Tactical Rules Trigger Bullish Signal

• The Fed held rates steady at 3.50-3.75% with core PCE inflation at 3%, pivoting focus from employment to inflation as unemployment fell to 4.3%, maintaining a 'green light' rating
• The S&P 500's 200-day moving average is rising at 31% annualized (down from unsustainable levels), which historically correlates with better-than-average odds of positive returns when trending between 20-30%
• International equities outperformed domestic by 630 basis points since January 20th, but the ACWX trend at 42% annualized was downgraded to 'flashing red' as it remains above sustainable levels

Market Summary: Tactical Rules Trigger Bullish Signal

Key Development: RiverFront Investment Group upgraded its tactical rating from "flashing yellow" to "flashing green," signaling improved near-term outlook for equities over the next 3-6 months.

Three Tactical Rules Assessment:

*Federal Reserve (Green Light):* The Fed held rates steady at 3.50-3.75% at its January 28th meeting. With unemployment falling to 4.3% and core PCE inflation at 3%, the Fed has pivoted from prioritizing employment to fighting inflation. Fed funds futures predict two rate cuts in 2026, though stronger-than-expected economic conditions (Atlanta Fed forecasting 3.0% Q1 GDP growth) may reduce cuts. The Fed remains supportive of investors.

*Market Trend (Upgraded to Flashing Green):* The S&P 500's 200-day moving average is rising at a 31% annualized rate, expected to fall below 30% within a week. This represents a more sustainable level after the index rallied nearly 40% since April 2025. The S&P 500 has traded sideways around the 7,000 milestone due to concerns about AI spending by hyperscalers and Fed policy uncertainty.

*International Trend (Downgraded to Flashing Red):* MSCI ACWX trend rising at 42% annualized rate, deemed unsustainable. International equities outperformed domestic by 630 basis points since January 20th.

*Crowd Sentiment (Upgraded to Yellow Light):* Mixed signals with daily sentiment in extreme pessimism zone while weekly sentiment remains in excessive optimism zone, creating neutral conditions favorable for holding equities.

Market Implications: The analysis favors domestic and international equities over bonds as yields are expected to continue falling. However, elevated international trend rates warrant caution in that segment.