The S&P 500 Wipes Out Most Post-Election Gains

Renewed Bearish Sentiment as Rising Yields Weigh on Markets

Jan 13, 2025

Market Overview

What a swift shift in market sentiment. For the first time in a while, FinTwit appears less bullish, with bearish views starting to surface. Last Friday’s surprisingly strong jobs report sparked a sell-off as the 10-year Treasury yield surged past the key technical level of 4.75%. Suddenly, a robust labor market is being interpreted as a long-term economic risk, with the market now laser-focused on the number of anticipated Fed rate cuts.

Nearly all the post-election gains have been wiped out, leaving the average buyers of the 2024-09-06 dip in the red. If SPY declines further to around 573, it would push even the average buyers of the 2024-08-05 (Dollar-Yen carry trade unwind) dip underwater. Should that happen, we’d expect doomsday narratives to dominate our Twitter feeds.

Coincidentally, a significant number of options positions were opened near the 4,000 strike just a week before this sell-off. This reflects growing caution in the market, though it’s a reminder that while you can’t predict the market, you can prepare—a principle we’ve adhered to.

Quote our last week’s post:

Interestingly, there’s growing activity around the 4,000 strike, reflecting concerns about a potential 32% drop from current levels.

Despite this, the market doesn’t appear to be in full panic mode. The decline has been relatively orderly so far. While this doesn’t rule out further downside, it’s worth noting as an observation rather than a conclusion.

Adding to our skepticism, the 10-Year Breakeven Inflation Rate hasn’t moved significantly, casting doubt on the prevailing market narrative driving these price actions. For now, we remain cautious as we have been for the past couple months and unconvinced by the current story being told.

Earnings Next Week

For the week of Jan 13 2025, notable earnings releases for companies with a market cap above $2 billion include:

2025-01-13: PM KBH 0.00%↑

2025-01-14: AM NEOG 0.00%↑

2025-01-15: PM SNV 0.00%↑ HOMB 0.00%↑

2025-01-15: AM JPM 0.00%↑ WFC 0.00%↑ GS 0.00%↑ BLK 0.00%↑ C 0.00%↑

2025-01-16: AM TSM 0.00%↑ UNH 0.00%↑ BAC 0.00%↑ MS 0.00%↑ PNC 0.00%↑

2025-01-17: AM TFC 0.00%↑ SLB 0.00%↑ FAST 0.00%↑ WIT 0.00%↑ STT 0.00%↑

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