The Trump Effect: Risk On!
The NASDAQ 100 (tech stocks) has absorbed the election rally, factoring in the Fed’s decision to pause rate cuts on 12/18/24. After three waves of selling, the index hit a low on 1/13/25 before surging past its 50-day moving average (DMA) on solid, above-average volume last Friday. The rally was sparked by cooler CPI data Wednesday, driving the index toward its downtrend resistance line. I expect the NASDAQ 100 to break through this resistance and rise about 3% higher; at this point, a new catalyst will be necessary to sustain the bull market trend.
With Trump assuming office on Monday, I expect him to follow through on promises to cut taxes and reduce regulations, which should positively impact corporate earnings and sales. The price and volume charts will reflect stocks benefiting from Trump’s agenda. AI-related stocks will maintain strong momentum, and companies with growing earnings and sales will likely capture investor attention.
Meanwhile, 20-year Treasury bonds have fallen to the 4/25/24 support line, pushing yields lower and allowing the S&P 500 to climb roughly 3% since 1/14/25. The junk bond index trades above its 50-DMA, signaling increased risk appetite and confirming a “risk-on” environment. Natural gas has surged nearly 50% since the election, driven by growing energy needs from AI data centers. The retail home furnishings industry has risen over 70%, indicating future economic growth. Bitcoin is approaching its all-time high, benefiting from expectations of Trump’s support. The energy sector has gained about 14% over the past 18 trading days, buoyed by a “drill baby drill” agenda. Regional banks are nearing their 50-DMA resistance, supported by a favorable yield curve, which helps banks profit from spread differences. Gold is regaining focus, trading above its 50-DMA as a hedge against inflation. Utilities are also above their 50-DMA, driven by higher energy demand from expanding AI data centers. The dollar is stable, with the market appearing content. Healthcare stocks remain weak due to the potential negative impacts of “Make America Healthy Again” regulations. China’s economy continues to weaken under communist rule, and consumer staples are trending lower while discretionary stocks are rising, signaling strong consumer spending and an optimistic outlook for corporate profits.
Bottom Line: Stocks with growing earnings and sales are under institutional accumulation, driving indexes higher. The market has adopted a “risk-on” attitude, expecting the Trump administration to boost overall performance. I remain highly bullish, anticipating indexes to break through to new highs and maintain their upward momentum. If I’m wrong, I will adjust quickly to avoid substantial losses, as risk management and position sizing are crucial to long-term financial success.
For where your treasure is, there your heart will be also. Matthew 6:21
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Dexter Lyons, Portfolio Manager
337-983-0676 Dexter@ChristianMoneyBlog.net
Active (BRI) Risk Management, CANSLIM Investing
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