Bulls Rage On Array ( [cookie] => ab3261-84402d-d0d385-a1b92f-fe8844 [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 32125 [reason] => Usage under limits [method] => ) 1 and can accesss 1
Our Views
- Equities managed to break the downtrend in place since mid-December, first flagged by Head of Technical Strategy Mark Newton.
- This upside breakout is taking place even as equities have had to absorb some recent “bad headlines” and this is my key observation so far in 2025: The stock market has had many opportunities to sell-off, but it has been resilient.
- Capitulatory level sentiment readings confirm this upside potential.
- Keep in mind the next FOMC rate decision is not until March 19, so while markets will likely be buffeted by inflation-related concerns, the Fed will not be required to calibrate monetary policy for another six weeks. This arguably removes volatility and a reason stocks can gain traction from here.
- In our view, investors are “buying the dip” as 2025 is tracking better than expected.
- Short-term trends are turning bullish, as SPX and QQQ have finally broken out of their respective triangle consolidation patterns, which were established roughly three months ago.
- The U.S. dollar has also broken down, while Treasury yields could trade largely range-bound in the near term as the correlation between Treasuries and Equities is partially unwound.
- Equal-weighted S&P 500, DJ Transportation Avg., DJIA, and Russell 2000 have not yet achieved the breakout seen in SPX and QQQ, and this likely takes some time.
- However, sentiment regarding tariffs and their possible negative implications for the U.S. stock market has gotten quite bearish for both the equity and bond markets in recent weeks, which arguably is a positive.
- While seeing a broad-based rally across equal-weighed indices like RSP would help in having more conviction on the longevity of this rally, at present, it’s arguably right to be long, expecting SPX to push up to 6,300.
- With lingering trade-war talks and robust economic data dissuading a dovish Fed pivot, we think the potential for downside volatility remains elevated.
- While regulatory developments and institutional adoption continue to bolster the medium- to long-term outlook, no immediate “good news” seems likely.
- Nevertheless, we still expect crypto to outperform this year.
- Until we see flows return to crypto, raising cash/trimming altcoin positions appears prudent (BTC dominance higher).
- Congressional Republicans continued their work on a strategy to win legislative approval for President Trump’s multifaceted agenda.
- A massive budget resolution, which includes cuts to Medicaid and many social programs while raising the debt ceiling, advanced toward a full House vote.
- Senate Republicans are meanwhile working on a separate legislative strategy that involves splitting the Trump agenda into two bills.
Wall Street Debrief — Weekly Roundup
Key Takeaways
- The S&P 500 rose 1.5% this week, while bitcoin traded at $97,307 Friday afternoon.
- Fundstrat Head of Research Tom Lee sees stocks remaining resilient despite much negative news that could have triggered extended sell-offs.
- Head of Technical Strategy Mark Newton agrees with Lee's view, adding that stocks have been largely immune.
"Believe you can and you’re halfway there.” — Theodore Roosevelt
Good evening,
Stocks miraculously finished the week higher, reiterating the belief that the bull market isn’t going anywhere. The S&P 500 added 1.5% this week, despite a hotter-than-expected inflation report and worries about reciprocal tariffs. The broad-based index is up 4% this year.
“The stock market has had many opportunities to sell-off, but it has been resilient,” Fundstrat Head of Research Tom Lee said.
On Wednesday, the Bureau of Labor Statistics reported that consumer prices rose 0.5% from a month ago on a seasonally adjusted basis. That marked the largest increase in the reading since August 2023. On an annual basis, headline CPI rose above 3% for the first time since June.
And just like that, investors were back to worrying about the progress on inflation stalling. The S&P 500 fell 0.3% on Wednesday. Bond yields jumped above 4.6%.
Lee, however, isn’t panicked by the jittery inflationary report, pointing out that Federal Reserve Chair Jerome Powell acknowledged the CPI print during his Congressional testimony, but did not suggest that the progress on inflation had stalled. “This implies the Fed still sees inflation cooling over time,” Lee added.
After the inflation report, investors now anticipate one less rate cut for 2025. Instead, the implied odds of a Fed hike rose to 20%. Although that's not a strong probability, Lee believes “that’s still too high.”
Core prices—which don’t include the volatile food and energy components—added 0.45% from December, the largest increase in nearly two years. Core inflation was up 3.3% from a year ago.
