Weekly Market Update (Jan 04, 2025)
- Market Hedwig
- Jan 4
- 2 min read
HIGHLIGHTS
Tariffs and AI are the 2 words that best summarize the US economy in 2025.
Private Markets: The number of private deals that exceed $1 billion has reached 24, highest in the previous decade. We expect fewer IPO deals as companies can access this level of funding without going public. The higher private market price transparency is lowering illiquidity premiums, decreasing secondary market discounts and putting pressure on the fees, which are all favorable to investors.
Fed Chair: Market expects the new Fed chair to be more dovish. It is notable that Fed is a committee but not one person. The focus on who is going to be the next Fed chair is way overblown.
K-shaped: The economic gains have been uneven. Rate cuts have not completely reduced the borrowing costs. Inflation was rising higher than expected. Most industries are in hiring recession and wage growth is dropping. However, stock market gains are making the wealthiest households richer. Other than consumer, it is k-shaped in business capital spending too when looking at tech vs non-tech companies.
MARKETS
23,235.63 | -0.31% | |
S&P 500 | 6,858.47 | +0.35% |
Dow | 48,382.39 | +0.51% |
10-Year | 4.19% | +4bps |
Brent | 60.75 | +0.46% |
DXY | 98.43 | -0.29% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
HSBC: AI enthusiasm and increasing profit growth have driven the large-cap tech stocks' performance and carried the US markets to new highs this year. We expect technology and communication sectors will contribute 55% of total profit growth in 2026.
Bank of America: Bull market is expected to continue in 2026, supported by strong economic and earnings growth. The pace could be moderated by the softening labor market, overshoot valuation, AI sector shakeouts or midterm election volatility.
Fixed Income
Morgan Stanley: Investors in stock market rotated from mega-cap stocks to broader high-beta stocks, such as small caps, meme stocks and unprofitable tech stocks. Correlation between low-rated bonds and stocks has increased significantly, resulting in low premium for quality. We expect more potential buyers in core, B-rated bonds.
HSBC: Emerging market (EM) performance is spectacular this year. It was seen as high-risk high-beta play conventionally, but EM bond volatility is now lower than in developed markets.
Economy
J.P. Morgan: Both consumer sentiment and confidence show a longer weakening trend. Sentiment tends to be more sensitive to prices while confidence is more correlated with labor market. Sentiment dropped due to supply chain disruption, fiscal stimulus and the Russia-Ukraine war keeping inflation high. Labor market is at historically tight level, softening the consumer confidence.
Goldman Sachs: The One Big Beautiful Bill Act (OBBBA) is providing investment incentives for US companies to increase their capital expenditures (capex) by lowering the cost of capital. The easier financial conditions and growing AI demand will boost the capex growth in 2026.
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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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