Not a Happy New Year Start for Chinese Equities

Chinese equities have their worst start since 2016

Highlights

• Chinese equities have their worst start since 2016

• Sentiment and valuations for U.S. stocks remain elevated…

• … and the gap between stock and bond valuations is a one-in-fifty event

• A wide divide on estimates of Q4 GDP growth is a sign of uncertainty

Key Takeaways

U.S. Market: Oversold Conditions and Cautious Optimism

• U.S. futures are in the green after having morphed into a technically oversold condition on a near-term basis. That said, the sort of choppy market of late is not a healthy backdrop as we saw in December where various stocks flash buy signals, luring traders in who have been trained this cycle to buy every dip, to only then see their positions quickly fall back, which was the hallmark of the last week of 2024.

Tax-Related Selling and Near-Term Risks

• Also keep in mind that the first few days of a new year often see tax-related selling — that could spur technical damage for the Nasdaq and various leaders that are already under pressure. So best to tread cautiously right now. More clarity will be coming our way next week, as volume picks up as investors return from holiday vacations and the top-tier data flow begin to stream in (employment).