The WSJ Dollar Index Falls 1.48% This Week to 101.80, Largest One-week Point Decline Since November 2023 — Data Talk

By Ben Levisohn

Sometimes the planets quite literally align. For investors, this isn't one of those times — but it might just work out OK anyway.

If you looked up into the night sky this past week, you might have seen a " planetary parade" as Venus, Saturn, Jupiter, Mars, Uranus, and Neptune lined up in a way that isn't uncommon, but also not pedestrian. It's the kind of sight that inspired ancient civilizations like the Babylonians and Mayans to seek omens about the future, both good and bad. Today, it's a phenomenon that might open our eyes to the wonders of the universe, if only for a fleeting moment.

If only the drivers of the financial markets were in similar sync. In the best of times, the government, monetary policy, and the economy pull in the same direction, helping corporate profits rise and stock valuations increase. This isn't one of those times. The economy, though strong, still has an inflation problem, one that has forced the Federal Reserve to back away from what promised to be a steady series of rate cuts in 2025. The reelection of Donald Trump has introduced an element of chaos that has the potential to shake markets or lift them higher.

The stock market, then, is left not to climb the proverbial wall of worry but to navigate a swamp of uncertainty. How Trump decides to attack taxes, tariffs, the national debt, and immigration will result in wilder gyrations than we've been used to during the past couple of years. "Expect increased noise and volatility surrounding the incoming administration's new policies, but these are the four main areas whereby those policies could impact the markets and the economy," writes Sevens Report's Tom Essaye.

Market volatility is often a reflection of what investors think they know. When the path ahead looks relatively certain, investors get comfortable — some would even say complacent — and don't feel the need to make big changes to their positions. But when something unexpected happens, it results in a mad dash to reflect the new information in trades and portfolios. Too many scares, and volatility rises. Between the economy, inflation, and the Fed, investors are already dealing with plenty of known unknowns. Making sense of it all will be complicated with a wild card like Trump in the mix. "Anyone not plugged directly into the new administration will have difficulty assessing the macro outlook, because policy shocks are likely to be dominant here," writes Gerard MacDonell, an economist at 22V Research.

Investors got a taste of Trump's potential impact on the market this past week — when he did the unexpected. On Tuesday, for instance, stocks soared after the president refrained from placing tariffs on China, Mexico, Canada, and other U.S. trading partners or deporting millions of immigrants during his first day on the job. Tech shares got a big boost on Wednesday, when Trump touted Stargate, a $500 billion joint venture between Oracle, SoftBank Group, and OpenAI to build AI infrastructure across the country.

By Thursday, he was helping boost Bitcoin with talk of a national reserve and accusing Bank of America CEO Brian Moynihan of "debanking" conservatives. ( Its shares rose 1.3%.)

He also caused oil prices to sink after saying he would press OPEC to let them fall to hasten the end of the war in Ukraine, even as the S&P 500 index rose to a new all-time high. "The intraday swings in oil (lower) and stocks (higher) underscore market volatility accompanying Trump v2.0 as the president rolls out policy and riffs on all things Econ, Political, and Markets," writes Evercore ISI strategist Julian Emanuel.

If those moves and comments were an amuse-bouche, then the main course is still to come. They range from proposed tariffs of 10% on Mexico and Canada that could arrive as early as Feb. 1 to a crackdown on illegal immigrants that has just begun. Some of Trump's goals, like the promise to lower corporate tax rates to 15%, depend on congressional approval — and that approval doesn't seem like a sure thing, given the deficit hawks in the Republican party and disagreements over strategy. If the moves don't materialize, expect the market to be very, very disappointed.

While Trump's policies create land mines for investors to dodge, they also have the potential to act as fuel for the stock market's rally. The market should get a lift from Trump's artificial-intelligence policies, writes John Higgins, chief markets economist at Capital Economics. While the efficacy of Stargate remains to be seen, there is little doubt that Trump intends to ensure the U.S. remains the leader in AI.

That will be good news for Big Tech, whose earnings should continue to get a lift from AI spending, but also for a market on the whole as nontech companies begin to see the benefits the new technologies provide, something that could lift the entire S&P 500. "Trump's attitude toward AI reinforces our view, and we are sticking to our forecast that the index will end 2025 at 7000," Higgins writes.

It won't be a straight line, however. Over the past five weeks, investors got a preview of what the stock market could look like under Trump. Two weeks ago, the mood was bleak. Economic data was coming in too hot, investors were worrying that inflation was about to roar back to life, and the Fed suggested that it might have reached the end of its rate-cutting cycle. Trump had yet to take office, and his promised tariffs and deportations had the potential to shake investor confidence. With the market priced to perfection, the S&P 500 dropped 4% from Dec. 18 through Jan. 10.

