Things you need to know.
– Stocks wavered and, in the end, did little.
– Eco data does not change anything.
– FED expected to remain on hold for 1st half of 2025.
– Gold, Oil and Bonds tread water.
– Try the Spaghetti con Crema di Cipolla e Parmigiano.
What started out weak yesterday morning – ended mixed…. the ‘Santa rally’ that many are hoping for seeming to stall a bit. I think Santa has already come, but that’s me…. – have you seen the performance this year? S&P up 27%, Nasdaq up 33%, Russell +12%, the Dow + 15% I discussed this with Cheryl Casone on Fox Business yesterday – you can see the clip below.
https://video.foxbusiness.com/v/6366461990112
In any event stocks ended up doing a lot of nothing on very low volumes – something that we also discussed…The Dow gaining 28 pts, the S&P down 3 pts, the Nasdaq down 10 pts, the Russell up 20 pts, the Transports up 40 pts while the Equal Weight S&P gained 7 pts. .
Eco data yesterday – while not a mover did show that Initial Jobless Claims fell by 4k claims coming in at 219k vs. the expected 223k…again suggesting that the labor market is NOT under stress – but did little to alter any bet that investors have on the next FED move. Which btw is nothing.
As of December 2024, the Federal Reserve signaled a more cautious approach to adjusting interest rates in 2025. In its latest projections, the Federal Open Market Committee (FOMC) is expected to only change rates two times (2 – 25 bps cuts) over the course of 2025 – my sense is the second half of the year, reducing the federal funds rate to approximately 3.75%-4% by year’s end.
Given this outlook, investors need to remain patient, in fact – I am hoping that the FED just HOLDS rates where they are – as I do not think the data suggests the economy needs any more stimulation….in fact – the Fed is anticipated to pause in the first half of 2025, to assess economic conditions and the impact of the policy changes that they already made, especially in light of persistent inflation, a strong labor market and a resilient economy.
The risk that I see is that they cut rates prematurely allowing inflation to take root again which might cause them to RAISE rates in 2025…something the algo’s and investors would not be happy with at all and while I am not suggesting that is what is going to happen, let’s be honest, if inflation rears its ugly head – it is a possibility.
Remember – History does repeat itself…. think 1979-1982. Or better yet, just think about those Jordache ‘Bell Bottom’ jeans…they were very popular in the late 60’s early 70’s only to fade out, but are now enjoying a notable comeback as fashion enthusiasts and designers have embraced this iconic ’70s style, incorporating bell-bottom trousers and jeans into contemporary wardrobes. Country star Lainey Wilson making them ‘popular’ again – saying “You ain’t gonna see me in skinny jeans”! And I agree – I hate skinny jeans because they accentuate skinny legs – but that’s me…. you do you!
Bonds did nothing – 10 yr rates hovering at 4.6%+…yesterday morning they were 4.62% and by the afternoon they were yielding 4.57% and this morning yields are back to 4.61% as the bond market tries to digest the latest economic data. As an investment – treasury bonds have had a tough year…the TLT down 11%, the TLH down 8% while the AGG is only down 2.5%. The performance disparity between the AGG Index (iShares Core U.S. Aggregate Bond ETF) and the TLT (iShares 20+ Year Treasury Bond ETF) and TLH (10 – 20 yr iShares Treasury Bond ETF) can be attributed to their differing compositions, durations, and sensitivity to interest rate changes. The AGG includes a broad mix of U.S. Treasuries, mortgage-backed securities (MBS), corporate bonds, and some asset-backed securities.
Oil also continues to trade around the trendlines as the year comes to a close. Oil traders digesting the latest stimulus efforts by China – the world’s biggest importer of oil – as they try to decipher where oil is going. The World Bank – confused as always – did raise its forecast for China’s economic growth in 2025 while at the same time saying that they remain concerned about business confidence and a declining property sector which they expect will weigh on their economy. So I have to ask – which is it? You can’t sit on the fence – either you are raising the outlook, or you are not! This is why I don’t make investment decisions based on what the World Bank has to say!
Yesterday the API reported a decline in US crude stockpiles – which would suggest US demand is strong, today we will get the latest EIA data – so oil traders will watch to see if they confirm that decline or not. In any event I think we remain in the $66.50/$72.75 trading range.
The VIX – fear index – traded down and below all 3 trendlines yesterday once again suggesting that investors are complacent…this morning it is up 72 cts or 5% at 15.45 – remaining BELOW the trendline at 16.03 – Key levels to watch 16.03, 16.60 and then 17.29.
Gold as well is just churning in a tight range…. $2,640/$2,660 as we wind down the year. YTD gold is up 20.5% – not bad for an asset that has no business and pays no divys – but only responds to supply and demand based on what investors perceive about the economy, inflation and geo-political unrest – all issues that have been top of mind this year. Remember – Goldman is calling for $3,000/oz by year end 2025, a 15% increase, which suggests to me that they think inflation and geopolitical unrest will be continuing to be ‘top of mind’ next year. For now – it remains in the $2600/$2700 trading range.
US futures are down again this morning…. Dow futures are down 145 pts, S&P’s down 22, the Nasdaq down 85, while the Russell is off 12 pts. Much of what happens over the next 3 days will be technical – some profit taking, some tax selling and some short covering – all very typical for this time of year. It’s Friday, next week is another holiday shortened week, volumes will be light, moves will be exaggerated. Don’t make any major investing decisions this week.
European markets are open after the Boxing Day holiday and are all a bit higher….
No Eco data to speak of.
The S&P ended the day down 3 pts at 6037. Again, you know how I feel – My sense is that this is the top for the rest of the year. And if it is – it ain’t so bad…. The Dow is up 15%, the S&P + 26%, the Nasdaq + 33%, and the Russell is + 12.5%.
The Official ‘Santa Claus’ rally that began on Monday the 23rd ends on Friday January 3rd.
Click here https://slatestone.com/contact-us/ to contact me – Put KP in the message box and I will reach out to you to discuss your investment portfolio and any questions you may have.
Take good care.
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Spaghetti con Crema di Cipolla e Parmigiano
This is simple and so delish…. Try it on Saturday night.
For this you need: ½ lb. of spaghetti, 4 Vidalia onions – sliced thin on a mandolin, butter, chicken broth, s&p, Olive oil and of course fresh grated Parmegiana cheese.
Start by bringing a pot of salted water to a rolling boil on the back burner so it’s ready when you need it.
Now, in a large sauté pan – add a bit of olive oil, the sliced onions and 1 stick of butter. Season with s&p and sauté until the onions are nice and soft and a bit toasty. (10 mins). Then add 2 cups of chicken broth.
Add the pasta to the water – cook until aldente.
Now add the onions to the food processor to create the ‘crema di Cipolla’ – the onion cream.
Add the ‘cream’ to the sauté pan and when the pasta is aldente – Strain, reserving a mugful of the pasta water and add directly to the sauté pan and mix. Next add the cheese and you’re done. Serve immediately in warmed bowls. *If the pasta sucks up all the sauce – then add a bit of the pasta water to moisten.
Buon Appetito
