| | | Market Snapshot
| Dow | 41985.35 | +32.03 | (0.08%) | | Nasdaq | 17784.06 | +92.43 | (0.52%) | | SP 500 | 5667.56 | +4.67 | (0.08%) | | 10-yr Note | -23/32 | 4.251 |
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| | NYSE | Adv 948 | Dec 1685 | Vol 4.5 bln | | Nasdaq | Adv 1784 | Dec 2449 | Vol 8.9 bln |
Industry Watch
| Strong: Communication Services, Consumer Discretionary |
| | Weak: Materials, Industrials, Real Estate, Technology, Consumer Discretionary, Financials, Health Care |
Moving the Market
-- Reacting to earnings reports and commentary from FedEx (FDX), Nike (NKE), Lennar (LEN), and Micron (MU)
-- Quarterly options expiration day leading to heavy volume
-- Surge in buying in mega caps propelling indices higher
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Closing Summary
21-Mar-25 16:25 ET
Dow +32.03 at 41985.35, Nasdaq +92.43 at 17784.06, S&P +4.67 at 5667.56
[BRIEFING.COM] There was a negative bias driving the equity market on this quarterly options expiration day. The major indices didn't reflect that at the close, however. The Dow Jones Industrial Average (+0.1%), S&P 500 (+0.1%) and Nasdaq Composite (+0.5%) closed at their best levels of the session, propelled by a late afternoon surge in the mega caps.
Apple (AAPL 218.27, +4.17, +2.0%) and Microsoft (MSFT 391.26, +4.42, +1.1%), which make up 13% of the S&P 500 in terms of market cap, were among the top performers. Tesla (TSLA 248.66, +12.40, +5.3%), Meta Platforms (META 596.25, +10.25, +1.8%), and Amazon.com (AMZN 196.21, +1.26, +0.7%) were also standouts from the space.
Still, many stocks registered declines following disappointing earnings and/or guidance from the likes of FedEx (FDX 230.33, -15.88, -6.5%), NIKE (NKE 67.94, -3.92, -5.5%), Lennar (LEN 115.22, -4.85, -4.0%), and Micron (MU 94.72, -8.28, -8.0%). This piled onto the market's existing concerns about growth, especially how it pertains to earnings prospects.
The equal-weighted S&P 500 closed 0.5% lower and eight of the 11 S&P 500 sectors closed in the red with the real estate (-1.0%) and materials (-1.0%) sectors registering the largest declines.
The materials sector was weighed down in part by shares of Nucor (NUE 122.01, -7.49, -5.8%), which issued an earnings warning for the first quarter along with US Steel (X 40.90, -0.16, -0.4%).
The only sectors to close higher were communication services (+1.0%), consumer discretionary (+0.6%), and technology (+0.5%), reflecting leadership from the mega cap space.
There was no top-tier US economic data today.
Looking ahead to Monday, market participants receive the following economic data: Flash March S&P Global U.S. Manufacturing PMI (prior 52.7) and flash March S&P Global U.S. Services PMI (prior 51.0) at 9:45 ET.
- Dow Jones Industrial Average: -1.3% YTD
- S&P 500: -3.6% YTD
- S&P Midcap 400: -5.6% YTD
- Russell 2000: -7.8% YTD
- Nasdaq Composite: -7.9% YTD
Mega caps weigh down market this week
21-Mar-25 15:35 ET
Dow -110.34 at 41842.98, Nasdaq -20.56 at 17671.07, S&P -21.01 at 5641.88
[BRIEFING.COM] The major indices are in a holding pattern ahead of the close. The S&P 500 trades 0.4% higher and the Nasdaq Composite is 0.1% lower.
The equity market held up okay this week, leading the Invesco S&P 500 Equal Weight ETF (RSP) to rise 0.5% since last Friday. The market-cap weighted index sits on a 0.1% gain since last Friday.
Mega caps have shown relative weakness leading the Nasdaq Composite to trade 0.5% lower than last Friday.
Yields at highs while stocks move lower
21-Mar-25 15:00 ET
Dow -98.55 at 41854.77, Nasdaq -11.64 at 17679.99, S&P -18.25 at 5644.64
[BRIEFING.COM] The major indices moved slightly lower in recent trading.
Treasury yields are near intraday highs as stocks slowly move lower. The 10-yr yield is at 4.25% and the 2-yr yield is at 3.94%.
Separately, the CBOE Volatility Index dropped below 20.00, indicating some unwinding of hedging against further downside risk.
