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Davos:

Economic orthodoxy is out. Rule-busting and experimentation are in. That's a key takeaway from this week's gathering of top executives and world leaders in Davos. Why it matters: Economic mini-experiments are happening in nations big and small as government officials embrace tariffs, protectionism, anti-immigration and other policies. The goal is to invigorate economic growth after tried-and-true policies have failed, despite warnings from mainstream economists that such approaches will damage the economy. However, the conventional wisdom around the economic benefits of free trade and a more interconnected world became that for a reason — and risks abound. Driving the news: "My message to business is simple: Come make your product in America, and we will give you the lowest tax rate on Earth. But if you don't make the product here, you will have to pay a tariff," Trump told the gathering in a virtual appearance — a reminder that the world's largest economy is led by a figure who rejects the mainstream economic view that tariffs are harmful. What they're saying: Top executives may not love the prospect of big tariffs but say they believe the set of policy changes on the way will be good for the economy on net. "Lower regulatory burden will result in higher profit margins, will then allow us to manage the tariff burden differently," Bank of America CEO Brian Moynihan said in an interview with Axios earlier today, so long as tariffs are used "in moderation." "We absorbed the tariffs put in during the first Trump administration and they never came off. Ten years later, we're talking about outsized economic growth relative to trend and relative to the rest of the world," Moynihan said. Or as JPMorgan CEO Jamie Dimon put it to CNBC yesterday when asked about tariffs, "If it's a little inflationary but it's good for national security, so be it. I mean, get over it." The intrigue: For the second year in a row, Argentine President Javier Milei gave a special address at Davos criticizing mainstream economic thought. "I say to all global leaders, it is time to break free of the script," Milei said. "The truth is that there is something badly mistaken about the ideas that have been promoted through forums such as this one." "It is essential to break these ideological chains if we want to usher in a new golden age," he added, borrowing a phrase from Trump's inaugural address. What to watch: European leaders face a harsh reality about their economy: Take a new approach, or fall even further behind after its yearslong slog. Officials in Germany are debating whether to upend a longtime debt rule enshrined in their constitution to jumpstart the stagnant economy. Speaking in Davos, German Chancellor Olaf Scholz pushed to expand borrowing to invest in infrastructure — an idea that helped tank the government last year. The nation's top central banker backed the idea, telling a German newspaper that the longstanding debt rule has worked well. "But now we live in a world of tectonic change and we have to address that. ... We have to start thinking outside the box."

From JC

Tech Hits 52-week Lows vs QQQs

JC PARETS

 JANUARY 22, 2025

Technology stocks have been quite the laggard for some time. In fact, the Large-cap Technology Index ($XLK) is actually down since mid-July.

Sector Rotation is the lifeblood of a bull market. How many times have you heard me say that?

And this cycle is no different. They used to tell me that it was only the Tech stocks that were driving this bull market, and nothing else what's working.

Here we are with the S&P500 hitting new all-time highs literally every single month, and Technology stocks are actually down since July.

It's been the epic rotation into Consumer Discretionary that has helped drive this market higher.

Yesterday I hosted a livestream with retail expert Jeff Macke about the Consumer Stocks that we want to own heading into 2025. Check it out here.

The chart that I think shows this rotation really well is this one here, with Technology hitting new 52-week lows relative to the QQQs, while Consumer Discretionary is hitting new 52-week highs:

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Rotation rotation rotation.

That's what this is all about.

The largest component of the Consumer Discretionary Sector is $AMZN, representing 20% of the Index. It also has a 6% weighting in the Nasdaq100 $QQQ.

Below is an updated look at a chart we sent you last week showing the S&P 500 breaking above the top of its short-term downtrend channel.  Since that downtrend was broken, the path of least resistance has been higher.  After making a new all-time intraday high this morning, the S&P is currently set to make a new all-time closing high as well.

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A new all-time closing high would confirm the bull market that's been in place since it began in October 2022.  Below is a table showing all bull markets for the S&P in its history using the 20% rally/decline threshold.  Through today, the current bull market has seen a gain of 70.4% over 833 calendar days.  As shown at the bottom of the table, the median gain for all prior bull markets has been +76.7%, so we're getting close to that level!  We still have a ways to go to get to the average bull market gain of 114.4%, however.

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In yesterday's Chart of the Day, we looked at historical earnings results for Netflix (NFLX) ahead of its Q4 2024 earnings release after the close.  Using our Earnings Explorer tool, we pointed out that Q4 earnings have historically been by far NFLX's best quarter.  On average, NFLX shares had gained 9.14% on its 22 prior Q4 earnings reaction days (the first trading day following its quarterly earnings release).  Notably, after yesterday's closing bell, NFLX posted stronger than expected Q4 results, and the stock rallied 10%+ after hours.  At the moment, NFLX shares are up 9.4% on the day.  It doesn't get much closer to the historical script than that!

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jog on

duc