
HIGHLIGHTS
US equities recovered this week after the defensive tone since the start of the year. Investors are going to shift attention from macroeconomic to micro trends in the coming weeks because of the Q4 earnings season. All eyes are on Trump’s inauguration on Monday.
Inflation: CPI increased slightly, with energy prices contributing over 40% of the increase. Although the economic data is not sufficient to prompt a January cut, the likelihood of March cut increased to 30%. Fed officials suggested starting rate cut in the first half of the year if disinflation continues.
TikTok: As the ban date for TikTok is approaching, politicians in the US are finding ways to keep it accessible to Americans. People are also guessing whether it will actually get banned on the scheduled date. A basket of social media stocks went up more than 3% this week.
Wildfire: It is projected that the wildfire will decrease the GDP growth by 0.2%. Nonfarm payroll in January is also expected to be lower by 15-20k jobs. The municipal bonds of California are downgraded from AA+ to AA-.
MARKETS
19,630.20 | +2.45% | |
S&P 500 | 5,996.66 | +2.91% |
Dow | 43,487.83 | +3.69% |
10-Year | 4.61% | -17bps |
Brent | 80.78 | +1.38% |
DXY | 109.40 | -0.22% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Goldman Sachs: Major banks reported the 2nd most profitable year ever in 2024, mainly driven by lending and trading revenues. They expect Trump to ease regulations and further improve market sentiment.
Morgan Stanley:Â We suggest diversifying away from the index with better value and risk-adjusted approach. Chasing passive index is not recommended as it remains concentrated and expensive. Be selective in high-value growth stocks while avoiding the crowded passive stocks.
Fixed Income
Morgan Stanley: More rate cuts are priced out. However, the narrative switches to new policies, real growth and term premiums. Stocks have been resilient even expectation of rate cuts reduced. We recommend using treasury selloff as an entry point for increasing positions in credit and spread products.
UBS:Â The recent increase in yields reflects a better economy but does not weigh on equity market. Stocks are expected to digest the high yields and move higher as the economic performance is supportive of earnings growth.
Economy
Barclays: Trump’s inauguration should give better directions on the initial policy but is not likely to give full clarity. The macro outlook in the US Has been favorable recently, with inflation being stable and resilience in consumer spending.
J.P. Morgan: Immigration’s impacts crystalize, and so does our view of the job market. Although it seems to be softer, it should still support solid growth because of the favorable economic activity and corporate earnings. We expect these to allow employers to add 150k jobs each month on average.
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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