Despite recent challenges, the stock market has demonstrated remarkable resilience, with the S&P 500 remaining within 5% of its all-time high and achieving a new record close on January 23, 2025.

This steadfast performance comes amid various potential setbacks, including unexpected inflation data, diminished prospects for interest rate cuts, and the introduction of new tariffs. Analysts attribute this resilience to investor confidence that President Trump will avoid policies that could significantly disrupt the market.

Historical patterns suggest a 77% probability of a market rally following such consolidation phases. The market’s ability to maintain strength in the face of unfavourable news indicates that buyers are currently in control, potentially setting the stage for an upward breakout.

However, some caution that the S&P 500 has been confined to a trading range over the past four weeks, which could signal underlying weaknesses. The Invesco S&P 500 Equal Weight ETF’s recent underperformance suggests that current economic strength may already be fully reflected in stock prices, posing risks if economic conditions falter.

In summary, while the stock market exhibits strong resilience and potential for new highs, investors should remain vigilant. Monitoring economic indicators and policy developments will be crucial in assessing whether the market will break out to new highs or encounter resistance in the near term.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

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