Stocks are on pace to record another strong weekly advance, and many on the Street are getting excited over what comes next. The S & P 500 is up 2% for the week through Thursday’s close, putting it on course for the first back-to-back weekly gains since early December. The Dow Jones Industrial Average and Nasdaq Composite have also risen 2.5% and 2.2%, respectively, this week. The moves follow strong earnings from companies such as Netflix and enthusiasm around President Donald Trump ‘s policies. Trump also told global leaders at the World Economic Forum in Davos, Switzerland, on Thursday that he’ll ” demand that interest rates drop immediately .” Overall, the backdrop looks favorable for stocks — at least in the near term, according to Scott Rubner, tactical specialist at Goldman Sachs. “The market technical overhang from late December (January week 1) has cleared, and we have entered the traditional #January Effect,” Rubner wrote this week. “Positioning is not reflective of the current rally in risk assets and may cause some FOMU (fear of materially underperforming) benchmark. We have a favorable technical window for the next 1 month.” There’s a lot of cash available to come into the market. Indeed, Bank of America strategist Michael Hartnett noted that clients over the past week moved $61.5 billion into cash versus a $5.9 billion inflow into stocks. Another potential sign of more gains ahead was highlighted by Ned Davis Research. The firm said its risk-on/risk-off ratio hit a record high last week, suggesting favorable market conditions. “The ratio’s rise has carried a bullish breadth message. The components of the Risk-On Index agree that we’re in a risk-on environment while the risk-off components reflect a lack of defensive positioning,” wrote Tim Hayes, the firm’s chief global investment strategist. To be sure, there are still risks that could derail the market’s momentum, including the possibility of heavy U.S. tariffs on imported goods from trade partners such as Mexico, China and Canada. “Risk-on should persist at least until there is clarity on U.S. trade policy,” wrote strategists at MRB Partners. “The comforting news is that Trump 2.0 has arrived whilst the U.S. economy has solid momentum and durable underlying fundamentals, especially in terms of corporate profitability.” Elsewhere Friday morning on Wall Street, Baird upgraded Twilio to market outperform , calling for more than 40% upside for the cloud communications stock. “We acknowledge the recent strength, which we had been wary to chase, but expect a potential beat-and-raise cadence to continue to push shares higher, particularly with the strengthening profitability, cash flow, and capital returns,” analyst William Power said. “We also view valuation as still reasonable, particularly given potential upside scenarios.”