S&P 500 drops, led by losses in Lockheed Martin and MGM; Super Micro Computer rallies on upgrade
21-Mar-25 14:30 ET
Dow -90.05 at 41863.27, Nasdaq -14.69 at 17676.94, S&P -18.39 at 5644.50
[BRIEFING.COM] The S&P 500 (-0.32%) is today's top lagging major average, down about 18 points.
Briefly, S&P 500 constituents Lockheed Martin (LMT 437.64, -29.10, -6.23%), MGM Resorts (MGM 31.25, -1.28, -3.93%), and Weyerhaeuser (WY 29.12, -0.99, -3.29%) hold decent losses. LMT falls after the Trump administration chose embattled aerospace and defense company Boeing (BA 180.10, +7.27, +4.21%) to lead the next generation of fighter jet programs, while MGM falls despite the March Madness tournament getting underway.
Meanwhile, Super Micro Computer (SMCI 42.20, +3.10, +7.93%) is atop the standings after JP Morgan upgraded the stock to Neutral amid stronger demand and supply improvements.
Gold ends lower, posts third consecutive weekly gain amid geopolitical tensions and strong dollar
21-Mar-25 14:00 ET
Dow +28.15 at 41981.47, Nasdaq +9.70 at 17701.33, S&P -6.66 at 5656.23
[BRIEFING.COM] The Nasdaq Composite (+0.05%) is narrowly higher, along with the DJIA, owing to a bounce into positive territory over the past half hour.
Gold futures settled $22.40 lower (-0.7%) at $3,021.40/oz, trimming weekly gains to +0.68%, marking their third consecutive weekly gain, driven by geopolitical tensions and expectations of Federal Reserve rate cuts. However, a stronger U.S. dollar exerted some downward pressure on gold prices on Friday.
Meanwhile, the U.S. Dollar Index is up about +0.2% to $104.07.
Lennar delivers solid Q1 earnings beat, but sluggish Q2 outlook stirs demand concerns (LEN)
Coming off a rare top and bottom-line miss last quarter, Lennar (LEN), one of the country's largest homebuilders, rebounded in 1Q25 to easily beat EPS and revenue expectations. The upside results were driven by better-than-expected deliveries of 17,834 and new orders of 18,355 homes, which were up by 6% and 1%, respectively, as well as LEN's focus on better aligning its production pace with sales. However, the solid Q1 performance is being overshadowed by LEN's disappointing Q2 guidance, including an EPS outlook of $1.80-$2.00 that badly missed analysts' estimates.
- Home affordability continues to act as a major hindrance for LEN and other homebuilders. Even for luxury homebuilder Toll Brothers (TOL), stubbornly high mortgage rates have forced it to ramp up incentives to coax its more affluent customer base to take the leap. This was witnessed when TOL reported downside Q1 results on February 18 and guided for Q2 deliveries of 2,500-2,700, missing analysts' expectations and equating to a yr/yr decline of 1.5% at the midpoint.
- For LEN, the impact of home affordability constraints is seen across its Q1 metrics and guidance. To help spur demand, the company has lowered prices -- ASPs for homes dipped by 1% yr/yr to $408,000 -- while also offering incentives such as mortgage rate buydowns. The cumulative effect of these actions is that adjusted gross margin contracted by 340 bps qtr/qtr to 18.7%, while EPS decreased by 17% yr/yr to $2.14.
- Unfortunately for LEN, there doesn't appear to be any relief on the near-term horizon. While mortgage rates have fluctuated a bit over the past several weeks, they remain elevated in the 6.60-6.80% range. Furthermore, the implementation of tariffs is bound to put some upward pressure on manufacturing costs, although LEN has not experienced any impact just yet.
- In addition to high mortgage rates, slipping consumer confidence levels are also weighing on demand. As such, LEN issued conservative Q2 deliveries guidance of 19,500-20,500 homes, reflecting tepid growth of 1.5% at the midpoint. Adding to the concern, the conservative deliveries guidance comes even as LEN continues to ratchet prices lower. For Q2, the company is targeting ASPs of $390,000-$400,000.
- The company isn't seeing the seasonal pickup that's typically associated with the beginning of the spring selling season. Looking beyond the disappointing spring selling season, the longer-term outlook for LEN and the homebuilding industry remains positive. Positive factors working in LEN's favor include favorable demographics, the chronic undersupply of available homes in the U.S., and the accumulated wealth built up from home price appreciation.
