Dara Ranasinghe talks about the future outlook for the US and global markets.
Don't be fooled by the possibility of a positive start to the new year, with stock futures signaling a solid start on Wall Street on Thursday.
For the past four years, the first trading day of the year has been a contrarian indicator, with the entire S&P 500 index ending each year in the opposite direction from the first day of each year, according to research from Deutsche Bank.
Taking last year as an example, the S&P closed about 0.6% lower on the first trading day of 2024, but ended the year up more than 20%, giving it a gain of about 53% over two years. This was the strongest consecutive annual performance since 1998.
Rather than where stocks end on Thursday, more attention may be focused on signals from the market over the last two trading weeks of 2024, which saw a quiet but decisive sell-off.
Investors liquidated global equity funds in the week ending Dec. 18 at the fastest pace in 15 years, according to LSEG Lipper data, but the move was offset by significant gains. It can be partially explained by profit taking and the Federal Reserve's hawkish signals at its December meeting. A meeting will be held to reduce interest rate cuts and raise the inflation rate.
On the other hand, the exceptionalism of the U.S. economy, supported by strong consumer spending, a resilient labor market, deregulation, and hopes for an economic recovery in China, bodes well for global markets in 2025.
In his New Year's address on Tuesday, Chinese President Xi Jingping said the country would implement more aggressive policies to boost growth in 2025.
China's factory activity increased in December, albeit at a slower pace than expected, according to a private sector survey released Thursday by Caixin and S&P Global.
Meanwhile, persistent inflation could force the Fed to pause rate cuts, just as political uncertainties in France and Germany undermine confidence in the single policy, and Donald Trump's incoming U.S. A more cautious view is that the president's tariff hike plans could hurt global economic growth. currency block.
Chinese stocks ended sharply lower in the first session of 2025, marking the weakest start to the new year since 2016.
Geopolitical risks are also on the list of concerns. Russian gas exports through a Soviet-era pipeline through Ukraine were halted on New Year's Day, ending Moscow's decades-long grip on Europe's energy markets.
But unlike in 2022, when a decline in supply from Russia pushed prices to record highs and worsened the cost of living crisis, hitting the region's competitiveness, the widely expected outage meant that European Union consumers will not affect the price.
