Is The Trump Rally Over?

DJIA 52-wk: +14.85% YTD: +2.22% Wkly: +3.69% 

S&P 500 52-wk: +23.90% YTD: +23.90% Wkly: +2.91% 

NASDAQ 52-wk: +28.21% YTD: +1.65% Wkly: +2.45%

Russell 2000: 52-wk: +17.05% YTD: +2.05% Wkly: +3.96%

The U.S. stock market experienced a robust performance during the week of January 13 to January 17, 2025, marking its best week in two months. AP News

This positive momentum was largely attributed to inflation data that was not as severe as anticipated, fostering optimism among investors about a potential soft landing for the economy. Barron's

Key Highlights:

• Inflation Data: The Consumer Price Index (CPI) reported a year-over-year increase of 2.9%, with the core CPI rising by 3.2%. While still above the Federal Reserve's 2% target, these figures were better than some traders had feared. Barron's
• Corporate Earnings: The fourth-quarter earnings season commenced, with major banks reporting strong results, contributing to the market's rally. WSJ
• Federal Reserve Speculation: There was speculation that the Federal Reserve might cut interest rates later in the year, which bolstered Big Tech stocks. AP News

Despite the positive trends, some analysts caution that the market may be getting ahead of itself, as inflation remains above target and the Federal Reserve is unlikely to reduce interest rates aggressively. Barron's

Overall, the week concluded on a strong note, with the S&P 500 and Nasdaq breaking past resistance levels ahead of the presidential inauguration and holiday weekend. Investor's Business Daily

How major US stock indexes fared Friday, 1/17/2025 (AP News)

Why the Stock Market Is Getting Ahead of Itself (Barron's)

Investing Action Plan: After The Inauguration, Watch These Stocks (Investor's Business Daily)

Bottom Line for Investors
Mitch Zacks base case is that 10-year U.S. Treasury bond yields will remain above 4% in 2025, especially if U.S. economic growth remains strong—as I currently expect it will. Some investors worry that higher bond yields will hurt the stock market’s chances of performing well, but I would point out that historically, value and growth stocks have done quite well even with the 10-year Treasury bond in the 4% to 5% range. If long-duration Treasury bond yields remain elevated as the economy grows and the new administration seeks to bring deficit spending down, that’s a scenario I think would help—not hurt—stock market performance.

Markets End Biden Era With a Roar. But Inflation Isn’t Dead:

While 17 million jobs were added during Biden’s term, consumer prices rose 20%, of 4.9% compounded annually. As a result, consumers’ real disposable income fell by a cumulative 3%, the only decline of any president in the past 50 years, which goes a long way to explains why Biden ends his presidency with the lowest approval rating, 37%, in history. And that record came as the national debt exploded by $8 trillion, to $36 trillion, surpassing the size of the U.S. economy.

This Weeks Interesting Sector Piece: Barron’s Roundtabel Picks:

Nvidia, Smucker, Muni Bonds, & 31 Other Investment Ideas from Our Roundtable Pros

Stocks are pricey—but there are values to be had. Learn more about our panelists’ picks in this week’s installment. So many stock picks, not enough time.

It started to feel that way about halfway through this year’s Barron’s Roundtable, a day-long gabfest about all things markets, held on January 6 in New York. Despite our Roundtable panelists’ generally bearish outlook on 2025, relayed chapter and verse in last week’s Roundtable feature, these 11 investment seers couldn’t stop talking—and talking some more—about all the stocks they find attractive this year (and a few bond funds, too). The recommendations kept coming, for small-caps and large, familiar and obscure, companies benefiting from artificial intelligence, mergers and acquisitions, new products, and expanded markets, or just better blocking and tackling of day-to-day affairs.

In this week’s Roundtable installment, Number 2 of three, we’ve collected 34 picks from five of the pros, plus their supporting commentary. The group includes Henry Ellenbogen, chief investment officer and managing partner of Durable Capital Partners; Sonal Desai, CIO and a portfolio manager at Franklin Templeton Fixed Income; John W. Rogers Jr., founder, chairman, co-CEO, and CIO of Ariel Investments; Rajiv Jain, chairman and CIO at GQG Partners, and Mario J. Gabelli, chairman and CEO of Gabelli Funds.

Eclectic in their investment specialties and analytical approaches, the five demonstrate that there are myriad ways to unearth value in an otherwise pricey market.

I believe the stock market is trying to make up its mind at this juncture. Patience is a virtue.

Factors I'm focusing on this week:

1) Busy week of earnings. I’m paying close attention to NETFLIX

2) Watching if the IWM, KRE & XLF continue their rallies

3) Keeping a close eye on MAG 7 AND SEMI stocks

4) PMI on Friday

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DATA: Barron’s print edition page 29 1/20/25 Market Week Jacob Sonenshine

Paragraph: one ChatGPT market recap for the week of 1/13/25-1/17/25 As stated above

Paragraph: two Mitch on the Markets online edition 1/18/25 Are Rising Treasury Yields Good for the Market Mitch Zacks

Paragraph: three Barron’s print edition page 16 1/20/25 Barron’s Roundtable Lauren R. Rublin

Paragraph: four Barron’s print edition page 6 Up & Down Wall Street Randall W. Forsyth

Paragraph: five Closing remarks Richie Naso opinion

Paragraph: 6 Factors I’m focused on this week Richie Naso