Midwit News

Former President Jimmy Carter, who passed away on December 29, 2024, at the age of 100, left behind a remarkable legacy of public service and humanitarian work. His centennial life not only highlights the increasing longevity we face as a society but also serves as a testament to the impact of lifestyle choices on lifespan.

Carter’s Enduring Impact:
Carter’s presidency (1977-1981) was marked by significant achievements:
• Negotiating the Camp David Accords between Egypt and Israel
• Establishing diplomatic relations with China
• Creating the Departments of Energy and Education
However, his post-presidential work, including founding the Carter Center and his efforts with Habitat for Humanity, arguably had an even greater global impact

The Longevity Imperative:

Andrew Scott’s book, “The Longevity Imperative,” emphasizes that while genetics account for 20-30% of lifespan variation, our lifestyle choices and decisions influence the remaining 70-80%
This underscores the importance of proactive measures in health, education, and social engagement to maximize our increasing lifespans.

December 2024 NFP Report: Economic Implications

Today’s release of the December Non-Farm Payrolls (NFP) report is crucial for understanding the current state of the U.S. labor market:

• Expectations: Payroll growth is anticipated to ease to 154,000 jobs, down from November’s unexpected surge of 227,000
• Unemployment Rate: Projected to remain steady at 4.2%
• Average Hourly Earnings: Expected to show a slight cooling in monthly growth while maintaining a robust annual pace

These figures will be closely watched as indicators of economic health and potential Federal Reserve policy directions.

Currency Market Implications:
The Japanese Yen is currently trading around 158 against the U.S. Dollar, approaching its July low of 162. A strong jobs report could push the Yen closer to this level, potentially triggering intervention by Japanese authorities if it surpasses 160

Minutes from the Federal Reserve’s December meeting revealed worries about inflation and the potential impact of President-elect Trump’s policies. This led to a more cautious approach regarding interest rate reductions, with expectations now set for only two rate cuts in 2025, down from the previously projected four.

Markets had to deal with CNN saying Trump is considering a national economic emergency declaration to allow for new tariff program. Quite the opposite from WaPo one on Monday. Such is what market will have to deal with in the coming 2-3 months of Trump in Power. Volatility will rise and if the unemployment or economy shows signs of softening then equities will correct in the US in the short term.

On the back of these more inflation, less rates cuts worries, crypto are down; bitcoin around 94k$ and global market cap at 3.4t$

Wall Street faltered on Tuesday as robust economic data dampened expectations for imminent rate cuts. The tech sector bore the brunt of the sell-off, with Nvidia plunging 6.2% despite unveiling new AI products. Other tech giants like Amazon, Tesla, Apple, and Microsoft also dragged down the market. As we enter 2025, the market had anticipated Fed rate cuts as early as March, but now July appears to be the earliest possibility according to current projections.

With inflation risks now a given, especially considering the upward trajectory of oil prices, the focus shifts to unemployment. The looming question is whether we’re heading towards higher unemployment rates, particularly in light of the significant layoffs announced by prominent figures such as Musk and Ramaswamy. This scenario would present a conundrum for the Fed and likely exert downward pressure on equities. The December jobless report, due on Friday, may provide initial insights into this developing situation.

• PCE: Personal Consumption Expenditures
  • A measure of spending on goods and services in the US used to provide a measure of economic strength
• YoY
  • 2.4% vs 2.5% Expected (prior 2.3%)
  • Core: 2.8% vs 2.9% Expected (prior 2.8%)
• MoM
  • 0.1% vs 0.2% Expected (prior 0.2%)
  • Core: 0.1% vs 0.2% Expected (prior 0.3%)

The inflation measure that the FED looks to regularly came in lower than expected. This provides a glimmer of hope to global markets which have been reactionary to hawkish Fed comments (expected slowdown of rate cuts) and US economic uncertainty (along with a looming US federal government shutdown). We can hope for a bounce!

• Fed has cut rates by 25bp today (11 to 1 vote)
• 50bp cuts “expected” in both 2025 and 2026
• Unemployment expected to stay around 4.3%
• Economy continues to grow

The comments and answers from Jerome Powell imply that the Fed feels they will achieve a soft-landing (“avoided a recession”). As usual the Fed is more concerned about inflation than unemployment, and if unemployment spikes in 2025 that may be an unpleasant shock to the market. While Powell would not commit to the number of expected cuts, the strong implication was slowed pace with the committee trying to understand how the planned Trump admin tariffs might impact inflation. The markets have so far been responding unfavorably to the news.

Today, the Federal Open Market Committee (FOMC) convenes for its final meeting of 2024. Following two consecutive rate cuts of 50 basis points and 25 basis points, the market widely anticipates another 25 basis point reduction, especially in light of Christine Lagarde’s assertion that “the inflation dark days are over.” However, as Bill Dudley pointed out, the Fed cannot overlook the implications of President-elect Donald Trump’s policies. Trump’s proposals, including tax cuts and tariffs, are inherently inflationary.

The critical question now is how the Fed is forecasting future economic conditions and whether a hawkish cut will suffice to stave off a potential resurgence in inflation. Additionally, the Fed has a mandate to oversee financial stability. The current rally of everything —Nasdaq, cryptocurrencies, and the US dollar—raises concerns about potential asset inflation that could spill over into the broader economy.

