocks. And a good reminder that the Fed “put” remains in play. That is, the Fed remains dovish.

• 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 6,607.70 on Tuesday. 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: We see 2025 tracking better than our base case.

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 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
• 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: