Weekly Stock Market Update & SPY Technical Analysis
This week marks a major turning point in U.S. politics as the new Trump administration prepares to take office. Investors are eager to see whether the “Trump Pump,” which occurred following Trump’s election in November, will be reignited after his inauguration this week. However, investors will need to exercise patience, as markets will be closed on Monday in observance of Martin Luther King Jr. Day. Trading will resume on Tuesday.
The transition of power doesn’t typically have an immediate impact on markets, but Trump has already been vocal about his plans to ease regulations and implement tariffs. During his first term, the president was widely seen as being good for business, leading many to view his return to office as an optimistic signal for stocks. While the initial reaction has been positive, there is still significant ground to cover to determine whether Trump’s policies will replicate their previous success.
In addition to the inauguration, this week will bring further earnings reports from giants like Netflix, United Airlines, Johnson & Johnson, American Express, and others. Last week, financial institutions kicked off earnings season on a high note, exceeding analysts’ expectations and signaling optimism about the economy. Many companies have specifically cited excitement over a new Trump presidency as a contributing factor. As more earnings are released this week, investors will closely monitor large-cap reports, as they could provide insights into what to expect from other companies in these industries in the coming weeks.
Consumer sentiment is also on the agenda, with the report expected to remain steady at a reading of 73.2. This would mark the second consecutive month of a flat reading. While this represents a significant recovery from the 12-month low of 66.4, it remains well below pre-COVID levels of 100+. Consumers are still grappling with the challenges of inflation and economic uncertainty, but a new administration may help boost morale in the months ahead.
SPY Technical Analysis:
Although markets are hovering near all-time highs, the SPY, in particular, continues to form lower highs on its macro chart. This pattern is likely to make buyers cautious this week, especially if the index fails to achieve an early-week breakout spurred by the Trump catalyst. While the broader trend remains bullish, many large-cap stocks are currently in consolidation phases and may stay within these ranges until earnings season concludes.
There are moments to adopt an aggressive stance in the market and others to take a more defensive approach. At present, investors appear to be leaning toward caution, mindful of potential headwinds in the near term.