FSI Sector Allocation - February 2025 Update

In this February 2025 update on sector allocation, the Fundstrat Direct Team reviews recent stock market behavior since mid-December, including the impact of DeepSeek’s R1 AI model launch on semiconductors and AI infrastructure, and how major U.S. equity sectors such as Technology, Communication Services, Healthcare, Financials and Energy have traded to start the year. The report discusses sentiment indicators (AAII bull-bear spread), the “First 5 Days” rule, the January Barometer, softer December 2024 CPI and PPI data, the New Tenant Rent Index, and the latest FOMC meeting, along with the potential implications of early 2025 tariff-related headlines tied to the new U.S. administration.

The team updates its systematic sector allocation framework, highlighting where Tom Lee and Mark Newton’s views align and diverge across the 11 GICS Level 1 sectors, and how tactical momentum, earnings revisions and trend models are shaping February 2025 sector weights. The report also walks through 4Q24 earnings season so far by sector, with emphasis on Communication Services, Financials, Industrials, Boeing (BA), and AI-focused names such as Nvidia (NVDA). It concludes with an updated list of favored sector and thematic ETFs (including ARKW, SKYY, IAI, CIBR and IEDI), explaining how recent performance, technical setups and macro drivers inform the current ETF selection. Full sector-level details, model outputs, and the team’s positioning views are provided in the downloadable PDF.

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