However, it’s arguably not nearly as bad upon a closer look. Lee said that’s because core CPI’s top five contributors—used cards and trucks, leased cars and trucks, auto insurance, shelter and motor vehicle fees—make up 0.37% of the 0.45% increase. In his view, inflation in those categories is not accelerating, nor is their rise in January sustainable. Our Chart of the Week has more details:
The market calmed down some Thursday after the producer-price index painted a better picture. That report could imply a softer personal-consumption expenditures report—the Fed’s preferred inflation gauge—as the components that feed into it from PPI were soft in January.
Yields fell slightly after the report. As Lee put it, stocks “essentially dismissed the hot CPI,” as they recovered from losses.
Many investors had worried about possible effects of a broad range of tariffs implemented by President Trump. But Lee believes they won’t go into effect for several months, which could bode well for the market. Head of Technical Strategy Mark Newton agrees. He said, “the key takeaway is it’s always very difficult to assume that any sort of economic data or macro events or tariff-related news is going to cause an above-average move in the stock market.”
Lee and Newton are both paying close attention to the American Association of Individual Investors’ sentiment surveys. The percentage of net bulls fell to nearly 20% this week, the worst reading since November 2023. Both consider this to be a contrarian indication, meaning they expect strong returns ahead.
But for now, the market continues to be choppy.
“It’s a big chop-fest, where we haven’t seen a lot of satisfying movement,” Newton said.
Writer’s note: We won’t be publishing First to Market on Monday, Feb. 17, in observance of Presidents Day.
Elsewhere
Robert F. Kennedy Jr., President Donald Trump’s controversial pick for the national health secretary role, was confirmed on Thursday without a single Democratic vote. He was sworn in hours later. He will lead the agency and its 13 operating divisions, which include the Food and Drug Administration, the National Institutes of Health, and the Centers for Disease Control and Prevention. A known vaccine skeptic, Kennedy has vowed to “follow the science” in pursuing research on vaccine safety. In an apparent response, Louisiana state’s top health official said Thursday the state will no longer promote mass vaccination.
More drama ensued in tech this week. OpenAI Chief Executive Sam Altman rejected a $97.4 billion takeover bid led by rival Elon Musk, who helped co-found the ChatGPT maker with Altman. Musk wants Altman to drop plans to convert the non profit into a for-profit company. OpenAI is controlled by a nonprofit board bound to its original mission of safely building better-than-human AI for public benefit.
Papa John’s has new elite fans. An investment fund backed by a member of Qatar’s royal family is looking to take over the pizza chain. Irth Capital Management, co-founded by Sheikh Mohamed “Moe” al Thani, a member of the royal Qatari family, has spoken with advisors about mounting a take-private bid for $1.4 billion for Papa Johns, according to a Semafor article citing people familiar with the matter. Last year, the firm disclosed a 4.99% stake in the company.
Indian Prime Minister Narendra Modi met with U.S. President Trump this week, as the developing country looks to renew its partnership with the largest economy in the world. The Indian leader said he was open to reducing tariffs on U.S. goods, repatriating undocumented Indian nationals, and buying military fighter jets from America. However, one remaining sore point between the two leaders is India’s reputation as one of the largest sources of undocumented immigrants to the U.S. Modi also met with Elon Musk, whose Starlink satellite internet business is looking to expand in India.
Another government agency was dismantled this week. This time it was the Consumer Financial Protection Bureau, which Congress established to monitor credit card companies, mortgage providers, debt collectors, and other segments of the consumer finance industry. Dozens of workers were fired. Some believe that Elon Musk led efforts to shut down the agency that would otherwise have come to regulate his social-media platform, X, as he proceeds with his longtime plans to transform it into a Chinese-style "everything app" that offers digital payment functionality.
And finally: Hate your ex? In that case, name a rat, or a cockroach, or a feral cat that’s about to be neutered after them. Animal shelters and zoos around the country are encouraging former flames to raise money for a good cause and also have a little laugh this Valentine’s Day. The Minnesota Zoo’s campaign to name a bug after either a friend or a foe has attracted donors from across the world.
Important Events
FS Insight Media
Stock List Performance
| Strategy | YTD | YTD vs S&P 500 | Inception vs S&P 500 | |
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Upticks
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+1.56%
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-2.41%
|
+42.48%
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Small Cap Stock List Performance
| Strategy | YTD | YTD vs Russell 2500 | Inception vs Russell 2500 | |
|
SMID Granny Shots
|
+21.01%
|
+17.16%
|
+33.92%
|
