December fifteenth, two thousand twenty-four (241209-241215)
Marc Rowan said at a financial conference in New York this week:“I could not envision a more hostile environment to private capital than the last 4 years.”...
What happened over the past week was a microcosm of all the core factors influencing markets this year:
1) The Small Business Optimism index and PPI terminal demand data (PPI Final Demand) accelerated higher, further validating the “No Landing” economic growth narrative.There had previously been disagreement over the growth and inflation paths, but the latest activity data show that the U.S. economy continues to demonstrate strong resilience, an extended late-cycle phase is becoming the dominant narrative.
2) This week's slightly weaker CPI continued to reinforce the disinflationary trend (Disinflationary Trend).giving asset pricing some breathing room and also leading the market to fully priced a December FOMC cut, with the yield-curve adjustment fully reflecting this expectation, particularly as short-end rates have reacted with notable sensitivity.
3) Trump and the new administration’s policy rhetoric continued to amplify the impact of the political winds.The visit to the New York Stock Exchange not only provided an emotional boost but also prompted speculation about the future direction of policy. From tax reform to deregulation, the market is continually reassessing the potential economic impact of Trump’s return to the stage. The intersection of politics and markets is a key variable driving volatility in risk assets.
4) Broadcom’s strong bet on AI delivered a 22% gain in a single day, propelling it into the trillion-dollar club. This is not only a demonstration of the technology sector’s dominant position in capital markets, but also further proof of the capital appeal of themes related to AI。
The Structural Divergence continues:
Although market sentiment was buoyant after the election, genuine Breadth Expansion has yet to appear. Although the S&P Equal-Weight Index briefly outperformed the S&P 500 (see the circled area in the chart), this trend was quickly interrupted, giving way to a one-way market continuing to be led by Mega-Cap Tech.
Large-cap tech is up 11% this month and has outperformed the S&P 500 for 10 consecutive days, only showing some weakness on Friday.
Meanwhile, the Nasdaq again set a record high, and the S&P also reached its 57th New All-Time High of the year. The number of record highs for 2024 has now risen to the fifth-highest in history, behind only 1995, 2021, 2017, and 1964.
Chart: Structural divergence continues; broader market participation remains elusive
The Magnificent 7 account for more than 70% of trading volume, By contrast, other indicators more broadly linked to economic activity and outlook appear weak. For example, the Dow Transports fell on 9 of the past 10 days, nearly giving back all of its post-election gains:
Chart: Dow Jones Transportation Average
Chart: S&P 3mth implied correlation has never been this low
Chart: Market breadth has worsened over the past couple of weeks but remains just below average on a medium-term view
The weekend is over. Wishing everyone who made it this far a happy week ahead!
If you made it this far, give us a like so we know!
Note: All content in this article is for reference only and does not constitute investment advice or serve as a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for decision-making.