The US stock market is made up of thousands of unique stocks. It was a wild ride, featuring massive volatility as traders rushed into the market to buy and sell. The latest developments, especially political rhetoric and various economic data releases, have affected market performance, causing an extreme turn in investor sentiment.
It’s a phenomenon we see on any given day when the market’s moves can be heavily influenced by a few large-cap stocks. These firms, referred to as “big bend” stocks, can make or break total returns. As such, when combined, they can produce a dangerous picture of the market’s vitality. The S&P 500 is broadly considered the most important benchmark for US equities. It determines its own moving or rolling average based on the data from the last 125 trading days. This metric, the days on market, is one of the best market trend indicators. When the S&P 500 is trading above its moving average, it shows strong momentum and bullish sentiment from investors.
Analysts look at inventories to determine the health of today’s market. They look at these levels against their own historical levels over the last six months. This analysis can provide insights into whether the market is trending upward or downward, thus aiding investors in making informed decisions.
Another resource that provides great perspective on overall market mood is the Fear & Greed Index. This index combines those seven separate market indicators to judge which emotions are most affecting the market right now. Each of these indicators count equally—each indicator is weighted equally in determining a composite score, which ranges from 0 to 100. A reading of 100 means investors are the most greedy they can be, and a reading of 0 means investors are the most fearful. Recognizing this emotional terrain will better prepare investors and help them more successfully weather extreme volatility and uncertain outcomes.
Recently, US stocks experienced a rally after former President Donald Trump softened his tone regarding Greenland and backed off from tariff threats. That change in rhetoric seemed to offer a lot of comfort to investors and added to the bright outlook for stocks. At the start of Dow Jones Industrial Average was down over 850 points – an 8% plunge. This drop was due largely to increasing hostility over Greenland and tariff threats, which were compounded by a sharp drop in the dollar.
Consumer spending has bounced back with unexpected strength over the holiday season, continuing to spend robustly despite the persistent high prices. This lingering consumer optimism bodes well for the overall economic resiliency and expansion. Yet in November, retail sales jumped more than anticipated. That’s good news for the economy going forward, because it means that consumer activity—which makes up nearly 70 percent of the economy—remains strong.
Inflation is still very much in the picture as wholesale prices still came in hot in November. This long-lasting inflation may affect real consumer spending and associated economic growth going forward. In this uncertain environment, investors continue to be on the lookout for ways that inflationary pressures can impact their facts and findings.