Raymond James analysts anticipate a 'reversion to the mean' trade in U.S. equity markets during the first quarter of 2025. They believe the recent extreme narrowing of the market, driven by technical factors rather than economic fundamentals, will give way to broader participation. This shift is expected to be fueled by stabilizing or declining Treasury yields and potential events like debt ceiling debates.
Investing.com -- Raymond James analysts predict a"reversion to the mean" trade in 1Q25, saying that extreme narrowing in U.S. equity markets during 4Q24 gives way to broader participation.
The narrow market rally, initially concentrated on the"Mag 7" stocks, has spread to other sectors, leaving indices historically expensive in price-to-earnings terms, while the median equity remains relatively undervalued, according to the firm. Key factors expected to drive this shift include a stabilization or decline in 10-year Treasury yields, which have been a significant influence on market breadth.Additionally, they believe that potential events like another debt ceiling debate or discussions about ending quantitative tightening could also pressure yields lower.
Market Reversion Equity Markets Technical Factors Treasury Yields Debt Ceiling
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