While LEN delivered better-than-expected Q1 results, the homebuilder continues to face challenges related to home affordability due to high interest rates and inflation, leading to a cautious Q2 outlook that is sinking shares lower today.
Micron sells off after Q3 guidance fails to signal a meaningful near-term recovery (MU)
After initially springing higher on decent earnings and revenue upside in Q2 (Feb), shares of Micron (MU -7%) quickly reversed course and sold off. The memory chip maker's guidance is driving today's downbeat reaction. MU guided to Q3 (May) adjusted EPS of $1.47-1.67, in-line with consensus, and revs of $8.6-9.0 bln, which was higher than consensus. While the guidance was decent, far better than the soft outlook MU provided in December, it ultimately did not signify a meaningful change in trend.
Recall last quarter, MU commented that consumer-oriented markets were weak, likely staying this way through Q2. However, management anticipated a return to growth during the back half of FY25 (Aug). As such, the market was looking for signs of this trend. At the midpoint of its Q3 revenue guidance, MU is targeting a 29% increase yr/yr, a further deceleration from the 38% jump posted in Q2, not much of a significant rebound. Given the bubbling macroeconomic uncertainty, which can cloud the timing of a recovery across the consumer electronics market, this guidance is not providing any relief today.
- There were several silver linings from Q2 worth mentioning. Data center DRAM revs reached a new record. High bandwidth memory, or HBM (vital in AI workloads), surged by over 50% sequentially to a new milestone of over $1.0 bln in revs. MU commented that its HBM shipments were ahead of schedule. As a result, revs of $8.05 bln landed near the high end of MU's $7.7-8.1 bln guidance in Q2.
- AI remains a powerful driver of overall demand at MU. Major hyperscalers (Amazon, Microsoft, Google, etc.) reiterated substantial yr/yr capital investment growth earlier this year for 2025, creating a sturdy foundation for MU. The company expects mid-single-digit server unit growth in 2025, supported by traditional and AI servers. On that note, MU increased its HBM TAM estimate by $5 bln from last quarter to now exceed $35 bln.
- However, speaking of HBM, a possible threat looms in the distance. MU competes against two main DRAM suppliers, one of which is Samsung (SSNLF). Currently, MU is qualified as a supplier of HBM, alongside its other competitor SK Hynix, for NVIDIA's (NVDA) GB300, its highest-performing AI system for enterprises. If Samsung is qualified, it could significantly disrupt MU's position in this market.
- Meanwhile, MU's other segments are facing a weak economy. In PC, MU is still confident that the market will grow by mid-single digits in 2025, with growth weighted to the back half of CY25 due to the Windows 10 end-of-life in October. In mobile, MU's projections for volume growth in 2025 stayed at a low-single-digit percentage but was optimistic about ongoing AI adoption fueling increased DRAM demand. Lastly, in industrial and automotive, customers are in the later stages of inventory adjustments.
Market participants are not approving of MU's weaker-than-anticipated recovery. Even though AI demand remains robust, consumer-oriented segments are struggling. There are still possible tailwinds on the horizon, such as the end of Windows 10. However, investors are seeking confirmation of a back-half turnaround before helping MU break above strong resistance at around the $110 mark.
NIKE beats Q3 expectations, but weak Q4 outlook signals further troubles in turnaround plan (NKE)
NIKE (NKE) ran past analysts' muted 3Q25 EPS and revenue expectations, but the company's overall results and bleak 4Q25 outlook indicate that it has yet to turn a corner in its turnaround bid. On a yr/yr basis, EPS and revenue fell by 45% and 9%, respectively, and NKE is anticipating more declines in Q4, creating disappointment that its "Win Now" strategy will take longer than expected to produce results. The centerpiece of that strategy, which was implemented by newly appointed CEO Elliott Hill, rests on revitalizing NKE's product innovation machine and rebuilding wholesale partnerships with retailers such as Foot Locker (FL), Dick's Sporting Goods (DKS), and JD Sports.
- Shareholders and analysts were hoping to see some green shoots emerge in the Q4 report. NKE did keep a tight lid on costs -- Selling and Administrative expense decreased by 8% to $3.9 bln -- helping it to comfortably exceed EPS estimates, but there was little else to cheer about. Sales remained quite sluggish, dropping by 4% in North America, the company's largest market, while China saw a 15% decrease on a constant currency basis.