The bullish case would be to think Powell will play Stanta tonight and everything will keep pumping.

Masayoshi Son, renowned for his appreciation of analogical numbers, has committed to investing $100 billion in the U.S. while creating 100,000 jobs. President Trump noted that in 2016, many were eager to oppose him, but this time around, everyone seems keen to befriend him.
This investment announcement, combined with positive market momentum, has propelled U.S. equities to new record highs, with the E-mini reaching 6,154 and Nasdaq March 24 futures hitting 22,408. A pressing question remains: how will Jay Powell manage to sustain this strong rally while stand on a hawkish stance regarding future rate cuts?

In contrast, China and Hong Kong experienced declines following disappointing retail sales data, which showed a growth of only 3.0%, falling short of the expected 4.6%. The Hang Seng Index (HSI) December futures traded as low as 19,704 during U.S. hours, highlighting the urgent need for a robust demand boost from the government. Yet when will the market price bad data to being good data?

Meanwhile, cryptocurrencies continue to surge forward, with Bitcoin reaching an all-time high of over $106,000 and Ethereum fluctuating around $4,000. Hyperliquid is trading at $28, and Animoca’s Moca coin soared to $0.40—an impressive 480% increase following its listing on Upbit in Korea.

On Wednesday, the Federal Reserve is expected to implement a hawkish cut, reducing rates by 25 basis points—marking the third cut this year and bringing the total to 100 basis points. However, Chairman Jerome Powell is likely to emphasize that the path ahead remains uncertain. Despite this, equities maintained an upward trend on Friday, with the Nasdaq rising by 0.76% to reach 21,780 points.

On Thursday, the Bank of England is anticipated to hold its interest rate at 4.75%, but it is expected to signal potential future cuts. Similarly, the Bank of Japan is also expected to maintain its current rate after hiking in March, though market participants will be closely watching for indications regarding the timing of any future rate increases.

In the cryptocurrency market, Bitcoin remained above $100,000 throughout the weekend, despite some fluctuations in other cryptocurrencies. Currently trading at $105,000, Bitcoin has surpassed its previous high, driving broader market momentum. Additionally, Citron Research has taken a short position on MicroStrategy (MSTR), arguing that the company’s stock price has become increasingly disconnected from the underlying value of Bitcoin. Citron claims that investing in MSTR equates to paying around $250,000 per Bitcoin, raising concerns about its valuation.

China is committing to delivering results next year, with top officials targeting an increase in consumption, investment returns, and domestic demand. They are expected to cut the reserve requirement ratio (RRR) and boost fiscal stimulus. While these announcements seem more significant than those made at the end of September, they still lack specific details and clarity. After trading as high as 20,600, HSI December futures fell close to 20,000. We’ll see how the session unfolds. Any dips remain a buying opportunity in anticipation of support in 2025, especially considering Trump’s invitation for Xi to attend his inauguration—a friendlier gesture compared to his debut in 2016.

In the U.S., equities took a pause following a strong Producer Price Index (PPI) report that raised concerns about a resurgence of inflation. Although yesterday’s Consumer Price Index (CPI) was in line with expectations, it indicates an upward trajectory toward the 2% target. The yen weakened to 153, while the euro traded around 1.04 amid expectations of a 25 basis point rate cut from the ECB and weaker projections.

The PPI came in at 0.4%, exceeding the expected 0.2%, marking its highest level since June. Jobless claims rose to 242,000, with last week’s figures revised upward.
While these developments are not dramatic at the moment, they serve as a reminder of the market’s complacency and its conviction in a “Goldilocks” scenario for the U.S. economy. However, as August demonstrated, if cracks begin to appear, the market may sell off sharply—one of the main risks heading into 2025. Could 22,000 be the level at which to start shorting the Nasdaq?

Starting today, central banks are gathering before year-end, and the overall sentiment is expected to be accommodative. The ECB is anticipated to cut rates by 25 basis points, with over an 80% probability, while a 50 basis point cut cannot be excluded given the challenging economic situation. The euro is currently trading at 1.05 and will likely dip closer to parity after the cut and Christine Lagarde’s press conference.

Next week, all eyes will be on the Fed. Following yesterday’s CPI report of 2.7%, the market is pricing in more than a 90% probability for a 25 basis point cut. However, a contrarian view suggests that inflation may be on an upward trend, with November figures above 2%—the Fed’s target—and higher than those from October and September. Additionally, the real economy remains strong, and unemployment is solid. This raises questions about whether the Fed might be tempted to pause rate cuts sooner than January.

Following the Fed’s meeting, the BoJ will also be in focus. As members indicated yesterday that they don’t see significant costs associated with waiting before raising rates, the Japanese yen spiked from 151 to 153 back to 152.1 this morning as it strengthen on CPI because rate there most likely will be but an hawkish tone too signaling a pause from January.

In the wake of the Fed’s expected cut, the cryptocurrency market has rallied, with Bitcoin climbing back above $101,000. Additionally, sectors like AI and real-world assets (RWA) are experiencing double-digit recoveries after a brief dip.