Neither 'complacent' nor 'calibrating' adequately  describes this February tight-wire act for a majority of stocks, whether big-cap leaders, or most others.

It's not just about tariffs; the situation in Europe (where the Vice President just throttled the Sec'y. of Defense 'at' a security conference); or even Fed policy. It is 'confused' to describe the backdrop, and that was expected for February.

Finally ...l ideally shuffling February eliminates a previously overbought S&P Index and uncertain postures due to all the global uncertainty; as it prepares for a Spring rally. And that may very well take place. However, that is predicated on not just a deal with Russia over Ukraine; not just whether the world understands that Elon Musk is tasked with doing what no other Administrations -nor Congress- has done; a real fight against waste, fraud and abuse..

(But cuts are far broader than selective, which is bringing resistance from Congress which likes spending our money. Some overly-aggressive firings are being reversed; but too soon to tell how it all pans-out. Most Americans appreciate the effort to get a handle on spending; after decades of failure to do so, despite almost every Administration promising too. Right now military procurement staff and planners are reviewing what programs can be trimmed or even cut entirely; so that's more uncertainty in various industries; while AI of course is going to see increased support; probably counter-drones too.)

Bottom line: ideally shuffling high-level patterns through February eliminates a previously overbought S&P Index and uncertain trading postures due to all the minimization, or elimination efforts targeting excess globalism; which does make it tough to cull-out which stocks are really preparing for a Spring rally.

And that may very well take place. But with Auto tariffs (if and how heavy they are applied) delayed until April; and Defense cuts in the air .. likely benefiting a handful of new-era companies we've discussed; and less so the gargantuan major Defense Contractors; although they may be 'compensated' by new-era projects related to 'space' and global defense (part of the new era); it's tough to speculate destiny for contract money; with National Security a certainty.

As you've already seen, it's tricky to see 'who' gets awarded 'what' or 'when'.. and that makes it tough for managements and difficult for investors to sort out. I try with a handful; and have pointed-out the serious speculative nature of all this..at the same time tired old-big caps that were leading, have been lagging as anticipated; part of why we looked for alternative plays last year, seeing the limitations of expanding multiples on the overworked 'lagging seven'. (If you think I'm pondering META or its impact on S&P 'if' this breaks; yes that's one.)

Many remain 'stretched', and I ponder potential selling pressure looming for a couple; but resist identify vulnerabilities given many get engaged in unhedged shorting; in-itself a risky proposition. But if the economy slows, certain big-cap issues will be hit; including old-fashioned advertising / marketing approaches. We think 'out-performance' remains or resumes in less over-inflated tickers, but even there we prefer to see the big-cap Indexes correct but not implode.

Enjoy the holiday weekend: look for any early stumble Tuesday to turn higher; of course based on the news as exists now.

So crosscurrents prevail; the prospects of complex negotiations aren't clear; a reconciliation plan in Congress regarding the Budget is unclear (for resolution) while we have said before there is no choice but to unwind the 'credit-card like syndrome' of spending programs with no realistic concept of paying for them.

So you get carve-outs in many sectors; much speculation about robust cuts to spending; as this 'is' basically what Trump was elected to do; stop the insanity and as neither Trump nor Musk will be running for (re) election; they go forth. POTUS has said we're going to cut the Budgets; he has also contracted some of the tariff ideas (as far as broad implementation; shifting to reciprocal), and I note he himself has said 'short term pain' for longer-term gain; but he's heard I think from Bankers and Wall Street (often the same) to 'chill' the progression.

The fear of course is not getting rid of 'paper straws'; it a market-crash fear. It may be a couple months before we see enough movement in policy decisions that satisfy investors; but also there are some things that are clear. One sure is in Defense; where high-profile Defense Systems may be trimmed, in-favor of more effective systems to attack or engage 'swarms' of missiles or drones.

That is why we have been a little negative on big Defense contractors (like of course Lockheed or Boeing) and more favorable towards drones as well as what are called counter-UAV (anti-drone) systems; battle-space management and so on. It is similar for broader domestic and border security; and voice-generative AI.

Market X-ray: the world is in economic turmoil, with risk of upheaval pending. Trump now postpones 'Auto Tariff' considerations until April 2; and concerns of upending the global economic system probably is tempering Mr. Trump for now. Let him focus on 'peace' and Musk focus on cutting spending, for now.

We have a 3-day (Washington's Birthday) weekend; then shuffle into upside.

Moves are somewhat disrupted; or politics desensitized, with a long weekend, of which there have been too many this year (well, at my age rest is good they say). This market is 'historically rich' for S&P; and needs earnings to justify a multiple expansion that otherwise makes 'leading mag 7' the 'lagging mag 7'.

(I didn't come up with that great line.) I do believe they already lag where most interest is this year, which is 'Application Software' AI and Space / Defense, as well as Quantum Computing to varying degrees..more so in Spring rallies given more than one conference gathering focused on the Quantum 'space'.)

Speaking of Quantum and various research cuts that likely slow things down: leaves questions remaining: will proposed Federal (bipartisan bill) investment in quantum research materialize into lasting support, or will it suffer the same fate as other scientific funding initiatives that have faced cuts and uncertainty?

On the international stage, even prior to VP Vance's Paris speech, the Trump administration reaffirmed its quantum technology, artificial intelligence, and advanced semiconductor focus. A recent summit between Trump & Japanese Prime Minister Ishiba identified these as essential to economic stability.

More By This Author:

Market Briefing For Monday, Feb. 10, 2025
Market Briefing For Monday, Feb. 3, 2025
Market Briefing For Monday, Jan. 27, 2025