Analysts caution that the U.S. stock market may not sustain its year-end rally in January and may instead experience short-term pullbacks.
An analyst at Korea Investment & Securities, Choi Bo Won, notes that while short-term gains in U.S. indices may be limited, temporary pullbacks are worth monitoring. Nonetheless, he emphasizes that the U.S. remains an attractive market for medium- to long-term investments.
Historical data from Korea Investment & Securities reveals that U.S. benchmark indices often rise in November and December following presidential elections, but January typically experiences temporary profit-taking.
Uncertainty surrounding Federal Reserve policies—especially with the possible start of a second Trump administration in January 2025—is expected to further constrain index gains.
While a cautious consensus may heighten concerns about slowing performance in January, major U.S. companies are projected to see earnings growth in 2025–2026. Their 12-month forward earnings per share (EPS) significantly improved compared to other global markets.
Despite lingering uncertainty around Fed policies, companies tied to Trump administration expectations have relatively low valuation burdens, potentially driving index gains.
January is the period of renewed attention to specific policies as new appointments are made. Analysts anticipate heightened sensitivity to macroeconomic indicators and Federal Reserve policies.
Choi predicts market fluctuations in late January, driven by earnings announcements from major companies. He recommends gradually buying on dips rather than aggressively increasing overall index positions.
Discussions on budget execution and potential regulatory easing for certain industries are expected to accelerate as Congress reconvenes in early January.
As earnings season approaches in January and February, performance-related concerns will likely intensify. Choi advises investors to align strategies with both performance trends and sector-specific policy developments.
He highlights promising areas of communication services, industrials, IT software, and small- to mid-cap healthcare sectors.
For U.S. stock picks, Choi recommends focusing on growth stocks such as Alphabet (GOOGL), Elastic (ESTC), Salesforce (CRM), and Visa (V). These companies face minimal policy risks under a potential Trump administration and offer competitive products and services.
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