Market Analysis for December 28, 2024

Overview

As we approach the end of December 2024, the stock market has exhibited mixed results affected by various global economic developments, particularly in the tech and energy sectors. Last week saw major volatility due to rising inflation fears and adjustments in interest rate expectations.

Weekly Recap

Major Events Impacting the Market:

1. Federal Reserve Policy Changes: The Federal Reserve indicated potential interest rate hikes in early 2025, which has influenced market sentiment, especially within growth sectors like technology.
2. Energy Prices Surge: Recent spikes in crude oil prices, driven by geopolitical tensions in the Middle East, have affected energy stocks and may provide opportunities for ETFs focused on the energy sector.
3. Tech Sector Volatility: Major tech firms faced scrutiny regarding data privacy, leading to increased regulatory pressures, which impacted stock prices across the sector.

Performance Highlights:

• The S&P 500 index closed the week down 1.5%, reflecting investor caution.
• Technology ETFs, such as the Invesco QQQ Trust (QQQ), dropped approximately 2.3%.
• Energy-focused ETFs, like the Energy Select Sector SPDR Fund (XLE), managed to increase by 3%, benefitting from rising crude prices.

Predictions for Next Week

1. Potential Market Correction: Given the recent downturn, a short-term correction could occur. Investors should be cautious but may find opportunities in undervalued stocks and sectors.
2. Interest Rate Watch: The upcoming FOMC meeting in January will be highly anticipated as investors seek clearer guidance on the Fed’s stance concerning inflation and interest rates.
3. Earnings Reports: Several major companies are set to report earnings next week, including Apple and Tesla, which may drive market momentum either way.

Recommendations for Trading on December 28, 2024:

Buy:

• Energy ETFs: Given the upward trend of energy prices, consider buying into XLE for long-term benefits from the ongoing energy crisis.
• Apple Inc. (AAPL): The stock has seen recent volatility but remains a strong long-term hold, especially with holiday sales looming.

Sell:

• Tech ETFs (like QQQ): If you are currently holding tech ETFs, consider selling some positions to mitigate potential losses until clearer signs of recovery emerge.
• High Valuation Stocks: Companies with high PE ratios might be at risk during the potential correction, consider liquidating these positions.

Upcoming Events to Watch:

• Apple Earnings Report (January 1): Anticipated to provide insights into consumer demand post-holiday season.
• Geopolitical Developments: Monitor Middle East tensions as they can impact energy prices, leading to fluctuations in related stocks and ETFs.

Conclusion

Investors should remain vigilant as 2024 comes to a close, with significant implications for portfolio strategies into the New Year. Focus on energy investments for growth while maintaining a watchful eye on tech performance as the market reacts to economic indicators.