WHO THINKS IT’S A BULL TRAP?
Reasons against bull trap:
- CPI & PPI data very good: Recent Consumer Price Index (CPI) and Producer Price Index (PPI) data have been encouraging, indicating that inflationary pressures might be easing. The CPI data for December 2024 showed a year-over-year increase of 2.9%, while PPI data reflected a softer-than-expected rise, suggesting potential relief for businesses.
- Bank earnings AMAZING: Major financial institutions such as JPMorgan Chase, Goldman Sachs, and Wells Fargo have reported strong earnings. Their impressive performance highlights the resilience and strength of the banking sector, providing a solid foundation for market stability.
- 10yr finally showing relief along with $DXY the dollar: The 10-year Treasury yield has shown signs of easing, pulling back from recent highs. Simultaneously, the US Dollar Index (DXY) has also experienced some fluctuations, but remains strong overall. This combination suggests a more stable economic environment.
- Tech earnings around the corner should be strong: Anticipation is high for upcoming earnings reports from major tech companies. With positive forecasts and strong performance expected, the tech sector could provide a significant boost to market sentiment.
- Trump admin is freeing up energy and crypto regulations as soon as they get into office: The Trump administration has announced plans to deregulate the energy and cryptocurrency sectors. This move is expected to stimulate growth and investment in these industries, contributing to overall market optimism.
Reasons for bull trap:
- Inflation sticky: Despite positive data, inflation remains a concern. Core inflation continues to exceed the Federal Reserve’s target, indicating that price pressures may persist and challenge economic stability.
- Earnings might not be strong enough: While some sectors, such as banking and technology, are performing well, there is uncertainty about whether overall earnings will meet expectations. Disappointing earnings reports could dampen investor confidence.
- Too many unknowns with Trump admin: The new administration’s policies introduce a range of uncertainties. Potential changes in trade, regulatory, and fiscal policies create an unpredictable environment that could impact market stability.
- Tariffs could backfire: The reintroduction or escalation of tariffs could have negative repercussions for businesses and consumers. Increased costs and potential disruptions in supply chains might lead to economic challenges and market volatility.
What do we think? Is it a bull trap or a genuine rally? The market’s reaction to these factors will be crucial in determining the direction.
Sources:
https://x.com/amitisinvesting/status/1879598052702331009
https://www.americanbanker.com/news/bank-stocks-rise-after-strong-earnings-easing-core-inflation
https://www.fxstreet.com/analysis/all-eyes-are-on-the-us-cpi-data-due-today-202501150903
https://www.investing.com/analysis/us-dollar-soft-ppi-adds-to-pullback-cpi-report-up-next-200656257
https://www.msn.com/en-us/money/economy/high-inflation-is-entering-its-fifth-year/ar-BB1ro9a2
https://www.bcg.com/publications/2025/prepare-for-new-tariffs