Inside Markets

An uneven policy path, reluctant Fed and full SPX valuation (~21x forward estimates) has us looking to add equity exposure on pullbacks only.

The CBOE Volatility Index (implied equity volatility) closed at elevated levels (27.62) yesterday.

The majority of SPX sectors have reached short-term oversold territory over the past two weeks.

The advance/decline line on the S&P 500 (SPX) has remained in negative territory for 11 straight sessions.

The tactical backup in Treasury yields from oversold levels looks to extend in the days/weeks ahead with more curve steepening.

Markets are priced for a rate cut at next week’s meeting followed by a pause in January (1/29 FOMC).

The post-election cyclical rotation has stalled with the Russell 2000 (RTY) Nasdaq 100 (NDX) performance ratio pulling back after signaling a potential break above this year’s base pattern near 0.116.

It seems unlikely that tomorrow’s CPI print would discourage the Fed from cutting rates by another 25bp next week, given lingering uncertainty around the health of labor markets.

Consensus estimates for Mag 7 earnings suggests +18% growth in 2025, which is down from +33% earnings growth in 2024.

Earlier this week, we estimated the negative impact on October payrolls from hurricanes and the BA strike was ~125,000.