- Alongside the well-documented company-specific issues than NKE is contending with (market share losses due to lack of new products, margin erosion due to high inventory levels), mounting macroeconomic headwinds are compounding the problem. The company can now tack on tariffs to its list of challenges that it must overcome. Following a 330 bps drop in Q3, NKE is forecasting gross margin to contract by 400-500 bps in Q4, driven by ongoing promotional activities and new tariffs, which will lead to higher manufacturing costs.
- NKE is making progress on the innovation front, investing in new product lines such as a women's activewear collaboration with Kim Kardashian's Skims, as well as a collaboration with Supreme that will feature a new Air Max 1 launch. However, NKE's new products aren't expected to have a material impact on its financials until 2H26. Mr. Hill noted last night that Q4 will reflect the largest impact from "Win Now" actions with the revenue and gross margin headwinds moderating from there.
- In the meantime, NKE will have to muddle through another rough quarter in Q4. The company guided for a mid-teens decrease in revenue, skewing towards the low end of that forecast. Although inventory was down by another 2% in Q3 to $7.5 bln, the company is still working through older merchandise, leading to heightened promotional activity.
- Mr. Hill has offered some encouraging commentary regarding NKE's efforts to rebuild its relationships with wholesale partners. He stated that he's confident that the company's renewed focus on product innovation will strengthen its relationships with retail partners. Following another revenue decrease in the Wholesale business (-7%) in Q4, participants will be looking for some improvement next quarter and in the subsequent quarters.
NKE's dismal Q4 guidance is raising concerns about the effectiveness of Mr. Hill's turnaround strategy and the lack of meaningful progress shows the magnitude of the company's troubles. Still, from a longer-term perspective, NKE's powerful brand name and proven track record of success lends confidence that the company will dig itself out of this deep hole.
FedEx delivers a worrying Q3 report; slashes guidance on a stubbornly weak industrial economy (FDX)
FedEx (FDX -9%) delivered a worrying Q3 (Feb) report last night. While headline results were decent, with earnings barely missing estimates on a slim top-line beat, the delivery giant sliced its FY25 (May) guidance for the third consecutive quarter. FDX anticipates ending the year with adjusted EPS between $18.00-18.60 versus its previously lowered forecast of $19.00-20.00, and revs either flat or slightly lower yr/yr compared to its prior prediction of just flat growth.
What happened? Echoing his remarks from last quarter, CEO Raj Subramaniam stated that the weak industrial economy continues to place outsized pressure on the company's higher-margin B2B volumes. The frail economic conditions are not expected to improve over the immediate term, particularly given the increased uncertainty injected into the demand environment due to tariffs, which are also partly underpinning a more stubborn inflationary backdrop.
- Economic headwinds were in full force during Q3, particularly hindering FedEx Freight, which posted a 5.3% decline in revenue yr/yr to $2.09 bln. FDX noted that the challenges associated with this segment were not as severe as last quarter, but it still endured fewer shipments and lower weight per shipment. While the Federal Express segment also felt the effects of a soft industrial economy, it was less pronounced, supporting a minor 2.7% lift in revenue to $19.18 bln and helping total revs climb by 2.1% to $22.2 bln in Q3.
- Federal Express volumes improved during the quarter to reach FDX's highest yr/yr average daily growth since Q4FY21. Federal Express package volume growth of 5% was the underlying reason. LTL (less-than-truckload) volumes were pressured, but the rate of decline improved sequentially. In U.S. domestic express services, volume ticked slightly higher, while international volumes expanded by 8%.
- Encouragingly, FDX was still able to drive adjusted operating margin expansion of 60 bps yr/yr in the quarter, underscoring the positive effects of its DRIVE and Network 2.0 initiatives. Adjusted EPS of $4.51 still missed estimates, albeit by a narrow margin. FDX's DRIVE savings mounted qtr/qtr, achieving $600 mln of savings in Q3. Management reiterated its goal of reaching its incremental target of $2.2 bln for FY25.
- Network 2.0, FDX's plan to streamline package networks to enhance efficiency, is also rolling out smoothly. The company optimized five U.S. stations thus far in 2025 and expects 45 more in Q4. Meanwhile, FDX is on track to finish the rollout in Canada by the end of next month.
- Regarding the Freight separation, since FDX outlined its plans to fully separate the segment last quarter, the company has established a Separation Management Office. Management mentioned that it is making progress on all fronts, completing a $16 bln debt exchange offer in anticipation of the separation, possibly by mid-2026. Freight is a minor component of FDX's overall business but does boast attractive margins compared to Express. Following the separation, Freight would be the largest carrier by revenue.
