It will take a while for the impact of the range of Executive orders issued by President Trump to be understood. Recent inflationary data has been reassuring albeit it remains above the Fed's mandated level. The high bond yields remains a concern as so much US debt is being refinanced this year (US$9 trillion), higher financing costs is likely to impact equities so keep an eye on the 10yr yield.
The market started 2025 with microcap and risk stocks in particular strongly outperforming the market, however in the first full week of trading this trend reversed aggressively. Inflation and job data will continue to hang over the Market this year but the implications of the incoming President Trump and his policies will increasingly impact on bond yield and the wider equities markets. We are in a period similar to that seen in the mid to late 90s with continued fears of overheating and inflation concerns resulting in market retreats followed by periods of strong market performance. Our market history page shows the volatility by sector during this time. During the period '95 to 2000 a time of remarkable underlying growth the market retreated 8 times for typically 2 or 3 consecutive months. The economic environment today would appear to be far more uncertain in comparison.
The US Indexes were strongly ahead on Monday with the Mag7 pushing the Nasdaq and S&P higher. The VIX was flat at 16. The main indexes were; DJIA +0.78%, S&P 500 +1% and Nasdaq +1.51% (Mag7 +1.74%). On an equal weighted basis (our measure) the overall market was +0.58%. Breadth of 59% (daily range since the election is 9% to 71%). Daily volumes of 9.9b (the range since the election is 8b to 18b).
Daily returns on an equal weight basis: Market +0.58%, Mag7 +1.74% (NVDA +3.1%, TSLA +3.1%, AMZN +2.4%, GOOGL +1.6%, MSFT +1.1%, AAPL +0.8%. META +0.2%), large cap +0.62%, medium cap +0.46%, small cap +0.34% and micro cap +0.72%.
Weekly returns on an equal weight basis: Market +2.5%, Mag7 +1.95% (TSLA +8.1%, AMZN +3.2%, MSFT +2.4%, GOOGL +2.1%, NVDA +1.3%, META -0.5%, AAPL -2.9%), large cap +3.7%, medium cap +3.8%, small cap +3.5% and micro cap +1.5%.
In mid January our risk monitor tipped in favour of the Micro cap stock for the first time in over 12 months but this has reversed.
Technology +0.9%, was the strongest sector yesterday, Blockchain continued its recent run and was +7.5% on the day, Semicon was also strong at +2.5%. Basic Materials was the second best performing sector. Metals & Mining was +1.1%, Lithium stocks +2.9%, Silver +1.1%, Gold +0.7% all performed well albeit the have materially underperformed the market over the last 6 months. Iron & steel was +1%. Diversified Chemicals +2% continues to perform well and is +8% over two weeks. Banking stock +0.9% (+5.4% over 1w) continued to push Financials higher at +0.65% on the day. Within Consumer Cyclicals +0.52%, Media & Publishing +1.3% and Hotels & Entertainment +0.8%. Auto & Truck Manufacturers were +0.8% with EV stocks performing best, this was unexpected following Trump's executive orders in this area. Water +1.5% and Gas +1.2% were the best performing Utilities with Electric & IPPs at +0.2% lagging the market slightly. Healthcare Services & Providers +0.8% was the best performing sub sector of Healthcare but all other sub sectors under performed slightly. Construction & Engineering +1.8% was the strongest sub sector within Industrials (+0.45%), Machinery, Tool & Heavy Vehicles +0.5% was offset by Aerospace +0.3%. However looking more closely as Aerospace the large Aerospace stocks outperformed again and were +0.7% on the day and are +5.2% on the week. Real Estate +0.4% marginally lagged the market performance with Real Estate operators +1% and +4% on the week. Consumer Non-Cyclcial was +0.3% with Personal & Household +0.7% followed by Food & Beverage +0.4%. Energy +0.1%, was the worst performing sector yesterday. Trump's "drill baby drill" comment saw the oil price slip slightly and the Fossil fuel stocks followed -0.01% on the day. Uranium +2.4% was the best sub sector followed by Renewables Energy Equipment +0.5%. The renewable element of the sector has now lagged the market by c5% over the last two weeks.
A notable number of 52 week highs was seen in the following sectors: Energy (fossil fuels - Oil & Gas Equipment and Services), Financials (Banking) Industrials (across the sector) and Technology (Software & Services, Technology Equipment)
High volumes were seen in the following sector: Financials (Banking), Healthcare (across the sector), Industrials (across the sector) and Technology saw a very high number (Software & IT Services, Technology Equipment)