Market Musings 1/14/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
What are the 3 top market catalysts we’re watching in 2025?
We’re a couple weeks into the new year and it definitely feels like a different market. Last year, investors were very optimistic spinning almost everything in a positive light. This year, we feel investors are trending much more cautiously. So, how did we get here?
Well, it started with the lowered rate cut expectations mid December and that brings us to our first trend, #RateCuts. #RateCuts were the story of the year in 2024. Markets were chomping at the bit for the Fed to start and got a massive 100 bps chop in the final three meetings.
However, the Fed is signaling that that’s it for the time-being while markets were expecting #RateCuts to continue. Expectations have fallen to just one cut this year in the second half. However, market expectations continually shift and we expect volatility as new data pulls forecasts in one direction or the other.
Key data we’re monitoring are #LaborMarkets and #Inflation.
On #LaborMarkets, the November and December job reports point to a recovery from the weak summer. However, we’re still seeing plans for more layoffs and not sold jobs are in the clear yet.
For #Inflation, while significantly improved from a couple years ago, inflation progress has gotten stuck the last several months and even the Fed is finally getting concerned.
Combined, #LaborMarkets, #Inflation and #RateCuts need to thread the needle to successfully #Goldilocks soft land the economy.
Our second focus trend is #AI.
Tech, particularly servers and semiconductors, have been surging on the #AI infrastructure buildout. Cloud hyperscalers have been funding it, but investors have started to push back on the expensive endeavor in recent quarters. We’ll likely need to see continued commitment for the buildout to continue.
However, we also continue to look for any #AI application to take off. While everyone and their mothers are using #AI, nothing has really shown the profit potential to justify the spending yet. If an application could show promise, that could help bolster the infrastructure buildout case. In particular, we’re watching emerging #AI agent capabilities.
And, finally we’re monitoring US policy changes with the incoming administration. Markets got an initial bump from #Deregulation and corporate tax optimism, but have also pulled back on potential #Tariff and immigration policy concerns. We’ll see what actually gets enacted and adjust our market expectations from there.
In any case, we’re expecting another volatile year with a lot on the table for markets.
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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by Pixabay.