Markets Wait for Q4 Earnings Reporting

Today, the stock markets are closed as we observe the birthday of Dr. Martin Luther King, Jr., a prominent Civil Rights leader. This provides a moment to reflect on the current state of the markets as we start the new trading year.

So far, major indexes have shown positive performance, each gaining at least +2% year to date. The Dow Jones, S&P 500, Nasdaq, and the small-cap Russell 2000 have all experienced these gains.

Today is also significant as it marks the Inauguration Day for President-elect Donald Trump, who will be serving a non-consecutive second term. Since the election on November 5th of the previous year, the indexes have seen increases: the Dow has risen +4.74%, the S&P 500 by +5.60%, the Nasdaq increased by +8.04%, and the Russell 2000 climbed by +3.20%.

Looking back at the previous election cycle, the stocks performed strongly. The Dow surged +44.76%, the S&P 500 increased by +68.35%, the Nasdaq skyrocketed +95.90%, and the Russell 2000 rose +9.83%. A significant factor in this growth was the boom in artificial intelligence. Additionally, the early months of President Joe Biden's administration saw an economic comeback known as the Great Reopening, aided by mass Covid-19 vaccinations. However, this surge also led to supply-chain issues, causing prices to rise sharply, prompting the Federal Reserve to raise interest rates starting in March 2022.

As we look ahead, there is considerable optimism about the next four years under Trump, especially with expectations that reduced regulations could stimulate earnings growth. Furthermore, the legalization of cryptocurrency has spurred growth in Bitcoin and platforms such as Coinbase, which has appreciated by +59% since Election Day. Positive global developments, such as a ceasefire between Israel and Hamas, have also contributed to a more stable political climate as Trump assumes office.

Nonetheless, challenges remain, including controversial proposals about immigration policies and debates within the Republican Party regarding healthcare initiatives and potential cuts to the corporate tax rate.

This week, several important companies are scheduled to release their Q4 earnings reports, including Netflix, Johnson & Johnson, and American Express. The upcoming earnings season promises to be busy, with signs indicating a healthy quarter for major financial institutions, such as JPMorgan and Citigroup.

Markets, Earnings, Stocks