The dawn of 2025 brought with it a cocktail of year-end profit-taking and New Year optimism. Let’s break down how this played out across various asset classes:
Equities
The first trading sessions of the year were a mixed bag, to say the least. Here’s how the major indices fared:
- The S&P 500 and Nasdaq Composite both took a slight dip, each declining 0.5% for the week.
- In a surprising turn, the Russell 2000 outperformed its larger counterparts, settling 1.1% higher. This outperformance of small-caps is something I’ll be watching closely in the coming weeks.
Looking at the S&P 500 sectors, only three managed to keep their heads above water:
- Energy led the pack with a robust 3.2% gain
- Real Estate eked out a 0.6% increase
- Health Care just barely stayed positive with a 0.01% uptick
On the flip side, Materials (-2.1%), Consumer Discretionary (-1.5%), and Consumer Staples (-1.4%) took the biggest hits. This sector rotation tells an interesting story about where investors are placing their bets for the year ahead.
It’s worth noting that the S&P 500 closed below its 50-day moving average, which shifted from support to resistance on Monday. In my experience, this technical indicator often signals a potential shift in market sentiment, so it’s definitely something to keep an eye on.
Bonds and Treasuries
The bond market didn’t sit idle either. Treasury yields inched up as investors reassessed their expectations for rate cuts. The 10-year Treasury yield closed the week at 3.95%, up from 3.90% last Friday. This uptick, while modest, suggests that the market might be tempering its optimism about aggressive rate cuts in the near future.
US Market Highlights
Diving deeper into the U.S. economic landscape, several key developments caught my attention:
- The manufacturing sector showed signs of life, with the PMI hitting a 9-month high of 49.3. While still in contraction territory (below 50), the rising production and new orders are encouraging signs. However, as someone who’s weathered multiple economic cycles, I can’t help but note the lingering concerns about tariffs and employment contraction. These factors could throw a wrench in the recovery works.
- The housing market got a welcome boost, with pending home sales reaching a 22-month high in November, rising 2.2%. The South led this growth, while the Northeast saw a decline. It seems buyers are slowly adapting to higher rates, a trend I’ve observed in previous rate-hike cycles. However, regional disparities suggest the recovery isn’t uniform across the country.
- Tesla, a company I’ve followed closely since its IPO, hit a significant bump in the road. They reported their first-ever annual drop in deliveries, with 2024 totals at 1.79 million, down from 1.81 million in 2023. As an analyst who’s tracked the EV market’s evolution, I see this as a wake-up call for the industry leader. Rising competition and inventory buildup pose key challenges that Tesla will need to address head-on.
- In a concerning development, China-linked hackers breached U.S. Treasury systems, accessing employee workstations and unclassified documents in what’s being called a “major” cyberattack. While Treasury and CISA report no ongoing threat, this incident underscores the growing importance of cybersecurity in our increasingly digital financial world.
- On a lighter note, Delta Airlines topped U.S. airline rankings for punctuality in 2024 with 83% on-time arrivals, followed by United (81%) and Alaska (79%). As someone who’s spent countless hours in airports over my career, I can appreciate the significance of this achievement. Frontier (72%) and JetBlue (75%) ranked among the lowest, reminding us that not all airlines are created equal when it comes to timeliness.
Global Markets
Turning our attention to the global stage, several developments caught my eye:
- China’s economic data painted a nuanced picture. Manufacturing growth slowed, with the PMI hitting 50.1 in December. However, services and construction surged, lifting the non-manufacturing PMI to 52.2. As someone who’s navigated countless market cycles, I’m keenly aware of how China’s economic health can ripple through global markets.
- A potential U.S. Steel sale to Japan’s Nippon hit a roadblock, blocked by President Biden on national security grounds. This $14.9 billion deal’s cancellation sent U.S. Steel shares tumbling 7%. It’s a stark reminder of the growing trend of economic protectionism we’re seeing worldwide, a trend that could reshape global trade patterns in the years to come.
- In South Korea, a tragic Jeju Air Boeing 737-800 crash claimed 179 lives. As investigators consider potential causes like a bird strike or landing gear failure, Boeing shares fell amid intensified safety scrutiny. This incident serves as a somber reminder of the challenges facing the aviation industry and the potential market impacts of such tragedies.
- On a more positive note, Canada’s factory activity hit a 22-month high, buoyed by increased export sales as U.S. clients stocked up in anticipation of potential trade tariffs. While this is encouraging, supply chain delays and rising costs remain significant hurdles. As someone who’s analyzed countless economic reports, I’m always cautious about reading too much into single data points.
Commodities & Crypto Corner
Energy
Oil prices are on the upswing as we start the year, driven by favorable demand in the USA, which is bracing for an Arctic cold snap. This weather event could temporarily impact both demand and U.S. oil supply, particularly in Texas.
As of now, Brent is trading at $75.50, while WTI hovers around $72.50.Natural gas prices in Europe have seen a sharp increase, with the Rotterdam TTF jumping from 40 to 50 EUR/MWh in just 15 days.
A key factor here is the definitive end of Russian gas flow via Ukraine this week, following the expiration of a contract between the two countries. This development could have significant implications for European energy markets in the coming months.
Metals
The metals market is starting the year in a holding pattern. Many financial players are waiting for further economic stimulus from China before turning bullish on industrial metals.
Recent economic data and Beijing’s growth target for 2025 haven’t generated much enthusiasm. Copper is currently trading at $8,800 per tonne in London (spot price).Gold, on the other hand, is starting the year on an upward trajectory, despite the greenback’s appreciation.
An ounce of gold is currently trading around $2,650. In my experience, gold’s strength in the face of a rising dollar often signals underlying investor unease about broader market conditions.
Crypto
Bitcoin has kicked off 2025 with a bang, up over 3% since Monday and trading around $96,600. This comes on the heels of a stellar 2024, where it surged by over 120% to a new all-time high of over $108,000. The launch of Bitcoin Spot ETFs, expectations of monetary easing, and Trump’s return to the White House all contributed to Bitcoin’s record-setting year.
As we look ahead, the crypto community is eagerly watching to see if President Trump’s campaign promises regarding cryptocurrency will come to fruition. Whether it’s making the USA the “cryptocurrency capital of the world” or creating a strategic Bitcoin reserve on U.S. soil, these ambitious plans could potentially drive Bitcoin to new heights. However, as someone who’s seen many market cycles, I always advise caution when it comes to speculative assets like cryptocurrencies.
Key Events & Calendar
Looking ahead, here are some key events to watch in the coming week:
- Monday: ISM Manufacturing PMI
- Tuesday: JOLTS Job Openings
- Wednesday: FOMC Minutes Release, ISM Services PMI
- Thursday: ADP Employment Report
- Friday: December Jobs Report, including Non-Farm Payrolls and Unemployment Rate
Each of these reports has the potential to move markets, so I’ll be watching them closely and analyzing their implications.As we navigate these market currents, it’s crucial to stay focused on your long-term investment goals. Don’t let short-term volatility throw you off course. Remember, successful investing is about playing the long game.
Here’s a fascinating fact to close us out: Did you know that if you had invested $1,000 in the S&P 500 at the start of 1980, it would be worth over $120,000 today? That’s the power of compound interest and patience in action. It’s a reminder that while day-to-day market movements can be exciting (or nerve-wracking), the real wealth-building happens over decades, not days.
As always, I encourage you to stay curious, stay informed, and most importantly, stay patient. The markets will do what they do, but it’s our reaction to them that determines our success as investors.
Until next week, this is Irving Wilkinson, signing off. Happy investing, everyone!
