US Weekly Report: Welcome to the Trump 2.0 era

Welcome to the Trump 2.0 era

Just as market participants had bought into the idea that tariffs would not be an immediate focus on Trump’s ‘Day One’, the US President was quick to disrupt the risk party by floating a 1 February timeline for a 25% tariff on Mexico and Canada. However, doubts remain over whether this February timeline will materialise, given that markets may be all too familiar that there could be a disconnect between Trump's rhetoric and what is eventually enforced.

Trump’s 'Day One' also saw a flurry of executive actions, with several key initiatives outlined in the table below. His first actions appear to prioritise reversing Biden-era's climate agreements, tightening immigration controls, and pushing for government reforms. While the absence of tariff measures was widely welcomed for now, we still expect that tariffs may eventually be implemented with considerable force, so as to allow room for consensus to be reached. In such environment, investors may need to adopt a more reactive stance, rather than a predictive one.

Look-ahead

Apart from the near-term political noise, this week will also feature the release of Netflix’s earnings, which are expected to set the tone for upcoming tech earnings. Recent underperformance in growth sectors appears to reflect concerns over whether much has been priced into the valuation, with investors looking to upcoming earnings reports to justify these lofty multiples. Ahead, expectations are for Netflix’s 4Q revenue to grow by 14.5% year-over-year to US$10.1 billion, with earnings per share (EPS) projected to nearly double to US$4.19, up from US$2.11 last year.

S&P 500: Retest of its December 2024 all-time high ahead?

The S&P 500 has shown resilience over the past week with a 2.7% gain, which has broken the lower-highs pattern from December last year and overcome a near-term downward trendline resistance. Buyers now appear to be targeting a retest of the December 2024 all-time high at the 6,100 level, as the daily relative strength index (RSI) reverts back above its midline. The broader upward trend remains intact, supported by a rising channel and various key moving averages. Any subsequent move above the 6,100 level could set the stage for a potential rally toward the 6,420 level next, where a key Fibonacci extension could present the next resistance.

Key levels:

• R2: 6,420
• R1: 6,100
• S1: 5,700
• S2: 5,374

US 500 Cash chart:

Source: IG charts

Sector performance

Sector performance over the past week revealed outperformance in value, with the utilities and financial sectors leading the way, each posting gains of over 5%. Utilities likely benefited from their defensive appeal and exposure to strong energy demand driven by artificial intelligence (AI) advancements. Meanwhile, financials were buoyed by an exceptional earnings season among major US banks. Conversely, growth sectors underperformed despite the backdrop of lower Treasury yields. Their impressive performance over the past year has brought their elevated valuations into focus as investors await upcoming their earnings releases over coming weeks. Apple (-2.9%) stood out as the clear laggard among the Magnificent Seven stocks over the past week, as its loss of the top spot in China's smartphone market raised concerns about the growth in its third-largest market.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 14th – 20th January 2025.

Source: Refinitiv
*Note: The data is from 14th – 20th January 2025.

Source: Refinitiv
*Note: The data is from 14th – 20th January 2025.