Week Ahead Outlook - January 20, 2025

Market Commentary – January 20, 2025

Last week, we wrote that equity markets were oversold, and we had several buy signals – and if we received some good news, markets could rally.

Well, inflation data in the form of the Producer Price Index (PPI) and Consumer Price Index (CPI) came in for December better than expected and this stemmed the sell-off. We’ve been in a correction since mid-December when the Federal Reserve (Fed) announced its a hawkish rate cut at the Federal Open Market Committee (FOMC) meeting – and now it could be coming to an end, possibly. But that’s only if we can get some more good news. Yesterday was Donald Trump’s second inauguration day, and it has been expected that he will have a busy start, signing into action new policies and executive orders without hesitation. This should either cause market volatility in both the equity and fixed income markets or cause rates to be stable (or drop) and for stocks to rally. Well, stocks are still positioned to rally. We have the 14-day stochastic on a buy signal for the S&P 500, the Nasdaq 100 and the S&P 600 Small Cap/Mid Cap indexes. The 100-day moving average has held for the S&P and Nasdaq. The 200-day moving average has held for Small Caps/Mid Caps. The strongest buy signal is on Small Caps/Mid Caps as their sell-off was deeper, and we have both daily and weekly buy signals. We do believe stocks will rally. We remain buyers here and anticipate the S&P 500 can achieve a rally to 7200-7400 this year.