What a difference two weeks makes. The economy remains strong — it's expected to have grown at a 3% clip in the fourth quarter, according to the Atlanta Fed's GDPNow tool — but December's consumer price index contained nothing to suggest that inflation was set to reaccelerate. Fed Chair Jerome Powell seems unlikely to disrupt a good situation when the central bank meets on Jan. 28-29. Fourth-quarter earnings season has also started off strong, with companies beating estimates by an average of 8.7% through Thursday. No wonder the S&P 500 gained 1.7% this past week after closing at a record high on Thursday.

The shift in mood from optimism to misery and back again was abrupt. SentimenTrader's Jason Goepfert noted that the ratio of bullish respondents in the American Association of Individual Investors survey plunged below 40% for the week ended Jan. 15, only the second time that has occurred since May 2023. The S&P 500 has been higher 72% of the time in the six months following such declines and 79% of the time in 12 months later, according to SentimenTrader data. Investors were feeling much better in the survey released on Jan. 23 — the percentage of bullish investors rose to 43.4% from 25.4%.

But even quick recoveries in optimism have typically been followed by stock market rallies. Compare the change in the Cboe Volatility index, or VIX — which reflects how wild the next 30 days of trading are expected to be — to historical volatility, or the size of the swings of the previous 30 days. On Dec. 18, the day the Fed hinted at the possible end of rate cuts, the VIX surged to 27.6 from 15.9. By Jan. 17, it had fallen to 16. Over the same period, realized volatility ticked up just a few points.

That kind of drop in the VIX relative to actual volatility doesn't happen very often, but when it does, it has historically been good news for the stock market. The S&P 500 has gained a median of 3.8% over the following three months, 7.2% over six months, and 13.5% over 12 months after similar events since 1990.

In other words, the odds favor the bulls.

Don't be surprised if the wild mood swings continue. In this kind of environment, investors should continue to favor the companies that benefit from policy goals that are unlikely to change.

Trump's deregulatory push could see the industries that operate under the tightest restrictions get a boost — and it doesn't need approval from Congress. Manufacturing, which has seen productivity decline since the financial crisis, could also get a boost if it starts to close the gap with the services economy, according to Société Générale's Manish Kabra. He also recommends regional banks — the "risker the better" — and small-cap stocks, whose size makes regulations feel particularly onerous.

Trump's energy push might not be great news for oil explorers — it could boost supply and lower prices — but it will be great news for companies that benefit from increased spending on production, Kabra writes. For retail investors, that could mean favoring the VanEck Oil Services exchange-traded fund over the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

The Stargate announcement is a signal that the AI trade should continue to pay off. Investors have been worrying companies will start spending less on AI infrastructure, but the announcement should be seen as a sign that demand is very much alive and well. Nvidia should be a big beneficiary, says Melius analyst Ben Reitzes. He notes that, on the high side, Nvidia could receive more than half of the $100 billion to be spent during the first year of the program. He also argues that Broadcom and Arista Networks should get a boost from the spending on networking, while Oracle could benefit as well.

"We certainly don't have this kind of spending for capex, nor have this kind of cloud revenue in our current model for buy-rated Oracle, who is a big beneficiary," Reitzes writes. Oracle stock gained 14% this past week.

In a volatile world, gold also looks like a good bet. The precious metal has gotten a boost from central-bank buying as countries, particularly those with adversarial relationships with the U.S., look to expand their reserves out of the dollar. But gold also benefits from a lack of fiscal discipline in the U.S. and elsewhere.

While the U.S. deficit hasn't been an issue yet, the continued expansion of debt-to-gross domestic product should be another tailwind. Macro Intelligence 2 Partners also notes that gold's recent slumber — it has dipped 0.2% since peaking on Oct. 30 — likely caused investors to sell in favor of other assets. "With the price starting to show signs of life again...if these sellers want their positions back, they are going to have to chase the price," the firm writes.

Maybe the planets have aligned after all.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Ben Levisohn

Sometimes the planets quite literally align. For investors, this isn't one of those times — but it might just work out OK anyway.

If you looked up into the night sky this past week, you might have seen a " planetary parade" as Venus, Saturn, Jupiter, Mars, Uranus, and Neptune lined up in a way that isn't uncommon, but also not pedestrian. It's the kind of sight that inspired ancient civilizations like the Babylonians and Mayans to seek omens about the future, both good and bad. Today, it's a phenomenon that might open our eyes to the wonders of the universe, if only for a fleeting moment.

