Please hold your applause—yesterday’s market move was nothing more than a theatrical relief rally. Yes, we are technically still in a bull market, but don’t let that fool you into a false sense of security. This isn’t the exuberant, unstoppable bull everyone dreams about. Instead, we have a jittery beast—a market so nervous it might well break into a cold sweat at the slightest hint of trouble.
Let’s be clear: I remain unconvinced that this market is gearing up for a smooth ride anytime soon. The lingering uncertainty, courtesy of the current administration’s monetary policies (or, as I like to call it, policy uncertainty), keeps institutional investors on the sidelines. Their takeaway? “No certainty, no investment.” And who could blame them?
Take last Monday, for instance—the so-called correction sparked by the latest DeepSeek drama. Yes, Deep Sheikh might eventually revolutionize how large corporations invest in AI infrastructure, but let’s not get ahead of ourselves. The market’s knee-jerk reaction to the chaos reveals an unsettling truth: there’s plenty of cash out there, driven by less-than-stellar judgment. It appears that when faced with more questions than answers, emotions rule the day, sparking a domino effect where even the “smart money” seems compelled to lock in those hard-earned profits from the past two years.
Now, if you’re looking for signs of sanity amidst the chaos, look no further than the technology sector. Money is clearly exiting this space, as big institutions are busy piling into well-known, highly liquid stocks—AMZN, NFLX, GOOG (Alphabet), META—while TSLA and AAPL sit in the back seat. Curiously, MSFT has managed to dodge the fervor, remaining an overlooked gem to my surprise.
And there’s a flight to safety: the 10-year Treasury yields have taken a dip over the last couple of days, a clear indicator of increased buying in that space. When yields drop, you know someone is hedging their bets on certainty over speculative exuberance.
Looking ahead, brace yourselves for a series of potential market shakers.
- Friday’s Employment Report: Yes, it’s coming. Expect some skewed data—thanks, California fires—for a likely uptick in unemployment figures. How the market will digest this remains anyone’s guess.
- Next Week’s CPI Report: I’m expecting at least one CPI report in the first quarter to highlight higher inflation in the service sector—a topic I’ve forecasted before. So, keep your eyes peeled.
In summary, smooth sailing is a myth in today’s climate. Volatility is not just possible—it’s practically guaranteed. So, while you might want to cheer for any rally, let’s keep our enthusiasm in check. After all, the market’s nervous ticks and unpredictable turns have a knack for turning even the most optimistic outlook into a rollercoaster of regret.
On the bright side
The dollar has renewed its decent lower. (After the White House saber-rattling on tariffs.) This is good for earnings, as approximately 46% of S&P’s earnings come outside the United States.
Stay tuned; there will be plenty of Economic Theater 2025 to follow!