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This accelerated approach has generated 3.5% annualized alpha

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This accelerated approach has generated 3.5% annualized alpha: Sevens Report Analysts Quoted in Investing.com

Analyst explains 2 sector rotation strategies with proven outperformance

According to Sevens, this accelerated approach has generated 3.5% annualized alpha versus the S&P 500.

The second strategy called the Cheapskate Sector Strategy, involves buying the sector with the lowest price-to-earnings ratio from the previous year.

Sevens notes that the contrarian approach, while more psychologically challenging, has historically paid off, delivering an annualized return of 12.6% over 34 years. It has outperformed the S&P 500 in 20 of those years, with a 59% win rate. For 2025, Energy is the cheapest sector in the S&P 500 based on trailing P/E.

Sevens Report notes that while these strategies don’t work every year, their long-term success rates exceed those of most active managers.

Also, click here to view the full article published on January 31st, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

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Two Sector Rotation Strategies With Proven Outperformance

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Two Sector Rotation Strategies With Proven Outperformance: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Two Sector Rotation Strategies With Proven Outperformance
  • Dueling Political Influences on Oil Prices

Futures are modestly higher on more solid tech earnings and as markets are in a “show me” mode on tariff threats.

Apple (AAPL) beat earnings overnight and the stock is up 3% pre-market and that’s helping push futures higher.

On tariffs, markets remain skeptical tariffs will be implemented against Canada and Mexico tomorrow and if they are, they’ll be largely ineffectual.

Today focus will be squarely on the Core PCE Price Index (E: 0.2% m/m, 2.6% y/y).  This is the Fed’s favorite measure of inflation and markets will want to see an in-line to weaker number to keep rate cut expectations intact.  If this number is above expectations, however, look for yields to jump and for that to likely hit stocks.

In addition to the core PCE Price Index we do have one Fed speaker today (Bowman at 8:30 a.m. ET) and some more notable earnings (XOM ($1.58), ABBV ($2.13), CL ($0.89)) but they’re unlikely to move markets.

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FOMC Preview (Good, Bad, and Ugly Scenarios)

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FOMC Preview (Good, Bad, and Ugly Scenarios): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview – What’s Expected, Hawkish-If, Dovish-If Scenarios
  • December Durable Goods Orders Takeaways (Goldilocks)
  • NVDA Chart – An Ominous Technical Setup

Stock futures are slightly higher ahead of today’s Fed decision as global bond markets remain steady on the back of some favorable inflation metrics overnight.

Economically, Australian CPI fell from 2.8% to 2.4% vs. (E) 2.6% in Q4’24 and Eurozone M3 Money Supply rose 3.5% Y/Y vs. (E) 4.0%, both of which helped ease inflation fears.

There are no economic reports today leaving market focus on the FOMC Decision (2:00 p.m. ET) and Powell’s Press Conference (2:30 p.m. ET). As today’s Fed preview details, a hawkish outcome that sends yields higher could cause a painful selloff in equities.

Today is also the first day of big tech earnings with TSLA ($0.75), META ($6.90), MSFT ($3.12), and IBM ($3.74) all due to report quarterly results after the close. Expectations are already optimistic for 2025 so any disappointment could pressure stocks in after-hours trading regardless of the initial reaction to the Fed announcement.

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Were Tariff Fears Exaggerated? (No. Two Reasons Why)

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Were Tariff Fears Exaggerated? (No. Two Reasons Why): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Were Tariff Fears Exaggerated? (No. Two Reasons Why)

Futures are slightly lower following a major central bank rate hike and despite better-than-expected economic data.

The Bank of Japan raised interest rates 25 bps, as expected, and signaled further rate hikes are coming (also as expected).

Economically, Euro Zone and UK Manufacturing PMIs slightly beat estimates but both remained in contraction territory.

Today we get the most important economic reports of the week via the January Flash Manufacturing PMI (E: 48.9) and Flash Services PMI (E: 56.7) and again, markets will want to see in-line to slightly soft data.  Stronger than expected readings would likely boost yields and pressure stocks.  Other economic reports today include Existing Home Sales (E: 4.16 million) and Consumer Sentiment (E: 73.2).

Turning to earnings, the key report I’m watching today is AXP ($3.03) as that will give us insight into consumer spending and the stronger the report, the better.

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What Happens to Markets If the Bond Vigilantes Return?

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What Happens to Markets If the Bond Vigilantes Return?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Happens to Markets If the Bond Vigilantes Return?
  • What Happens to Markets If the Bond Vigilantes Don’t Return?

Futures are slightly lower mostly on digestion of the recent rally and following a mostly quiet night of news.

Economically, the only notable number was UK CBI Industrial Trends, which were slightly better than expected (-34% vs. (E) -40%).

Politically, President Trump conducted an interview with Sean Hannity overnight but nothing new was revealed.

Today we get our first notable economic report of the week via Jobless Claims (E: 218K) and the case remains that Goldilocks data (so in-line to slightly weak) is the best case scenario for stocks, as it implies solid growth but won’t further reduce rate cut expectations.

On earnings, the reporting season continues to gain steam and some reports we’re watching today include GE ($1.02), AAL ($0.64), FCX ($0.25), TXN ($1.19), ISRG( $1.77).