If only the drivers of the financial markets were in similar sync. In the best of times, the government, monetary policy, and the economy pull in the same direction, helping corporate profits rise and stock valuations increase. This isn't one of those times. The economy, though strong, still has an inflation problem, one that has forced the Federal Reserve to back away from what promised to be a steady series of rate cuts in 2025. The reelection of Donald Trump has introduced an element of chaos that has the potential to shake markets or lift them higher.

The stock market, then, is left not to climb the proverbial wall of worry but to navigate a swamp of uncertainty. How Trump decides to attack taxes, tariffs, the national debt, and immigration will result in wilder gyrations than we've been used to during the past couple of years. "Expect increased noise and volatility surrounding the incoming administration's new policies, but these are the four main areas whereby those policies could impact the markets and the economy," writes Sevens Report's Tom Essaye.

Market volatility is often a reflection of what investors think they know. When the path ahead looks relatively certain, investors get comfortable — some would even say complacent — and don't feel the need to make big changes to their positions. But when something unexpected happens, it results in a mad dash to reflect the new information in trades and portfolios. Too many scares, and volatility rises. Between the economy, inflation, and the Fed, investors are already dealing with plenty of known unknowns. Making sense of it all will be complicated with a wild card like Trump in the mix. "Anyone not plugged directly into the new administration will have difficulty assessing the macro outlook, because policy shocks are likely to be dominant here," writes Gerard MacDonell, an economist at 22V Research.

Investors got a taste of Trump's potential impact on the market this past week — when he did the unexpected. On Tuesday, for instance, stocks soared after the president refrained from placing tariffs on China, Mexico, Canada, and other U.S. trading partners or deporting millions of immigrants during his first day on the job. Tech shares got a big boost on Wednesday, when Trump touted Stargate, a $500 billion joint venture between Oracle, SoftBank Group, and OpenAI to build AI infrastructure across the country.

By Thursday, he was helping boost Bitcoin with talk of a national reserve and accusing Bank of America CEO Brian Moynihan of "debanking" conservatives. ( Its shares rose 1.3%.)

He also caused oil prices to sink after saying he would press OPEC to let them fall to hasten the end of the war in Ukraine, even as the S&P 500 index rose to a new all-time high. "The intraday swings in oil (lower) and stocks (higher) underscore market volatility accompanying Trump v2.0 as the president rolls out policy and riffs on all things Econ, Political, and Markets," writes Evercore ISI strategist Julian Emanuel.

If those moves and comments were an amuse-bouche, then the main course is still to come. They range from proposed tariffs of 10% on Mexico and Canada that could arrive as early as Feb. 1 to a crackdown on illegal immigrants that has just begun. Some of Trump's goals, like the promise to lower corporate tax rates to 15%, depend on congressional approval — and that approval doesn't seem like a sure thing, given the deficit hawks in the Republican party and disagreements over strategy. If the moves don't materialize, expect the market to be very, very disappointed.

While Trump's policies create land mines for investors to dodge, they also have the potential to act as fuel for the stock market's rally. The market should get a lift from Trump's artificial-intelligence policies, writes John Higgins, chief markets economist at Capital Economics. While the efficacy of Stargate remains to be seen, there is little doubt that Trump intends to ensure the U.S. remains the leader in AI.

That will be good news for Big Tech, whose earnings should continue to get a lift from AI spending, but also for a market on the whole as nontech companies begin to see the benefits the new technologies provide, something that could lift the entire S&P 500. "Trump's attitude toward AI reinforces our view, and we are sticking to our forecast that the index will end 2025 at 7000," Higgins writes.

It won't be a straight line, however. Over the past five weeks, investors got a preview of what the stock market could look like under Trump. Two weeks ago, the mood was bleak. Economic data was coming in too hot, investors were worrying that inflation was about to roar back to life, and the Fed suggested that it might have reached the end of its rate-cutting cycle. Trump had yet to take office, and his promised tariffs and deportations had the potential to shake investor confidence. With the market priced to perfection, the S&P 500 dropped 4% from Dec. 18 through Jan. 10.

