Investor Sentiment Hits New Lows! Will You Allocate More Equities or Cash?
Wednesday’s core CPI data came in below expectations, sparking a rally in $.SPX(.SPX)$ that erased all of January's earlier losses. However, despite positive news from bank and $Taiwan Semiconductor Manufacturing(TSM)$ earnings, the broader market and tech stocks declined yesterday. Has the market truly run out of steam?
1. Overvaluation, Narrower Market Breadth, and Waning Momentum
The issue of overvaluation in the US stock market remains prominent.
Since mid-December 2024, market breadth and momentum have been on the decline. As of last week, only 24% of stocks were trading above their 50-day moving averages, and just 29% of S&P 500 components outperformed the index.
Analysts from Fidelity and Tiger Brokers believe that the market is now in the late stages of a bull run, with limited upside potential.
The risk of mean reversion—a sharp return to long-term averages—could strike at any time. While this correction is expected to be severe, the timing and starting point remain uncertain.
2. Investor Sentiment Hits New Lows
According to the latest surveys:
Only 25.4% of investors are bullish on the market, a significant drop from the peak of 52.7% in mid-2024.
Meanwhile, 40.6% of investors are bearish about the next six months, marking the highest level of pessimism in the past year.
3. Earnings Season Brings Positives, but Is It Enough?
This week’s earnings season has delivered some good news, particularly for bank and tech stocks, but the overall market reaction has been muted.
Analysts project 7.3% earnings growth for Q4 2024 and further growth of 11.2%, 9.5%, and 12.7% for the first three quarters of 2025.
Historically, companies tend to exceed earnings expectations, which could provide additional support for the market.
Key tech earnings reports are scheduled for release at the end of January, and they will be a critical determinant of market direction.
At the same time, the upcoming inauguration of Trump next week introduces policy uncertainty, which may trigger further market volatility.
4. Unclear Market Direction: What Are Your Investment Choices?
Amidst these uncertainties, many investors are adopting a more conservative stance, favoring higher cash allocations to hedge against potential market corrections. Tiger Vault can be a reliable choice in such an environment.
Recently, US Treasuries have gained attention as a trading hotspot. In the context of high inflation, the positive correlation between the 10-year Treasury yield and stock earnings yield has become more pronounced.
According to the “Fed Model,” investors seek a balance between these two yields. Analysts at Tiger Brokers suggest that if $US10Y(US10Y.BOND)$ hits 5% early, it could be an ideal time to go long on Treasuries.
Questions to discuss
Will the January Effect still hold?
Are you optimistic or pessimistic about 2025’s market trajectory?
January performance is often seen as a bellwether for the year ahead.
Does this mean making money in 2025 will become even harder?
What’s your current portfolio allocation between equities and cash?
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For 2025, I’m more pessimistic, as narrowing market participation and policy uncertainties create risks. Although earnings growth looks strong, it might not offset these factors. The market’s late-stage bull run could lead to a sharp reversion to long-term averages.
I’ve increased cash holdings in my portfolio to hedge against potential corrections and am looking at US Treasuries if yields hit 5%. This provides a more conservative approach while still allowing for growth in case of a market rebound.
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Overvaluation, Narrower Market Breadth, and Waning Momentum
The issue of overvaluation in the US stock market remains prominent.
Will the January Effect still hold?
Are you optimistic or pessimistic about 2025’s market trajectory?
January performance is often seen as a bellwether for the year ahead.
Does this mean making money in 2025 will become even harder?
What’s your current portfolio allocation between equities and cash?
Rewards
Leave your comments and also post to win tiger coins~
- *January Effect*: Not a reliable indicator for 2025's market performance.
- *Market Trajectory*: Neutral outlook due to economic uncertainty and market volatility.
Key Challenges
- *Economic Uncertainty*: Global economic conditions, inflation, and interest rates may impact market performance.
- *Market Volatility*: Increased volatility can make it challenging to predict market movements.
- *Competition*: Rise of AI-powered trading tools and increased market participation may lead to fiercer competition.
Portfolio Strategy
- *Diversification*: Maintain a well-diversified portfolio with a mix of equities and cash/cash equivalents.
- *Risk Management*: Adjust portfolio allocation based on individual risk tolerance, investment goals, and time horizon.
It was a great surprise to me as last year, it seems to be hibernating.😴😴 [Bless][Bless][Bless][Bless] Hope this year I will have better luck in disposing them. 🙏🙏🙏
在這些不確定性中，許多投資者採取了更保守的立場，傾向於增加現金配置，以對衝潛在的市場調整。在這樣的環境下，Tiger Vault可能是一個可靠的選擇。
近日，美國國債作爲交易熱點受到關注。在高通脹背景下，10年期國債收益率與股票收益收益率的正相關性更加明顯。
根據“美聯儲模型”，投資者尋求這兩種收益率之間的平衡。老虎證券分析師建議，如果$US10Y（US10Y.債券）$提前觸及5%，這可能是做多美國國債的理想時機。
只有25.4%的投資者看好市場，較2024年中期52.7%的峯值大幅下降。
與此同時，40.6%的投資者對未來六個月持悲觀態度，創下過去一年來的最高悲觀水平。