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The Economic Calendar:
MONDAY: Fed Cook Speech (8:15a CT), S&P Global Composite PMI (8:45a CT), Factory Orders (9:00a CT), Total Vehicle Sales (9:00a CT), New York Fed Treasury Purchases (9:30a CT), 3-Year Note Auction (12:00p CT)
TUESDAY: Fed Barkin Speech (7:00a CT), Balance of Trade (7:30a CT), Redbook (7:55a CT), ISM Services Index (9:00a CT), JOLTs (9:00a CT), 10-Year Note Auction (12:00p CT)
WEDNESDAY: MBA Mortgage Applications (6:00a CT), ADP Employment Change (7:15a CT), Fed Waller Speech (7:30a CT), Used Car Prices (8:00a CT), EIA Petroleum Status Report (9:30a CT), EIA Natural Gas Report (11:00a CT), 30-Year Bond Auction (12:00p CT), FOMC Minutes (1:00p CT), Consumer Credit Change (9p2:00p CT)
THURSDAY: Challenger Job Cuts (6:30a CT), Jobless Claims (7:30a CT), Fed Harker Speech (8:00a CT), Wholesale Inventories (9:00a CT), Fed Barkin Speech (11:40a CT), Fed Schmid Speech (12:30p CT), Fed Bowman Speech (12:35p CT), Fed Balance Sheet (3:30p CT)
FRIDAY: December Jobs Report (7:30a CT), University of Michigan Consumer Sentiment (9:00a CT), WASDE Report (11:00a CT), Baker Hughes Rig Count (12:00p CT)
Key Events:
In the U.S., the trading year begins with several labor market data points, starting with the JOLT’s job openings data on Tuesday, moving to the ADP employment report on Wednesday, and finishing the week with nonfarm payrolls and the unemployment rate on Friday. The December unemployment report marks the first in several months that should not be clouded by one-off factors.
Source: TradingEconomics
The “January Effect” is a well-known phenomenon in the stock market that describes the tendency for stock prices to experience a significant increase during January. This phenomenon is often attributed to several factors, including:
These actions can lead to a temporary dip in stock prices in December. However, traders may repurchase these oversold stocks in January, driving prices back up.
While the January Effect has been observed historically, its strength can vary significantly. It is not guaranteed to occur yearly.
The S&P 500 has enjoyed a significant rally in 2024, notching 57 record closes. This strong performance, driven by AI-fueled gains in tech stocks and a resilient economy, has positioned the index for its best consecutive year performance since the late 1990s.
However, this robust growth has also raised concerns about market valuations. The S&P 500 currently trades at a price-to-earnings ratio significantly above its historical average. While the strong performance of AI-driven companies may justify higher valuations, many investors remain cautious.
Despite these concerns, analysts expect strong earnings growth to continue, with projections for 15% growth in 2025. However, the market shows signs of increased volatility, and any negative earnings surprises could trigger a correction.
In DB’s survey of 471 financial professionals, a “global trade war” is considered the most considerable risk for 2025, followed by a “tech stock plunge” and “concerns over inflation and bond yields.”
The U.S. Dollar Index futures have started 2025 with a robust move, with few immediate threats to its continued strength. Notably, should there be an unexpected increase in the 10-year U.S. Treasury yield approaching 5%, which isn’t our primary expectation, we could see the DXY index challenging the 110 mark.
Source: TradingView
The market is pricing the probability of only one Fed Funds rate cut for 2025.
Source: CME FedWatch
The Federal Reserve’s December meeting revealed a more cautious stance on future rate cuts than initially anticipated. While the 25-basis-point rate cut was approved, the dot plots highlighted a significant upward revision in the projected federal funds rate for 2025 and 2026, suggesting a slower easing pace than expected.
Narratives we are watching:
On the road to Bitcoin $200,000?
Analysts are projecting a significant rise in Bitcoin’s value in 2025. Predictions vary widely, with some forecasts suggesting Bitcoin could reach between $100,000 to $250,000. Specifically, there are mentions of Bitcoin potentially hitting $180,000 to $200,000, with some optimistic views suggesting it could go as high as $250,000 by the end of the year.
Trump has picked many crypto allies for senior positions in his administration. The incoming administration’s pro-crypto stance is expected to be crucial in Bitcoin’s price surge. President-elect Trump’s promises to make the U.S. the “crypto capital” include creating a strategic Bitcoin reserve and appointing crypto-friendly leaders like Paul Atkins to head the SEC, which could lead to more favorable cryptocurrency regulations.
Other appointees, like Howard Lutnick, chief executive of Cantor Fitzgerald, a financial firm that owns a large chunk of cryptocurrency stablecoin Tether’s assets, are Trump’s picks for commerce secretary. Venture capitalist David Sacks will be the new White House AI and crypto czar.
Trump also announced the creation of the Department of Government Efficiency, or DOGE, led by Elon Musk and biotech company founder Vivek Ramaswamy. Musk is a well-known supporter of DOGE, a popular meme coin.