What a difference two weeks makes. The economy remains strong — it's expected to have grown at a 3% clip in the fourth quarter, according to the Atlanta Fed's GDPNow tool — but December's consumer price index contained nothing to suggest that inflation was set to reaccelerate. Fed Chair Jerome Powell seems unlikely to disrupt a good situation when the central bank meets on Jan. 28-29. Fourth-quarter earnings season has also started off strong, with companies beating estimates by an average of 8.7% through Thursday. No wonder the S&P 500 gained 1.7% this past week after closing at a record high on Thursday.

The shift in mood from optimism to misery and back again was abrupt. SentimenTrader's Jason Goepfert noted that the ratio of bullish respondents in the American Association of Individual Investors survey plunged below 40% for the week ended Jan. 15, only the second time that has occurred since May 2023. The S&P 500 has been higher 72% of the time in the six months following such declines and 79% of the time in 12 months later, according to SentimenTrader data. Investors were feeling much better in the survey released on Jan. 23 — the percentage of bullish investors rose to 43.4% from 25.4%.

But even quick recoveries in optimism have typically been followed by stock market rallies. Compare the change in the Cboe Volatility index, or VIX — which reflects how wild the next 30 days of trading are expected to be — to historical volatility, or the size of the swings of the previous 30 days. On Dec. 18, the day the Fed hinted at the possible end of rate cuts, the VIX surged to 27.6 from 15.9. By Jan. 17, it had fallen to 16. Over the same period, realized volatility ticked up just a few points.

That kind of drop in the VIX relative to actual volatility doesn't happen very often, but when it does, it has historically been good news for the stock market. The S&P 500 has gained a median of 3.8% over the following three months, 7.2% over six months, and 13.5% over 12 months after similar events since 1990.

In other words, the odds favor the bulls.

Don't be surprised if the wild mood swings continue. In this kind of environment, investors should continue to favor the companies that benefit from policy goals that are unlikely to change.

Trump's deregulatory push could see the industries that operate under the tightest restrictions get a boost — and it doesn't need approval from Congress. Manufacturing, which has seen productivity decline since the financial crisis, could also get a boost if it starts to close the gap with the services economy, according to Société Générale's Manish Kabra. He also recommends regional banks — the "risker the better" — and small-cap stocks, whose size makes regulations feel particularly onerous.

Trump's energy push might not be great news for oil explorers — it could boost supply and lower prices — but it will be great news for companies that benefit from increased spending on production, Kabra writes. For retail investors, that could mean favoring the VanEck Oil Services exchange-traded fund over the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

The Stargate announcement is a signal that the AI trade should continue to pay off. Investors have been worrying companies will start spending less on AI infrastructure, but the announcement should be seen as a sign that demand is very much alive and well. Nvidia should be a big beneficiary, says Melius analyst Ben Reitzes. He notes that, on the high side, Nvidia could receive more than half of the $100 billion to be spent during the first year of the program. He also argues that Broadcom and Arista Networks should get a boost from the spending on networking, while Oracle could benefit as well.

"We certainly don't have this kind of spending for capex, nor have this kind of cloud revenue in our current model for buy-rated Oracle, who is a big beneficiary," Reitzes writes. Oracle stock gained 14% this past week.

In a volatile world, gold also looks like a good bet. The precious metal has gotten a boost from central-bank buying as countries, particularly those with adversarial relationships with the U.S., look to expand their reserves out of the dollar. But gold also benefits from a lack of fiscal discipline in the U.S. and elsewhere.

While the U.S. deficit hasn't been an issue yet, the continued expansion of debt-to-gross domestic product should be another tailwind. Macro Intelligence 2 Partners also notes that gold's recent slumber — it has dipped 0.2% since peaking on Oct. 30 — likely caused investors to sell in favor of other assets. "With the price starting to show signs of life again...if these sellers want their positions back, they are going to have to chase the price," the firm writes.

Maybe the planets have aligned after all.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

The IPC Indice de Precios Y Cotizaciones is up 1416.42 points or 2.84% this week to 51357.31

• Largest one-week point and percentage gain since the week ending Dec 6, 2024
• Up for three consecutive weeks
• Up 2400.07 points or 4.90% over the last three weeks
• Largest three-week point gain since the week ending March 27, 2024
• Largest three-week percentage gain since the week ending Dec. 29, 2023
• Today it is up 302.40 points or 0.59%
• Up for five consecutive trading days
• Up 1416.42 points or 2.84% over the last five trading days
• Largest five-day point and percentage gain since Monday, Dec. 9, 2024
• Longest winning streak since Thursday, Sept. 19, 2024, when the market rose for six straight trading days
• Up eight of the past 10 trading days
• Off 12.53% from its record close of 58711.87 hit Wednesday, Feb. 7, 2024
• Highest closing value since Friday, Dec. 13, 2024
• Off 12.53% from its 52-week high of 58711.87 hit Wednesday, Feb. 7, 2024
• Up 5.16% from its 52-week low of 48837.72 hit Monday, Dec. 30, 2024
• Down 9.67% from 52 weeks ago
• Up 4.90% from its 2025 closing low of 48957.24 hit Friday, Jan. 3, 2025
• Month-to-date it is up 3.72%
• Year-to-date it is up 1844.04 points or 3.72%

