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Wall St Week Ahead-Trump's first actions and job data to test market in January
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Wall St Week Ahead-Trump's first actions and job data to test market in January
Dec 29, 2024 3:28 AM

NEW YORK, Dec 27 (Reuters) -

After closing the books on a banner year for U.S. stocks,

investors expect to ride seasonal momentum into mid-January when

a slew of economic data and a transition of power in Washington

could send markets moving.

The S&P 500 rose roughly 25% in 2024 through Dec.

27, while the technology-heavy Nasdaq Composite index ,

which surpassed 20,000 for the first time in December, is up

over 31%.

On Friday, however, stocks sold off amid some profit taking

and questions about how markets could perform in January,

according to analysts and traders.

"There are concerns that maybe the first part of (next)

year can involve some repositioning and reallocation of funds

and those that are trading today and next week are probably just

trying to get a little bit ahead of that," said Robert Pavlik,

senior portfolio manager at Dakota Wealth.

Stocks tend to do well in the last five trading days of

December and into the first two days of January, a phenomenon

dubbed the Santa Claus rally, which has driven S&P gains of an

average of 1.3% since 1969, according to the Stock Trader's

Almanac.

Despite the Friday selloff, for the last five trading

sessions, the S&P rose 1.77%, while the Nasdaq was up 1.8%.

Just how long upward momentum lasts will depend on several

forces that could help drive markets in 2025.

Monthly U.S. employment data on Jan. 10 should give

investors a fresh view into the health and strength of the U.S.

economy. Job growth

rebounded in November

following hurricane- and strike-related setbacks earlier in

the year.

The market's strength will be tested again shortly after,

when U.S. companies start reporting fourth-quarter earnings.

Investors anticipate a 10.33% earnings per share growth in

2025, versus a 12.47% expected rise in 2024, according to LSEG

data, although excitement over President-elect Donald Trump's

policies is expected to boost the outlook for some sectors like

banks, energy and crypto.

"There's the hope that taxes and regulations will be

lowered or reduced next year, that will help support corporate

profits, which are what drive the market in the first place,"

said Michael Rosen, chief investment officer at Angeles

Investments.

Trump's inauguration on Jan. 20 could also throw the

markets some curve balls. He is expected to release at least 25

executive orders in his first day on a range of issues from

immigration to energy and crypto policy.

Trump has also threatened tariffs on goods from China and

levies on products from both Mexico and Canada, as well as to

crack down on immigration, creating costs that companies could

ultimately pass on to consumers.

Helen Given, associate director of trading at Monex USA,

said a new administration always brings with it a large degree

of uncertainty. There is also a good chance the impact of the

Trump administration's expected trade policies is far from fully

priced into global currency markets, she added.

"We're looking ahead to see which of those proposed

policies actually are enacted, which might be further down the

pipeline," Given said, adding she expected a big impact on the

euro, Mexican peso, the Canadian dollar, and the Chinese yuan.

The conclusion of the Federal Reserve's first monetary

policy meeting of the year in late January could also present a

challenge to the U.S. stocks rally.

Stocks tumbled on Dec. 18 when the Fed implemented its

third interest-rate cut for the year and signaled fewer cuts in

2025 because of an uncertain inflation outlook, disappointing

investors who had expected lower rates to boost corporate

profits and valuations.

Still, that could be good for alternative assets like

cryptocurrencies. The incoming crypto-friendly Trump

administration is adding to a number of catalysts that are

boosting crypto investors' confidence, said Damon Polistina,

head of research at investment platform Eaglebrook Advisors.

Bitcoin surged above $107,000 this month on hopes of

friendlier Trump policies.

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