Morning Brew December 18 2024

Good morning,

A cut today and two more in 2025, likely in May and December, will be the benchmark for the Fed tonight. As the cut is basically certain (96%) , there is little surprise expected in the decision itself.

The  press conference and the dot plot will be key. We need to be aware that until we understand more about the actual trade policies and tariffs, any outlook on inflation is pretty much a wild guess.

The Trump administration is attempting to square the circle by trying to lower inflation while imposing tariffs and deporting illegal immigrants who provide cheap labor. I suspect that we will need to wait until after the inauguration to see which measures turn out to be part of negotiating tactics and which come to fruition to see how that works out. I had the pleasure of joining Serge and Roman at www.znüni.rocks discussing what to expect from 2025. We are looking forward to an interesting year!

As we stand right now, the important trendline in the 10-Year Yield held, the USD Index is at 106.90, EUR/USD 1.0505, GBP/USD 1.27, and USD/JPY 153.40. The Japanese trade deficit came massively lower over night but had little impact. -680 Bio was expected, -117 was reported.  Gold and Silver seem to have stabilized at 30 and 2630 and are now trading at 30.40 and 2645, respectively. Bitcoin is giving up ground but remains above 100k. Equities traded calmly lower; it is a little strange that the volumes are extremely high despite indexes moving in small steps. We saw 16 billion shares traded on US exchanges yesterday, even though the Dow fell by 0.6%, the S&P by 0.4%, and the Nasdaq by 0.3%. Normally, such high volumes are triggered by stronger moves—this could already be year-end adjustments.

The Dow has the longest falling stretch since June 21, having fallen for 9 consecutive days; the fall only amounts to approximately 3.5%, though. Tesla had further gains of 3.5% and seems to be aiming for 500—less than a percent away. The median 12-month price target is $275, so we are looking either for a decline or a lot of analyst rating changes soon. The rest of the magnificent seven traded more calmly. Pfizer rose yesterday on a higher earnings outlook.

 Honda and Nissan are in talks to deepen ties maybe even merging and we have Nike earnings coming up: Nike’s upcoming earnings on December 19 will be a pivotal test as the company faces weak demand, margin pressures, and rising competition, while new CEO Elliott Hill takes the helm.

The next few days are busy with data and news Trade safely!!

Wednesday
- Data Japan Trade Balance, UK CPI, EU Inflation  US Rate Decision at 20:00 and the press conference at 20:30 CET
Thursday
- Data BOE Rate decision, US GDP, Initial Jobless Claims
Friday
- Data China Rate decision US PCE