Source: Dow Jones Market Data, FactSet

The Bovespa Index is up 96.56 points or 0.08% this week to 122446.94

• Up for three consecutive weeks
• Up 3914.26 points or 3.30% over the last three weeks
• Largest three-week point and percentage gain since the week ending Aug 30, 2024
• Today it is down 36.38 points or 0.03%
• Down for three consecutive trading days
• Down 891.40 points or 0.72% over the last three trading days
• Largest three-day point and percentage decline since Friday, Jan. 10, 2025
• Off 10.85% from its record close of 137343.96 hit Wednesday, Aug. 28, 2024
• Today's closing value is the sixth highest this year
• Lowest closing value since Friday, Jan. 17, 2025
• Off 10.85% from its 52-week high of 137343.96 hit Wednesday, Aug. 28, 2024
• Up 3.30% from its 52-week low of 118532.68 hit Friday, Jan. 3, 2025
• Down 5.06% from 52 weeks ago
• Off 0.72% from its 2025 closing high of 123338.34 hit Tuesday, Jan 21, 2025
• Up 3.30% from its 2025 closing low of 118532.68 hit Friday, Jan. 3, 2025
• Month-to-date it is up 1.80%
• Year-to-date it is up 2163.54 points or 1.80%

Source: Dow Jones Market Data, FactSet

The Bovespa Index is up 96.56 points or 0.08% this week to 122446.94

• Up for three consecutive weeks
• Up 3914.26 points or 3.30% over the last three weeks
• Largest three-week point and percentage gain since the week ending Aug 30, 2024
• Today it is down 36.38 points or 0.03%
• Down for three consecutive trading days
• Down 891.40 points or 0.72% over the last three trading days
• Largest three-day point and percentage decline since Friday, Jan. 10, 2025
• Off 10.85% from its record close of 137343.96 hit Wednesday, Aug. 28, 2024
• Today's closing value is the sixth highest this year
• Lowest closing value since Friday, Jan. 17, 2025
• Off 10.85% from its 52-week high of 137343.96 hit Wednesday, Aug. 28, 2024
• Up 3.30% from its 52-week low of 118532.68 hit Friday, Jan. 3, 2025
• Down 5.06% from 52 weeks ago
• Off 0.72% from its 2025 closing high of 123338.34 hit Tuesday, Jan 21, 2025
• Up 3.30% from its 2025 closing low of 118532.68 hit Friday, Jan. 3, 2025
• Month-to-date it is up 1.80%
• Year-to-date it is up 2163.54 points or 1.80%

Source: Dow Jones Market Data, FactSet

The S&P/TSX Composite Index is up 400.57 points or 1.60% this week to 25468.49

• Largest one-week point and percentage gain since the week ending Nov 22, 2024
• Up for two consecutive weeks
• Up 700.76 points or 2.83% over the last two weeks
• Largest two-week point and percentage gain since the week ending Nov 29, 2024
• Up four of the past five weeks
• Today it is up 34.41 points or 0.14%
• Up for nine consecutive trading days
• Up 932.17 points or 3.80% over the last nine trading days
• Largest nine-day point gain since Thursday, Sept. 19, 2024
• Largest nine-day percentage gain since Monday, Sept. 23, 2024
• Longest winning streak since Monday, Oct. 25, 2021, when the market rose for 14 straight trading days
• Up 11 of the past 13 trading days
• Off 0.87% from its record close of 25691.80 hit Friday, Dec. 6, 2024
• Highest closing value since Wednesday, Dec. 11, 2024
• Off 0.87% from its 52-week high of 25691.80 hit Friday, Dec. 6, 2024
• Up 23.72% from its 52-week low of 20584.97 hit Tuesday, Feb. 13, 2024
• Rose 20.56% from 52 weeks ago
• Up 3.80% from its 2025 closing low of 24536.32 hit Monday, Jan. 13, 2025
• Month-to-date it is up 2.99%
• Year-to-date it is up 740.55 points or 2.99%

Source: Dow Jones Market Data, FactSet