Ahead of Q3 results, expectations were low, but investors were looking for signs that FDX was uncovering modest success despite a formidable economy. The company underdelivered in that regard, struggling mightily in the face of powerful macroeconomic headwinds, casting a dark cloud on the transportation sector, with many of its peers heading lower today, including UPS -2.6%, KNX -2.5% (52-week lows), XPO -1.5%, ARCB -1.3% (52-week lows), WERN -0.3% (52-week lows), SAIA -0.3%, and ODFL -0.1% (52-week lows).
Accenture reports mixed Q2 earnings report as DOGE-related spending cuts weigh on growth (ACN)
Driven by broad-based growth across its markets and industries, consulting and IT services company Accenture (A) edged past Q2 EPS and revenue expectations. Despite the upside performance, the stock is trading sharply lower due to concerns that the company's growth is set to slow under the Trump Administration's deep spending cuts. In fact, these DOGE-led spending cuts are already having a negative impact on Accenture's business as illustrated by the 3% decline in new bookings to $20.9 bln, signaling a decrease in the company's future revenue streams.
- The slowdown in new bookings is especially discouraging since Accenture was experiencing solid momentum across its business, including in its largest Americas region where revenue grew by 11% to $8.55 bln. In terms of verticals, Financial Services and Products were notable areas of strength, up 11% and 9%, respectively, in Q4. Impressively, Accenture ended the quarter with 32 clients that had quarterly bookings of $100 mln or more.
- Assisting companies and organizations with their digital rollouts and implementations of AI are two key services that Accenture provides. More specifically, Accenture assists clients in embedding AI tools into their operations, and it also helps clients utilize AI in data analytics and process automation. Therefore, the rapid expansion of AI technologies is providing Accenture with a potent growth catalyst, as reflected by the company achieving GenAI new bookings of $1.4 bln during the quarter.
- Accenture has also identified a few strategic priorities that it anticipates will underpin growth in years ahead. Cloud Services, one of those strategic priorities, experienced double-digit growth in Q2, fueled by continued growth in cloud migration projects. Security, which generated "very strong double-digit growth" due to increasing client investments in data security, is another area that Accenture is focusing on.
- This good news, though, is being clouded over by Accenture's lackluster FY25 EPS outlook, which was below expectations based on the midpoint of the guidance range, and the decline in new bookings. The soft guidance is a function of DOGE and the reduction in federal spending, leading to the loss of several Accenture contracts. In FY24, U.S. federal contracts accounted for 17% of Accenture's North America revenue, so the erosion in the government sector is a significant development.
Although Accenture slightly exceeded Q2 expectations, the new bookings decline, and the associated DOGE cost-cutting measures that have led to the cancellation of several multi-million U.S. government contracts, is creating meaningful growth concerns.
The Big Picture
Last Updated: 21-Mar-25 07:06 ET | Archive
Stock market forced into second-guessing the outlook
Column Summary:
*Market Uncertainty: Tariffs and spending cuts have shifted market focus from tax cuts and deregulation.
*Economic Indicators: Mixed signals from jobless claims, copper prices, and yield curves complicate economic outlook.
*Investment Shifts: Defensive sectors outperform, and foreign markets gain as U.S. market volatility increases.
The stock market's thinking heading into 2025 was that the outlook glass is half full. Economic activity would be improving under a new administration pushing tax cuts and deregulation. That push hasn't changed. The problem is that tariff actions and government spending cuts have been pulled forward on the list of policy priorities.
Consequently, the stock market has been forced to consider the possibility that the outlook glass may be half empty, as the politics of the day have stirred concerns about an economic slowdown upending a previously full earnings growth outlook.
Corrections Among Us
The first quarter has had its highs and lows. The S&P 500 hit an all-time high on February 19, which left it up 4.5% for the year. By March 13, it had fallen as much as 10.5% from that high and was down 6.4% for the year.
The sudden reversal was precipitated by tariff and counter-tariff announcements, an unwinding of the momentum trade, and a stark sell-off in the "Magnificent 7" stocks. This all occurred at a time when Treasury yields were falling, which was a reflection of the market's burgeoning growth concerns, and European and Asian equity markets were posting robust gains, which was a reflection of rebalancing activity driven by a recalibration of the U.S. exceptionalism view.
The cumulative effect of the selling resulted in corrections for each of the major indices (a correction is typically defined as a pullback of 10-20% from a prior high).
