This week, markets are hitting new highs, with the S&P 500 and NASDAQ performing well, alongside strong movements in European markets. However, there’s increasing debate over whether the era of U.S. market dominance is coming to an end. Let’s break it down.

Global Market Trends: U.S. vs. The World

• The MSCI World ex-U.S. index has been outperforming the S&P 500 since the U.S. election and Biden’s inauguration.

MSCI World Excluding United States Index vs S&P 500 since October 2024.

• Despite this recent shift, historical data since early 90s suggests long-term outperformance of U.S. stocks versus non-U.S. stocks.

MSCI World Excluding United States Index vs S&P 500 since 1970.

• Traders should remain cautious about attributing market trends solely to political events.

Year-to-Date Performance Highlights

• S&P 500 & NASDAQ: Up 4% YTD
• European Markets: Up 10% YTD, driven by optimism around potential resolutions in Ukraine and stronger-than-expected earnings.
• Currency & Bonds: The U.S. dollar weakened by 1.5%-2% across major currencies, influenced by falling 10-year U.S. Treasury yields.

  

   

Key Market Movers

• Technology Stocks: Meta (+20 consecutive sessions of gains) and Nvidia continue to push markets higher.
• Retail & Consumer Stocks: Walmart’s price surge suggests market confidence but raises concerns about valuation.

  

  WMT last (lhs) vs 2025e EPS (rhs)

• Regional Banks & Healthcare: Mixed results, with some healthcare stocks seeing significant declines of 35%-40% due to 2025 outlook revisions.
• Options Market Impact: The recent option expiration pushed U.S. and European markets higher, reflecting increased options trading volume.

Inflation, Interest Rates & Fed Policy

• U.S. Inflation Data: Higher-than-expected CPI & PPI numbers last week indicate inflation remains sticky.

Core CPI mom +0.45%

• Federal Reserve Outlook: Markets currently pricing in a mere 0.39% rate cut for 2025—significantly less than expected.
• Volatility (VIX): Following a 2017-like playbook, volatility remains subdued despite macro uncertainty.

What’s Next? Key Events & Considerations

• Earnings Season Slows: Walmart and other high-beta stocks in focus; Nvidia’s earnings in two weeks will be a major catalyst.
• Market Seasonality: February and early March historically see weaker performance—something to watch.
• Macro Events: Flash PMIs (Friday), Fed Meeting Minutes (Wednesday), and Australian interest rate decision (Monday-Tuesday).

Trading Community & Mentoring Opportunities

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For questions or inquiries, reach out to Greg@duponttrading.com.

Have a good Trading Week!

Greg