January twenty-sixth, two thousand twenty-five (250120-250126)
This week, the S&P 500 reached a record high. The U.S. economy is in a range of healthy growth and gradually easing inflation; sentiment indicators and PB data still show light positioning, while liquidity has improved somewhat. With Trump taking office, the direction of U.S. policy has effectively driven the stock market higher.Lower oil prices, the proposal to establish a cryptocurrency reserve, a major push for AI capital expenditure, calls for lower interest rates—Trump said he understands interest rates better than the Federal Reserve and wants to see them fall “a lot”—and no tariffs so far, all of these outcomes are relatively bullish for equities and bearish for the dollar.
Chart: Liquidity has increased sharply
Key pivot levels for SPX:
1）Short term: 5959
2）Med term: 5795
3）Long term: 5314
Chart: Key pivot levels for SPX:
PB’s overall leveraged exposure has reached a record high, and leverage has grown over the past two weeks at the fastest pace on record; leveraged exposure has also reached a 5 high. However, it should be noted that Although gross leveraged exposure has increased, net exposure has not risen.(See Scott’s Tactical Flow-of-Funds: February Preview)
Chart: Post-election sentiment is following the same trajectory now as it did during the Trump 1.0 period
Chart: Sentiment returning to normal
After the so-called “friendly” conversation, the yuan surged against the U.S. dollar to a high of more than a month, Trump called China a “great power,” but said he “would rather not have to use tariffs against China.” As the risk premium built up around trade policy began to dissipate, the dollar started to fall.
Must-read this week—Springtime for America: A Transcript of Conversations Between Trump and Bessent, Read it, then come back to the Wrap.
https://mp.weixin.qq.com/s/YvQ6P6xficKef-hCMaNBHQ
Positioning in emerging markets seems a little premature; see Notes250124 Bessent’s Weaknesses and Possible Market Directions
“Over the medium-term horizon (6-12 months), the U.S. government is highly likely to succeed in weakening the dollar. Once views on the dollar change, overweighting emerging-market fixed income is the best option, including local-currency bonds and sovereign and corporate credit.”
Once the dollar starts to depreciate, global equity portfolios should increase their exposure to emerging markets. Although the S&P 500 may fall by then, emerging-market equities are expected to outperform developed markets.
It is not yet time to overweight emerging markets, but the conditions for doing so may gradually take shape later this year. The implementation of Trump’s policies and the evolution of the dollar will be key variables this year.”
At present There is buying in both onshore and offshore Chinese equities, but positioning is extremely light:
This week’s Stargate announcement further reinforced the assumed upside convexity in U.S. tech companies. All four major tech investment themes have performed very well and are delivering diversified trades, which is actually a healthier setup for the market.
The S&P 500 is entering a seasonal consolidation phase, and according to the statistics, This cycle likely already bottomed around 1/22, then should start rising in early 2.
Here is a chart covering a longer trading time frame.
Before we knew it, the U.S. stock buyback window had opened. The corporate stock buyback window opened on 1/24, and companies representing Companies representing 45% of the S&P 500 total market capitalization are now returning to the market to buy back shares.Scott expects 2025 total for the year will reach 1 trillion dollars, with this demand starting next week.
Next week will also bring a wave of earnings reports from large-cap tech companies：
Chart: the AI winner basket
Chart: the US robotics and automation basket
Chart: the Power Up America basket
Chart: the AI data center basket
The weekend is over. Wishing everyone who made it this far a happy week and all the best in the new week ahead!
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Note: All content in this article is for reference only, does not constitute investment advice, and is not a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for making decisions.