To The Moon

1 Market Recap

Stocks Struggle for Direction

U.S. equity markets delivered a mixed performance today, with notable sectoral divergences:

• Dow Jones Industrial Average: Fell 0.2% (-86 points) for its seventh consecutive losing session, marking its longest losing streak in nearly five years.

• $.SPX(.SPX)$ : Finished flat, with losses outnumbering gains by almost 3-to-1.

• $.IXIC(.IXIC)$ : Gained flat, buoyed by tech stocks, continuing its relative outperformance compared to the value-heavy Dow. $Tesla Motors(TSLA)$ $NVIDIA(NVDA)$

Ind Perf

• Broadcom Surges on AI Hype

Chipmaker $Broadcom(AVGO)$ dominated the day’s headlines, surging 24% after strong earnings and optimistic comments from its CEO about AI opportunities. The rally propelled Broadcom's market value past the$1T mark, underlining the continued influence of artificial intelligence on investor sentiment.

$AVGO

Market Breadth and Concerns

Despite AI-driven enthusiasm, gains were concentrated in a small subset of stocks, leaving broader indices struggling. The Santa Claus Rally—historically delivering a 1.3% average gain for the S&P 500 during late December—might offer a reprieve. However, today’s mixed performance reflects lingering investor caution…

2 Macro Drivers

Inflationary Pressures Persist

Recent inflation data has added complexity to monetary policy decisions:

• Consumer Prices (CPI): Stabilizing but above the Fed's 2% target.

• Producer Prices (PPI): Edging higher, suggesting inflationary pressures in the pipeline.

These mixed signals are contributing to volatility in the bond market:

• 10-Year Treasury Yield: Rose from 4.13% to 4.35%, reflecting renewed inflation concerns and potential policy uncertainty.

• Yield Curve: The widening gap between short- and long-term rates is benefiting banking stocks, which thrive in such conditions.

Energy

Oil prices rebounded this week (+3%) despite structural challenges:

• OPEC Outlook: Revised global demand growth forecasts downward due to a sluggish economic recovery.

• Supply Dynamics: The IEA predicts a supply surplus by 2025, adding to long-term bearish pressures.

• Short-Term Drivers: Brent crude climbed to $73.90 amid reports of potential new U.S. sanctions against Russia, while WTI stabilized above $70.

Metals

• Gold: Capped by rising bond yields, the yellow metal traded around $2,660, reflecting limited upside in the face of a strengthening dollar and higher real rates.

GOLD WTI

3 Outlook

• Santa Claus Rally: A Seasonal Tailwind?

Historical data supports optimism for a Santa Claus Rally, with the S&P 500 closing higher 77% of the time during the last five trading days of December and the first two in January. However, given today’s mixed market breadth, this seasonal trend may face headwinds.

• Key Catalysts to Watch

• Federal Reserve Decision (Dec. 18): Investors will scrutinize post-meeting statements for clues about future policy amid a backdrop of persistent inflation and slowing growth.

• Economic Data: Upcoming reports on GDP growth, retail sales, and inflation could shape early 2025 expectations.

• Geopolitical Developments: Escalating sanctions on Russia and evolving trade dynamics with China remain key variables.

Conclusion

As 2024 winds down, markets find themselves at a crossroads. AI enthusiasm continues to lift tech-heavy indices like the Nasdaq, but broader market gains remain elusive. Central bank policy will dominate the narrative heading into 2025, with questions about inflation, growth, and geopolitical risks shaping sentiment. For now, the holiday season offers a respite, but the year ahead promises to be anything but tranquil…

This analysis is intended for informational purposes only and does not constitute investment advice. Market conditions are subject to change, and readers should consult financial advisors before making investment decisions based on evolving economic and political factors.

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