Tuesday's Markets Update (December 31, 2024)

01 Jan 2025 by rate3

On Tuesday, equities continued to slip as data showed home prices rising while services remained on an improvement track. Additionally, profit-taking and concerns about future Fed rate hikes weighed on sentiment. The dollar continued to rise, marking its best YoY performance in 10 years. Natural gas prices corrected sharply downward after a spike caused by weather conditions. BTC and ETH remained unchanged at $93K and $3.3K, respectively, as the market entered a period of low liquidity.

Details

The S&P CoreLogic Case-Shiller 20-city home price index rose 4.2% YoY in October, exceeding expectations. New York led with the highest annual gain. Monthly prices declined 0.2%. 1Y trend: "Down" (SP)
The Dallas Fed's service sector index eased slightly to 9.6 in December. Revenues increased, while hours worked and capital expenditures softened. Employment rebounded, and price pressures intensified. 1Y trend: "Up" (CFed)

Crypto

Venture capital investment in crypto startups reached $13.6B in 2024, a recovery from 2023. Predictions suggest an increase to $18B in 2025, driven by declining interest rates and increased regulatory clarity. (source)

Comment: What's Up With Stocks?

In 2024, the top stock markets' performers are:

- Europe: North Macedonia saw a remarkable increase of 66%, driven by optimistic expectations regarding its potential acceptance into the European Union. Cyprus experienced a 58% rise, attributed to a sharp increase in tourist arrivals, as numerous other destinations became less accessible due to the ongoing war.

- Americas: Argentina led with 172% surge, while Venezuela followed closely with a 106% increase. These gains can be primarily explained by investors flocking to stocks in an effort to protect their assets from rapid depreciation caused by extreme inflationary pressures.

- Asia: Pakistan's market rose by 78%, benefiting from a swift slowdown in inflation, accompanied by the central bank's decision to cut interest rates by over 50% in 6 months. Sri Lanka saw a 50% increase, with similar dynamics at play as in Cyprus — a significant rise in tourist arrivals, coupled with a shift from inflation to deflation and a substantial cut in the local central bank's rate. It was added by Kazakhstan's stocks rising by 31% on sharp decrease of inflation and easing of banks policies, still, stocks rise was also stimulated by depreciating local currency.

- Africa: Zimbabwe's stock market skyrocketed by 675%, while Ghana and Nigeria recorded increases of 56% and 35%. These trends mirror the situation in Venezuela, where rampant inflation has led investors to turn to stocks as a hedge against depreciation.

This sheds light on how the global economic landscape has unfolded following the disruptive "enclosure" policies enacted by bureaucrats in 2020, which led to severe inflationary challenges and the subsequent outbreak of conflict. In the EU, which historically relied on exports to China and imports from Russia, there are few examples of sustained stock market growth, aside from localized recoveries attributed to shifts in internal goods and services.

In the Americas, a significant capital flight occurred toward North America, as the rest of the region grappled with the impact of closed Chinese markets and shifting trade policies. Africa, traditionally reliant on external supplies for food and essential goods, continues to face the brunt of inflation, exacerbated by the ongoing war in Europe. Conversely, Asia, with its ample food supply and affordable energy sources—including those from Russia—has seen notable improvements in market quality.

Overall, the global economic framework remains largely unchanged from "globalization" times, with production and consumption concentrated predominantly in Asia, which sources resources and materials from various regions, including South America and Africa. These sourcing patterns are particularly vulnerable to disruptions, leading to more pronounced effects on South America and Africa when production is interrupted. North America, in contrast, focuses heavily on capital and services, while Europe appears increasingly uncomfortable, lacking an independent resource base to ensure uninterrupted internal consumption and growth, independent of Asia’s influence. The ongoing war compounds these issues further.

Looking ahead, the potential recovery of China could play a crucial role in the revival of South America, particularly Brazil, while Africa’s economic outlook may improve as well. Nonetheless, the EU situation and world's food and energy supply chains will likely remain impacted by the sustained geopolitical conflicts. So, we can expect that capital continue to fly into N. American stock and money markets.