US equity markets stabilised Monday but 10 yr bond yields remains a concern

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.

US Indexes were mixed on Monday with softness in the Mag7 acting as a drag on Nasdaq. The VIX was down 2 at 19. The main indexes were; DJIA +0.86%, S&P 500 +0.16% and Nasdaq -0.38% (Mag7 -0.46%). On an equal weighted basis (our measure) the overall market was -0.53%. Breadth of 49% (daily range since the election is 9% to 71%). Daily volumes of 10b (the range since the election is 8b to 18b). 

Daily returns on an equal weight basis: Market -0.53%, Mag7 -0.46% (TSLA +2.2%, AMZN -0.2%, GOOGL -0.5%, MSFT -0.4%, AAPL -1%, META -1.2%, NVDA -2%), large cap +0.27%, medium cap +0.41%, small cap +0.1% and micro cap -1.2%. 

Weekly returns on an equal weight basis: Market -4.3%, Mag7 -4.3% (TSLA -1.9%, MSFT -2.5%, GOOGL -3%, META -3.5%, AMZN -4%, AAPL -4.3%, NVDA -10.8%), large cap -1.5%, medium cap -1.6%, small cap -3.2% and micro cap -6.2%.

Ten days ago our risk monitor tipped in favour of the Micro cap stock for the first time in over 12 months but this reversed last week.

Consumer non-cyclicals was the best performing sector yesterday followed by Energy. Following the strengthening of the oil price over the last few weeks (OPEC cuts and Trump concerns) Energy has been the best performer over the last for weeks and was +0.7% yesterday. The recent strength of the sector has been driven by Fossil Fuel stock but whilst Renewable Energy Equip is -8% on the week and -3.8% yesterday, these stocks are still +25% over four weeks. A bounce in Banking stocks and a surprisingly in Insurance (Reinsurance +1%) saw Financials (+0.3%) beat the market. Real Estate REITs performed well helping the the sector beat the market +0.3% on the day, Residential REITs +1.5%, Commercial REITs +0.6%. Basic Materials was flat on the day. Chemicals +1.75% and non-Paper Packaging +1.4% was offset by Mineral Resources -1.1%. Within Metals & Mining only Iron & Steel +2.4% and Aluminum +2.3% were up. Industrial sector was down on the day -0.4%, Construction Engineering +0.6% was the only main sub sector that was up. Aerospace was the weakest sector albeit the large cap Aerospace stocks were up 1.1%. Housebuilding was the only positive sector within Consumer Cyclicals which fell 0.7% on the day. Gas Utilities were +1% but overall the sector was -1% on the day. Healthcare -1.1% and Technology -2% were the worst performing sectors. Both of these sectors contain a high number of Micro cap stocks and the reversal in risk over the last week has hit these two sectors.