Soft landing !

US Market's Stellar Run: Nasdaq, Dow, and S&P 500 are powering through, marking eight consecutive weeks of robust performance. Is this the Santa Claus rally? This market cheer might just outlast the holiday season.

📉 Rate Cut Hopes: The expectation in the markets is that the Federal Reserve will deliver interest rate cuts, and these cuts may come sooner than originally expected.. While the Fed hasn't explicitly mentioned rate cuts, Chair Powell has hinted that rate increases are over for now. Falling inflation is fuelling optimism as core inflation at 1.9% dipped below the 2% target . US GDP growth is expected to pick up in Q4. Consumer sentiment is improving. Whats not to like about all the data ?  A soft landing, Goldilocks economy may be on the cards.

📈 Interest rate cuts are not just good for stocks. It is good for bonds too. With a 3.5% increase in some bond indexes in December, investors are hoping to lock in good yields, as well as make capital gains in the coming months. “The Year of the Bond” as some have dubbed 2024. Bonds can be bought directly, or through funds investing across different types of bonds, both government issued or company issued. There are a few agencies rating bonds according to risk. These ratings may vary. Standard and Poor’s use AAA for the best rating, followed by AA, A, BBB, BB, B, CCC, CC, and C. D is used for bonds that are already in default.

💥 US Market's Dynamic Big 7: The tech titans - Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla - have soared about 70% this year. Accounting for a quarter of the S&P 500, they've pushed the index up by 24%.

UK's Inflation and Rate Outlook: Inflation dips to 3.9%, but the Bank of England isn't ready for rate cuts yet. The inflation target is 2%. With recession risks and an economy that contracted in Q3, the first rate cut might have to be sooner rather than later to help the economy recover.

EU Inflation and ECB's Stance: Inflation eases to 3.1% in November, with the Eurozone at 2.4%. The ECB holds its benchmark rate at 4%.

Is there a spoiler in all this good news ? Yes, and it is in the Red Sea. A new risk to inflation. Attacks on merchant shipping has led to some ships going the long way round Southern Africa, adding time and costs. For over a century, the Red Sea has been an important artery for the global economy, and now comprises about 12% of global maritime trade, and 40% of Europe-Asia trade.

Another tanker was hit off the coast of India on Saturday, extending the risk beyond the Red Sea.

🛢️ Oil's Steady Course: Despite Red Sea tensions, oil markets remain calm for now (Brent at $79, WTI at $73 per barrel)

💰 Gold's allure : Approaching a 5-year high, gold closes at $2,053 per ounce, possibly reflecting concerns on shipping in the Red Sea

The inflation genie is not back in the bottle yet.

Crypto's Uncertain Future:

The promise of cryptos playing a major role in the economy is yet to be realised with the world still working with fiat currencies. Cryptos remain outside the mainstream economy.

Recently Bitcoin is having a resurgence going up from around $35,000 in early November to around $43,000 in mid December,  but these kinds of movements are not unusual in the crypto world. Solana is up nearly 30% in just one week ! Cryptos may not have caught the  imagination of mainstream investors but blockchain technology has potential. Yet, there are still not enough use cases at this point in time.

Warren Buffet drops to 8th place this week, and Mark Zuckerberg takes his place.

Elon Musk (Tesla, SpaceX) $254bn

Bernard Arnault and family (LVMH) $201bn

Jeff Bezos (Amazon) $176bn

Larry Ellison (Oracle)  $136bn

Mark Zuckerberg  (Facebook) $125bn

Stay tuned for more insights and updates !