Some Offsetting Positions
The pullback led to a compression in P/E multiples as stock prices fell faster than earnings estimates. Strikingly, the forward 12-month earnings estimate didn't fall at all. It stood at $274.47 on February 19 and today it sits at $277.54, according to FactSet.
It has been a peculiar divergence -- one that suggests this "correction" is either only a price correction from an overvalued state or a sign of worse things to come for earnings estimates on account of a weakening economy.
The latter narrative is not without its challenges.
- High yield credit spreads, which would widen rapidly on the specter of recession, or an actual recession, don't convey such concerns.
- The futures price for copper, which has extensive end uses in industrial applications, has surged 27% year-to-date as of this writing.
- Initial jobless claims -- a leading indicator -- are tracking at levels that are consistent with a solid labor market and an economy on a positive growth trajectory.
Still, worries about the growth outlook have been apparent in other ways:
- The spread between the 3-month T-bill yield (higher) and the 10-yr note yield (lower) has inverted.
- The counter-cyclical health care, utilities, and consumer staples sectors have exhibited relative strength over the last month.
- The futures price for oil, which has extensive end uses for consumer and industrial applications, has dropped 6.5% year-to-date as of this writing.
Are these the only discrepancies? No. These offsetting positions, though, speak to a market that can't determine if the outlook glass is half full or half empty. That indeterminate state has led to some fitful trading conditions for a market that had been priced only for good things happening.
Coming Months Are Integral
The mere idea that there could be an important economic shift afoot has been disruptive for the bull market. The linchpin right now are earnings estimates. They are holding up despite companies starting to sound a more cautious tone on the outlook because of the uncertainty generated by tariff policies and the strain consumers -- particularly low-end consumers -- are feeling from elevated price levels across a host of goods and services.
Fed Chair Powell observed, however, that the "hard data" is still pretty solid and has yet to fully reflect the weakening levels of consumer and business confidence that have been apparent in "soft" survey data. In other words, what consumers and businesses are saying isn't matching up with what they are doing. They have been more negative with their thinking than with their spending.
Mr. Powell added that the Fed is focused on the hard data and that, if the soft data is going to affect the hard data, we should know it very quickly.
The coming months, then, will be integral to the earnings estimate trend, not only because we are roughly three weeks away from the start of the first quarter reporting period, but also because we will know more about the impact of the tariff policies that have been put in place, more about government spending cuts, and more about the level and scope of reciprocal tariffs implemented by the U.S. come April 2.
A risk being run by the new administration is that the tariff policies overshadow its work to cut regulations and extend the 2017 tax cuts. That is the case now, but it will worsen if the economy rolls over on account of the tariffs and diminishes the influence of tax cuts, assuming the GOP can reach an agreement to extend the tax cuts without adding to the deficit. The former may ultimately be dependent on the latter. It is a delicate proposition amongst GOP members.
What It All Means
The investing environment has gotten more challenging -- quickly. The economy coming into the year was expected to pick up pace while inflation was expected to keep falling. Now, the market narrative features talk of stagflation with growth faltering and inflation rising, both of which could give way to a weakening labor market if they persist.
The price action has turned more defensive in the stock and bond markets, investor sentiment has been reined in appreciably, and the "Magnificent 7" has been anything but magnificent, which has applied a lot of downward pressure on the market cap-weighted indices.
Small-cap, mid-cap, large-cap, and mega-cap proxies are all down for the year; the low volatility factor has drastically outperformed the high-beta factor; value is outperforming growth; and foreign markets are outperforming the U.S.
That is all happening after a tremendous year in 2024 when everything seemed to go the market's way, and every dip was bought without question. Well, there are questions now because there are no clear answers about the economic outlook like there seemed to be after the election when investors were focused on less regulation, friendly tax policy, and a "Trump put" that has been talked down by the president himself.
The focus is now on tariffs and spending cuts, because the new administration has made it so. It is all politics, which we said the market would be playing in 2025 for better or worse. Things could get better, but they feel worse now because they have fostered a heightened sense of uncertainty about the economic outlook and, by association, the earnings growth outlook.
With that uncertainty festering, multiple expansion will be hard to come by since earnings prospects won't be fully trusted. A consequence of that mistrust is likely to be a market that continues to trade in a fitful manner where buy-the-dip tendencies are supplanted by an inclination to sell into strength that keeps this bull market under wraps.
-- Patrick J. O'Hare, Briefing.com
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