HIGHLIGHTS
Market was choppy this week, driven by the hawkish Fed, tariff threats, increasing yields and potential US government shutdown. The volatility index (VIX) increased about 85%.
Fed: Although Fed still cut the rates, the officials updated the dot pot and revised down to 2 rate cuts in 2025 instead of 3 rate cuts that are expected by the markets. They also mentioned that it may take longer for inflation to reach 2% target rate.
Japan: Bank of Japan (BoJ) decided not to change its rate this week, aligning with market expectation. However, the BoJ governor’s comments are dovish as he is worried about the upcoming wage and economic data. No consensus on whether it will hike in January.
TikTok: The US Supreme Court will hold an expedited hearing about banning TikTok next month if it is not sold by its parent company in China. Stock prices of the other social media companies increased after the original ruling.
MARKETS
19,572.60 | -1.78% | |
S&P 500 | 5,930.85 | -1.99% |
Dow | 42,840.26 | -2.25% |
10-Year | 4.52% | +13bps |
Brent | 72.99 | -1.82% |
DXY | 107.82 | +0.82% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Standard Chartered: We recommend investors to buy the dip, after the selloff of US equities this week. It is a great opportunity to add exposure as we expect earnings growth will accelerate in the coming year, which could potentially drive equities higher.
Goldman Sachs: We have high conviction that the equal-weighted sector can outperform equal-weighted S&P500 in the coming 6 months. Sectors that we recommend are health care, utilities, real estate, software service, and materials.
Fixed Income
Morgan Stanley: Fixed income performance has been average this year, and total returns are just in line with coupon yields. This is mainly because rate volatility and tight spreads combined to keep the gains in check. Although investment-grade corporate bonds are delivering mediocre returns, junk bonds are performing very well, especially the returns of CCC-grade bonds are more than 16% in 2024.
J.P. Morgan:Â Bond volatility is unlikely to fade anytime soon with uncertainty around inflation and tariffs. Markets are still guessing about the inflation progress and the pace of the rate cut cycle.
Economy
UBS: We believe the Fed wants to see lower inflation before cutting its rate further. We expect the 25bps cuts in June and September in the coming year, instead of the previous prediction of 25bps each quarter.
Morgan Stanley: Markets are watching the National Federation of Independent Business surveys closely as small businesses employ 60% of the workforce. November’s report indicated a strong rebound in confidence in the business condition.
KNOWLEDGE TRANSFER
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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