There is only one week left before the end of this year 2024 which will have been simply fantastic in terms of performance. We’re not going to lie, it’s been two years of fun and nothing seems to be able to deviate the markets from their vertical trajectory. Well, unless you are the SMI and the CAC40. Still, in recent times, it was enough to be 50% invested in Nvidia, 25% in Bitcoin and 25% in the rest of the Magnificent Seven and you stopped working for good at Christmas. There was also another effective strategy: Long Tesla since the elections and the year was bent.
The Audio of December 16, 2024
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The straight line
But here, we will have to manage this last real week and survive the FED and the PCE. Well, the good thing is that the FED will lower rates BEFORE seeing the PCE which will be published on Friday. A PCE which will be stronger than expected and which will leave a bitter taste to the guys at the FED who will wonder if they would not have had a better time to RISE rates to prevent inflation from rising again in 2025 Finally, whatever happens, it should still be noted that the economy is showing signs of weakness – no matter how you want to see it – that inflation is showing signs of resurgence (well, except in Switzerland). and that despite all that, the whole wonderful world of finance has never been more optimistic about the year ahead. We don’t even ask ourselves the question of whether we could POSSIBLY go down. Or even correct a bit. We simply wonder HOW MUCH we will still go up in 2025.
That’s why today, as we begin the last full 5-day week before 2025, we have the feeling that nothing can stop us and that nothing is going to prevent us from going higher. The FED will lower rates by 0.25% – this is a virtual certainty and the PCE which will be released on Friday should be in line with the CPI and the PPI published last week, namely: “which refuses to lower and which leaves assume that it could start to rise again soon at the risk of repeating the same scenario as at the end of the 1970s.” But we won’t worry about it in the least. First of all because everyone knows that inflation is currently transitory and under control. And then, as Trump will take control of the country in the second half of January, nothing will happen to us since we will enter the magical world of Trump 2.0.
Serenity
So here we are at the all-time high on most American indices and on the DAX. At totally crazy valuation levels based on the past. But at levels that have never so motivated investors who are filling their portfolios with leveraged ETFs and who are increasing their investments by increasing margins to be able to earn more with less money. We know that investing money that you don’t have always ends up very well and that’s also why the markets are so confident in the future. Nothing seems to be able to happen to the financial markets and in my 35 years of career, I have never had the feeling that confidence was at its peak and that NOBODY (or almost) had doubts about the future.
However, without wanting to be “negative” (we don’t even dare to say BEARISH anymore, it’s so ridiculous), not a day goes by without us coming across an economic figure or some statistic that makes us want to cutting your veins with a butter knife is so scary. I can already give you – in bulk – two frightening statistics:
1) The number of bankruptcies in the USA – which reaches levels which are close to the post-subprime period and which – usually – corresponds to levels during which this means that the economy is in recession
2) Projections on the cost of the US debt which suggest that in the next 10 years, 25% of US tax revenues will be used to pay the interest on the debt only
Two statistics which may make you want to doubt, but which in the end interest no one. I’m not even talking about the latest indications on US employment which suggest that it’s REALLY shit. Regardless, currently confidence is at such levels that nothing can happen to us. The only thing that matters is the increase. This weekend, an American research company called Apollo Research published a report which suggests that inflation is starting to rise again and that the probability of seeing the FED RISE rates in 2025 is also increasing. start to rise again. So of course, it’s not easy to make a decision on “what to do in 2025”, knowing that Trump-the-miracle-worker is coming in a few weeks and that it would be stupid to miss the next 30% on world markets, but if we could already recognize that “at times” the markets tended to get a little carried away, that wouldn’t be bad.
Don’t waste the home stretch
Anyway, on this Monday, December 16, far be it from me to want to sound the alarm, but as there is nothing to say before the FED, before the PCE and before two weeks truncated by Christmas and New Year, it seemed quite logical to me to come back for two minutes to the fact that we are getting a little carried away, even if no one seems to want to recognize it, because we are in the BULL RUN of the century and like the banks central are our friends, nothing can or will happen to us. Except a mysterious drone attack which invades the USA or the appointment of a lobotomized goat to Matignon, or the downgrade of the French debt by Moody’s. Let’s stay optimistic!
In any case, the week will remain focused on the FED which will arrive Wednesday evening and then as for the PCE, we will come back to it Friday afternoon, but to be frank, I have the feeling that the year is already folded and no one really wants to be interested in the market anymore. Or even take more risks. Well, at the same time, if you look at the numbers, the average investor has been RISK-ON for a long time. All this to tell you that nothing seems to be able to happen to us anymore. We have Trump’s Hedge, artificial intelligence which will bring in more money in the years to come than a winning Power Ball ticket and now we are talking about Quantum Computing which will allow us to travel in time and heal all the diseases in the world before they were invented. In short, everything is going to be fine and it’s not these last few trading sessions that are going to spoil the end of the year for us. Not even the fact that 70% of volumes go through the Magnificent Seven, not even the fact that Tesla’s valuation no longer has anything to do with reality, unless Tesla sells more cars than Apple sells Smartphones in 2025 or that Robotaxis become the norm on American roads before January 22.
This morning, a rabbit
In Asia we start the week walking on eggshells. Japan is down 0.06%, Hong Kong is down 0.5% and China is up 0.10% after mixed Chinese economic figures: Chinese industrial production was up last month. The recent stimulus measures put in place by Beijing have clearly worked. However, retail sales were lower than expected, reflecting continued weakness in consumer spending. But to put it simply, we are waiting for the FED to see things more clearly – according to Asian media – at the same time, it is not certain that Powell will come to talk about China and its recovery measures on Wednesday evening. But we can always dream. For the rest, last night Bitcoin posted a new record at more than $105,000 while we are talking more and more about a strategic Bitcoin reserve, more about the fact that Microstrategy – which will integrate the Nasdaq 100 in a week – is a massive buyer of Bitcoin every weekend.
In today’s news, we note that the Blue Whale fund, managed by billionaire Peter Hargreaves, have reduced their exposure to the “Magnificent Seven”, estimating that investments in the AI sector and the fact that it does not ” not bring in any money straight away”, are a little too high. We had already talked about it, but the subject comes back on the table. In 2024 nearly 300 billion have been invested (and again, the figure is not clear) and as we are talking about revenues around 10 billion, there is a gap. We will also note that Germany will experience a vote of confidence in its Chancellor during the day. If Scholz does not get this vote, there will be elections early next year. And meanwhile, the German economy is collapsing. According to a Bloomberg report, it appears that German households are 2,500 Euros less wealthy this year. The German economy is stalling just when Europe needs it most. Fortunately, Bayrou has arrived at Matignon, which should change everything.
Numbers side
Regarding the figures for the day, we will have an avalanche of PMI’s everywhere, but to be frank, everyone will remain focused on the FED which will arrive during the week. For the rest, not sure that our days will be exciting, unless Bitcoin goes directly to $150,000 before this weekend.
Have a great day and we’ll see you again very soon, right here!
Thomas Veillet
Investir.ch
“The stock market rewards patience and punishes greed.” Unknown