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Four Key Areas of Policy and Politics That Matter Most

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Four Key Areas of Policy and Politics That Matter Most: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Four Key Areas of Policy and Politics That Matter Most to Markets
  • Weekly Economic Cheat Sheet: Composite PMIs and Jobless Claims in Focus

Futures are higher in volatile trade as investors weigh Trump’s fresh tariff threats against pro-growth policy plans.

Economically, the German ZEW Survey was mixed while the U.K. Unemployment Rate ticked up to 4.4% from 4.3%.

Looking into today’s session, there are no notable economic reports and no Fed officials are scheduled to speak, however, there are Treasury auctions for 3-Month and 6-Month Bills at 11:30 a.m. ET and 52-Week Bills at 1:00 p.m. ET. Rising yields in reaction to the auction results could lead to more market volatility and pressure stocks while strong demand (lower yields) would be welcomed by investors.

Additionally, earnings season continues today with quarterly reports from SCHW ($0.90), MMM ($1.66), DHI ($2.41), NFLX ($4.19), UAL ($3.01), and COF ($2.66), and investors will want to see evidence of continued earnings growth to support the case for a further stock market rally in 2025.

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Sevens Report Research founder Tom Essaye Interviewed on Yahoo Finance

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Tom Essaye Interviewed On Yahoo Finance

Trump’s economic policy impact, US dollar: Asking for a Trend

“Sevens Report Research founder Tom Essaye outlines what investors need to know to separate the headlines that matter to the market from the noise.

Also, click here to view the full interview with Yahoo Finance published on January 8th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Jobs Day (Abbreviated Jobs Report Preview)

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Jobs Day (Abbreviated Jobs Report Preview): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day (Abbreviated Jobs Report Preview)
  • Are the Global Bond Markets Punishing the UK?

Futures are little changed as none of the economic data or central bank speak of the past 48 hours was impactful, so investors are focused on today’s jobs report it’s potential to move markets, especially if it’s “Too Hot.”

Economically, Euro Zone retail sales missed expectations, adding another lack luster data point to the growing list.

Today the major event is the jobs report and stakes for stocks are clear:  If this report is “Too Hot” and boosts fears the Fed has paused rate cuts, it’ll cause yields to rise and hit stocks, potentially hard.

Expectations for the report are as follows: 164K Job-Adds, 4.2% Unemployment Rate, 4.0% y/y Wage Growth.   An in-line to slightly weak number vs. expectations is the best-case scenario for markets this morning:

In addition to the jobs report we also get Consumer Sentiment (E: 74.5) and some notable earnings from DAL ($1.76), WBA ($0.37) and STZ ($3.34), but today is really all about the jobs report.

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Are Credit Spreads Confirming Stock Market Weakness?

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Are Credit Spreads Confirming Stock Market Weakness?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Are Credit Spreads Confirming Stock Market Weakness?

Futures are slightly higher and are seeing a modest bounce following a generally quiet night of news.

Economically, the only notable number overnight was German Unemployment, which met expectations at 6.1%.

Politically, the House of Representatives will vote on a Speaker today and if Speaker Johnson fails to quickly win that election, it’ll be a market negative as it will raise doubts Republicans can actually pass tax cuts later in 2025.

Today is an important day for markets from a political perspective, it’s also important from an economic standpoint as we get the first of the “Big Three” monthly economic reports via the December ISM Manufacturing PMI (E: 48.5).  Markets will want to see that number in-line to slightly lower, as a much better than expected number will likely see a repeat of yesterday, as the dollar and yields should rise and this early rally in stocks should fade as investors reduce expectations for future rate cuts.  Goldilocks data is needed for this stock market dip to end.

Speaking of the Fed, we get our first two speakers of 2025 in Barkin (11:00 a.m. ET), and Daly (5:30 p.m. ET) although they shouldn’t move markets.

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Five Important Events to Watch As We Start 2025

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Five Important Events to Watch As We Start 2025: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Important Events to Watch As We Start 2025
  • The Sevens Report Q4 Quarterly Letter Will Be Delivered to Subscribers Today

Futures are moderately higher to start the new year despite disappointing global economic data.

Manufacturing PMIs from China, the EU and the UK all missed expectations, highlighting the disparity between solid U.S. growth and lackluster global growth.

The Chinese Caixin Manufacturing PMI declined to 50.5 vs. (E) 51.7, the Euro Zone reading slipped to 45.1 vs. (E) 45.2 while the UK version dropped to 47.0 vs. (E) 47.3.

Today focus turns back to economic data and as was the case at the end of 2024, markets need in-line to slightly soft economic readings to keep Fed rate cut and soft landing expectations stable.  Today, that means Jobless Claims near their 225k estimate (and not too much lower) and the S&P Final Manufacturing PMI in-line with estimates (E: 48.3).

 

Sevens Report Quarterly Letter Delivered Today

Our Q4 ’24 Quarterly Letter will be released today.

We use our strength (writing about the markets) to help you 1) Save time (an average of 4-6 hours per quarterly letter) and 2) Show you’re on top of markets with impressive, compelling market analysis

You can view our Q3 ’24 Quarterly Letter here.

To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email info@sevensreport.com.

Join thousands of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.