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Our Views
- Equity markets ended 2024 with a whimper. The S&P 500 was down 4 of the 5 final trading days of 2024. Yet, equities are still finishing 2024 up 23%, making two back to back annual gains of 20% (2023 and 2024).
- Why are markets faltering at the end of the year? Foremost, to me, this can be attributed to profit taking. After all, markets were so strong throughout 2024.
- Is this period of weakness a sign of a turning point? We don’t think so.
- To us, the fundamental picture remains strong for 2025 and tailwinds are arguably stronger in 2025 than 2024: We view the new incoming administration as a positive, and the Federal Reserve as dovish.
- It is possible that weakness could continue into early January, but we would view that pullback as a buying opportunity. Buying the dip continues to make sense, in our view.
- In our view, this cycle is far from over. However, until bonds find a bottom and the USD peaks, it’s prudent for more tactically-minded crypto investors to remain nimble and ready to capitalize on opportunities once a trend reversal is confirmed.
- Patience may be required, as investors might need to wait until the next round of significant macro data is released and the TGA rundown begins.
- The TGA, a reserve account held at the Federal Reserve, serves as a kind of rainy-day fund, used to meet obligations when new debt issuance is temporarily off the table. We view this as a potential tailwind for capital markets because, in simple terms, drawing down the TGA represents a flow of funds from the public sector to the private sector. To us, this dynamic generally improves liquidity conditions, and this, in turn, benefits liquidity-sensitive assets like crypto.
- Louisiana’s Mike Johnson has been elected to be Speaker of the House for the 119th Congress.
- Johnson’s victory can also be seen as a victory for President-elect Trump, who backed the Speaker’s bid for re-election despite some unhappiness from conservatives of his own party.
- Nevertheless, Republican control of the House remains tenuous, and Trump will likely need to bring dealmaking skills to bear in order to get his agenda through the narrowly divided chamber.
Wall Street Debrief — Weekly Roundup
Key Takeaways
- The S&P 500 closed the week at 5,942.47, down 0.48%. The Nasdaq slid 0.51% to 19,621.68, while Bitcoin was at $98,238.87 on Friday afternoon, up almost 5% from Monday levels.
- Fundstrat Head of Technical Strategy Mark Newton does not believe lows are in place, but he maintains a constructive view of the market looking further out.
- Fundstrat Head of Research Tom Lee also acknowledges the possibility of weakness continuing in the near term, but to him, this remains a "buy the dip" regime.
"Cream rises. Excellence does have its rewards." ― Anthony Bourdain
Good evening,
We hope you and your family had a happy and joyous holiday. Stocks ended the week down, continuing a slide that began before the New Year. One obvious question arises: Does this decline signal a turning point for stocks?
"We don't think so," responded Fundstrat Head of Research Tom Lee. In his view, the tailwinds that helped 2024 gain more than 20% for a second straight year remain in place. In fact, those tailwinds "are arguably stronger in 2025 than they were in 2024," he told us.
One of those tailwinds could come in the form of the ISM Manufacturing PMI. The December reading came out on Friday, reaching a nine-month high. This is a metric Lee and his team are closely monitoring. "ISM manufacturing has been below 50 for 26 months (since Oct 2022), and we think it is set to rise above 50 in 2025," Lee said, with the Federal Reserve in an easing cycle and an incoming White House that is seen as business-friendly. "As we've noted in the past, ISM Manufacturing tends to lead S&P 500 PS growth rates by roughly four months," so "we would see a recovery in ISM to above the 50 mark as a signal for improving EPS growth." This can be seen in our Chart of the Week:
Looking toward the shorter term, Lee acknowledged that 2024 "ended on a whimper," but historical precedent suggests that this lackluster year-end could set up a strong January. The last trading week of 2024 saw four straight daily declines, and when the Fundstrat Data Science team looked at historically similar precedents, they found reason for constructiveness.
Since 1928, there have been 10 previous instances of three or more consecutive daily declines in the final trading week of the year. Stocks were up one month later 80% of the time, with a median gain of 3.6%. Looking further out, stocks were up 12 months later 80% of the time as well, with median gains of 12.4%.
Fundstrat Head of Technical Strategy Mark Newton was finishing a well-earned holiday break this week, but he found time to weigh in on this week's abbreviated market action. Although Newton remains constructive over the longer term, "short-term trends and momentum are still negative" thanks to recent declines, in his view. Expanding on this, he added, "while I expect that this consolidation should be complete by mid-January, it's hard to claim technically just yet that lows are in place."
To Lee, this means that a continued pullback might be possible, but that would represent a buying opportunity. "Buying the dip continues to make sense, in our view," he concluded.
Elsewhere
President Biden put a note of finality in rejecting Nippon Steel's troubled bid to acquire US Steel. Citing concerns about national security, Biden issued a presidential order opposing the deal after the committee charged with reviewing the proposal opted not to issue a formal decision or recommendation. The proposed merger, which President Trump has also opposed, is seen by many as potentially damaging U.S.-Japan relations and chilling any future bids for strategically important U.S. companies by foreign investors, even if they come from countries seen as longtime allies.
The People's Bank of China indicated plans to cut interest rates this year, bringing the Chinese central bank's monetary policy more closely into alignment with central banks of more established economies such as the U.S. and UK. The PBOC told the Financial Times it would consider lowering rates from their current level of 1.5% at some "appropriate time" in 2025.
Tesla shares sank this week after disclosing that vehicle deliveries in 2024 fell for the first time since 2012. The company has seen increased competition from rivals in recent years, particularly China's BYD. Tesla said its 1.79 million vehicles delivered in 2024 was down about 1% from its 2023 figures.
Victims of Bernard Madoff received their final distribution from a fund set up to compensate them. About $4.3 billion was returned to more than 40,000 victims in roughly 130 countries, another milestone in one of the largest frauds in history. With this final payout, about 94% of funds defrauded by the late Madoff and his firm will have been returned. Madoff died in April 2021 in prison.
The Treasury Department announced its systems had been breached by state-sponsored hackers in China, an allegation that the Chinese government predictably denied. Treasury officials said the breach was discovered on Dec. 8, noting that the perpetrators were able to access certain workstations and unclassified documents.
Important Events
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Stock List Performance
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SMID Granny Shots
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+11.93%
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+9.96%
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+24.65%
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Upticks
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+32.00%
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+31.39%
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+38.51%
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