Tucker Financial Weekly Market Review: December 20th, 2024

Weekly Market Report: December 20th, 2024

Last week markets digested a very busy economic calendar, a highly anticipated FOMC meeting, and some political noise with another U.S. government funding standoff translating to a notable move higher in equity and bond market volatility. The week ended with equity markets down globally with U.S. markets (-2%), developed international markets (-4.8%), and emerging markets (-4%) all losing ground. Interest rates moved higher across the curve as 10yr yields traded back over 4.5% and the curve steeped with both 2yr/10yr and 3mo/10yr becoming more positively sloped. Risk aversion and hawkish Fed narratives contributed to a strengthening USD and weakening commodity markets where oil and industrial metals traded down approximately 1%-3% across the board.

Market Anecdotes

• The FOMC delivered a hawkish 25 bps rate cut to get to a 425-450 target along with cooling market expectations for rate cuts in 2025. Post meeting pressers and speaking engagements made clear the economy is strong and they have time to assess incoming data.
• The BoJ, the only G10 bank in hiking cycle, left rates unchanged at 0.25%.
• 2024, like 2023, has been a remarkable year for AI, consumer, and technology stocks with the Mag 7 rally looking similar, yet different, than historically concentrated markets of the past.
• A recent Barron’s cover echoed bullish Wall Street, fund manager, and household sentiment for 2025 where the Conference Board survey of U.S. households hit its most bullish reading since the survey’s inception and UofM survey noted investors moving aggressively into stocks.
• The surge in immigration is clear from the U.S. Census Bureau data with associated political and economic ripple effects just now taking shape.
• Economic and financial market landscapes heading into 2025 contain ample pros and cons to consider with corporate earnings, economic growth, inflation trends, market interest rates, labor market conditions, and policy all factoring largely into forecasts.

Economic Release Highlights

• The PIO report showed headline and core inflation running at 2.4% and 2.8% YoY respectively with MoM readings of 0.1%. Personal income and expenditures grew 0.3% and 0.4% MoM.
• The final revision to U.S. GDP surprised to the upside with headline growth and PCE both revised higher from 2.8% to 3.1% and from 3.5% to 3.7% respectively.
• U.S. PMI (C,M,S) registered 56.6, 48.3, 58.5 with a strong services report countering a weak manufacturing report resulting in an improved overall composite reading for December.
• European PMI (C,M,S) at (49.5,45.2,51.4) beat forecasts across the board. UK (50.5,47.3,51.4) beat on services but missed on manufacturing.
• Industrial Production (-0.1% vs 0.3%) and Manufacturing Output (0.2% vs 0.5%) both came in below the consensus estimate for November.
• Headline Retail Sales beat forecasts (0.7% vs 0.5%) but Ex-Vehicles and Ex-Vehicles & Gas both missed the spot consensus estimate (0.2% vs 0.4%).
• UofM Consumer Sentiment came in right at consensus forecast of 74.0 while 1 yr forward inflation expectations moved down from 2.9% to 2.8%.
• The Housing Market Index ticked down one point to 46 in December, below the consensus estimate of 47 and at the lower end of the forecast range.