The euphoria of 2024’s market performance — led by a 23.3% gain in the S&P 500 — is quickly giving way to caution as we enter 2025.
While last year’s rally was driven by concentrated strength in the Magnificent Seven — Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), Nvidia (NVDA), and Tesla (TSLA) — broader market sentiment is now at risk.
With multiple warning signs flashing, a more cautious approach is warranted in the months ahead.
Choppy Markets Ahead
January’s trading is set to face significant disruptions. Unusual market closures, such as the one scheduled for Jan. 9 to honor the passing of former President Jimmy Carter, and additional holidays later in the month will create fragmented trading weeks.
This irregular schedule is likely to suppress volume and lead to a continuation of the choppy, low-participation environment seen during the 2024 holiday season.
Thin markets often amplify volatility, and in a month already weighed down by tax-loss selling and fund manager rebalancing, the stage is set for potential downside risks.
If sentiment falters, traders could see a pullback — or even a correction — as early as January.
Beyond technical factors, cracks are forming in the economy. Rising consumer credit stress is a looming issue, with credit card usage at or near historical highs.
U.S. credit card defaults have surged to a 14-year high, raising fears of a potential recession.
As households run out of disposable credit, the ripple effects could extend to consumer spending, impacting discretionary sectors.
This isn’t an imminent crisis, but it does put a question mark on the strength of the Consumer Discretionary sector. If spending slows, companies like Amazon (AMZN) and Tesla (TSLA) — already key drivers of market sentiment — could face additional pressure.
Not only that, but the Federal Reserve’s shift in December 2024, reducing its projected rate cuts for 2025 from six to just one, has already removed a major tailwind for the market. While this policy pivot was necessary to avoid overheating, it also dampened the optimism that fueled last year’s rally.
As we move into 2025, any further adjustments to monetary policy could create more turbulence. The Fed is unlikely to hike rates abruptly, but even small signals of tightening could weigh heavily on investor sentiment.
What This Means for Traders
With these risks in mind, 2025 is shaping up to be a year where caution pays.
Defensive sectors like Health Care (XLV), Consumer Staples (XLV) and Utilities (XLU) may see increased inflows, providing relative safety amid broader uncertainty. However, traders should be prepared for a mixed environment with more puts, fewer calls and a focus on balanced portfolios.
This year won’t be a repeat of 2024’s bullish ride.
The market faces too many structural and sentiment risks to expect a similar outcome. Staying nimble and prepared for volatility will be critical to navigating the challenges ahead.
Kane Shieh
Kane Shieh Trading
Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!
- Telegram: https://t.me/+Ji2OakXnGMM5OTI5
- YouTube: https://www.youtube.com/@GammaPockets/featured
Important Note: No one from The TradingPub team or Kane Shieh Trading will ever contact you directly on Telegram.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. 92% Accuracy on LIVE Trade Alerts — This Trading Setup Is Exactly What You Need in 2025!
The year has started fully and now is the best time to know exactly how you can target massive opportunities in the markets.
I’ve picked out the first stock I’m trading in 2025 – using the same method that has shown 92% accuracy across LIVE trades.
It’s a brand-new year and you don’t have to start trading cluelessly! In fact, you could start taking your shots at weekly opportunities with a method that has shown the power to pay consistently – with a 92% accuracy.
Tired of settling for measly gains in 2025?
You don’t need to sweat it. with a special method that has shown the power to pay out every week – with a 92% win rate on LIVE trades – all you need to do is watch this breakdown to see how you can start taking a shot at weekly payouts in the new year!
Go Here for More Details
