The stock market enters 2025 looking something like the Kansas City Chiefs. The S & P 500 is coming off consecutive 20% annual gains, the Chiefs were winners of the past two Super Bowls. Fans of both are rabid for a three-peat. Yet in each case, the offense has been less dominant, the wins have been squeakers rather than routs and the path to another trophy appears narrower, if still navigable.
The market equivalent of the Chiefs' mediocre record against the point spread is the average stock's stagnation since summer's end, the S & P 500 Equal-Weight Index sitting at September levels after its 6% pullback from a post-Thanksgiving high. The benchmark market-cap-weighted S & P 500 – the more important one for capturing aggregate portfolio values – is off less than 3% from its record level and in the past two months has consolidated while bouncing three times off its pre-election peak. .SPX 1Y mountain S & P 500, 1 year Friday's brisk, if perhaps belated, 1.1% rally finally saw the index respond to oversold conditions that had built up over weeks of sloppy market breadth and particular pressure on the cyclical parts of the market that are sensitive to rising bond yields. Election rally unwind Industrial stocks, banks and the small-cap Russell 2000 all fell some 8% in December, a rather comprehensive unwind of the reflex post-election rally that implicitly bet on a policy-enabled economic acceleration. The existence of a handy playbook from after the 2016 election of Donald Trump proved something of a trap. The simplistic lessons from back then were to favor real-economy and reflation plays and to assume the market could ignore an erratic policy-making process if help on taxes and regulation came before high-friction trade restrictions. But, as noted here two months ago , the starting point in 2024 was not as ripe for such a sustained rotation, and beyond that the burst higher in cyclical plays ran right into another rollover in the economic-surprise dynamic
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