HOW I SEE IT – by Bruce 

Tariffs/ S&P 500 10,000 end of decade/Jan. Barometer

Equity indices somewhat flat to up this week - even with the Monday sell off with all the tariff news - unsettling with Trump as it feels like daily, he is behind a market move. Will tariffs cause us to buy more Canadian.  Yes.

Positives: Investor Sentiment Survey - 33.3% bullish/ 23.8% neutral/ 42.9% bearish -bullish reading dropping - obviously tariff news behind it.

RBC CM US Strategy – “Reporting season has remained solid on the stats. and it does appear to us that the stock market has been driven by earnings dynamics in recent trading. Tariffs may have many economic impacts, but we think investors should focus on the economic and political goals that are driving decision making. The range of political potential outcomes is especially wide. Market positioning remains elevated and vulnerable to a pullback. Potential implications of tariffs - increase inflation expectations - dampen and consumer sentiment. Bear case moves from 5775 to 5600, driven by higher inflation and interest rate assumptions. See echoes of 2018 in current market backdrop - elevated investor positioning leading into trade policy uncertainties - Fed policy less of a risk in 2025 verse 2018, but early end to rate cutting cycle could be a risk. (Opinion - by the dip).”

Ed Pennock - “Interesting times - as the Chinese proverb goes. The rally is widening out. Tariffs on hold. Risk of war is diminishing. Bonds look like they have peaked. WTI at $79. Real GDP grow 3%. All positive for lower inflation.”

Jim Paulsen - “I do not expect a bear market to emerge this year. This year likely will prove more challenging. Third year of a bull market historically has proved more volatile. I am struck by how many cautionary messages are being delivered about the equity market. 1. Put call ratio signal aggressiveness. 2. Breath has worsened significantly since last fall. 3. Portfolio allocation towards stocks is high. 4. Stocks losing supportive of economic sentiment. 5.The stock market has lost its leadership.        6. ETF & mutual fund equity flows have been very strong. Danger zone. From an economic standpoint, the stock market entered a danger zone compared to where the bull has operated during us first couple years. But the danger zone is flashing yellow not red. (buy the dip).”

Dr. Ed Yardeni - “Listen to him yesterday on a conference call. Still looking for S&P 500 at 7000 by YE - 8000 next year - then 9000- then 10,000 by the end of the decade. Trump tariffs are about much more than money. We’re not worried that tariffs will spark and upward inflation spiral. If tariffs were to trigger a global trade war, it affects could slow US economic growth, but that’s not our base case outlook.”

Tom Lee – “January ISM upturn points to accelerating small earnings per share of growth. A reason to be optimistic about 2025 is that we got a positive January close. This is the January barometer as January goes so goes the year = It’s at 89%-win ratio. There are six reasons that show 2025 tracking better than our base case.1. Barometer first five days positive = 82%-win ratio. 2. Sentiment capitulation in December to January. 3.Inflation tracking softer than consensus view. 4.Fears of day one tariffs over blown. 5. Cyclicals leading year to date equals buy signal. 6. January barometer signal.”

Negatives: RBC CM Strategy – “US deficit could hamper ability to cut taxes in US. Challenges in CDN economy as record Canadian GDP under performance stretching on. Brian Westbury " Fed Reserve made it clear on last Wednesday that it’s not about to cut short term rates again anytime soon which is good news if you’d like to see the Fed live up to its goal, I’m bringing in inflation down to 2%. Expect the Fed to use the tariffs as a reason to hold the line on short term interest rates. If, as we expect, economic data begin to show signs of a slowdown, the Fed and the market will not immediately price in rate cuts. On the other hand, if the Fed does not react to a slowdown in the economy and starts to increase the money supply too much, then stagflation becomes a  problem. Either way the equity market faces some serious headwinds. The era of easy everything is coming to an end.”

Investment strategy – “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” Benjamin Graham
 

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