Special Market Update

It appears that Santa Claus has most definitely left the building.

After managing a year-end rally for much of December, the market weakened heading into the New Year and a combination of European concerns and declining oil prices sent stocks down nearly 2% to a two-week low today.

While this is a rough way to start 2015, it doesn’t raise any new red flags nor does it mean the market will be down all year. In fact, we’ve been preparing for this kind of bumpy January over the last few weeks as we knew larger macro stories would likely dictate market direction. That’s why we moved to lock in year-end profits and trim those names that were vulnerable to larger volatility.

Unfortunately, we’re likely to see volatility continue as richly valued stocks, uncertain world economies and declining oil prices remain big question marks for Wall Street. Until there is some clarity on these issues, the bulls will have difficulty taking back the reigns. Another question mark for 2015 is how earnings will hold up after last quarter’s performance, so volatility may even out a bit when the next reporting season starts up in a few weeks.

In the near term, we could see a test of the S&P’s recent 1,972 bottom, but ultimately I believe the market will begin to firm up later in the week in anticipation of a favorable employment report on Friday.

In the meantime, we’re prepared for what the market may throw our way. The good news is that interest rates remain low, so investing in names that are positioned to at least meet earnings expectations should set us up for a profitable year. We used the pullback to our advantage today with a Flash Alert to buy Arista Networks (ANET). I’ll have a full analysis on this new name in Wednesday’s Monthly Issue, and we’ll also dive deeper into my 2015 market outlook then.