Weekend Update, December 23rd, 2024
Index, Sector & Asset Performance
The post Presidential election rally in the S&P500 ended abruptly last week, squashed by Fed Chairmen Jerome Powell’s more hawkish 2025 outlook for the Federal Reserve Open Market Committee. Prior to a big Friday rebound, the value tilted Dow 30 logged a 10-day consecutive decline, it’s longest since 1974. The cause for last week’s sharp 2-day decline was the Fed’s more cautious outlook on the pace of 2025 rate cuts.
The S&P500 finished the week down near -2% after dropping almost -3.5% midweek on the Fed meeting. The cash S&P500 fell back below 6000 taking back most of the post-election rally. With last Friday’s option expiration bounce, the S&P500 is still up +25% this year
Global asset returns in 2024 year to date per Goldman Sachs:
The rise in interest rates continued last week. 10-year Treasuries rose almost +10 bps on the week to finish around 4.5%, while 2-year Treasuries rose a few bps to 4.3% even with a Fed rate cut and a friendly core PCE reading. I remind investors that interest rates and the dollar also rose in the summer of 3q16 and post-election 4q16 into year-end peaks. The 10-year Treasury yield is up +60 bps this year (almost identical to 2016), even as the Fed has cut 100 bps, moving the yield curve from inverted to upward sloping.
Economic Indicators and Earnings Commentary
Last week the US stock market was jolted by the FOMC’s “dot plot” shift to only 50 bps of cuts in 2025, down from 100 bps previously. We remind investors that historically, over periods beyond 1-2 weeks, there is near nothing predictive about the level or direction of interest rates in the Fed’s ‘dot-plot” or Fed funds futures markets. Many historical studies have been done on this topic. Looking at recent history, the dot plot didn’t get the rate call right for 2024.
The 3q24Q3 earnings season is over. Broadcom and Marvel were the latest semiconductor companies to report 2025 outlooks and quickly have become AI darlings (in addition to NVDA) for their product customer ASIC solutions and placements in the edge.
Global Market Trends/Commodities/Currencies
Oil prices, nothing new here on the back of weak China demand and strong global production.
Bitcoin pulled back to $96k on the Federal Reserve hawkish statement.
The US Dollar continued its second half of 2024 rally as the scramble for year-end dollars continues. While this is a normal seasonal pattern, the Dollar strength is a definite headwind to US equities in 2025 if it were to continue. This bears watching!
Oak Harvest Weekly Stock Talk
S&P 500 2025 Stock Market, A Checklist for 2025 and the Bull Market to Keep Running
Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.
