SVET Markets Weekly Update (January 27–31, 2025)
On Week 5, equities ended the week in the green, despite a Friday plunge triggered by the White House’s confirmation of tariffs. Economic growth showed signs of slowing, and the Fed opted to keep rates unchanged, with Powell making hawkish comments that contradicted his earlier remarks on inflation progress. Meanwhile, the European Central Bank cut key interest rates as the Eurozone economy faltered. In the cryptocurrency market, BTC and SOL initially rose before experiencing a sharp correction after stocks, while ETH stood out with a rally.
On Monday, equities dropped as tech stocks, including Nvidia and Broadcom, fell sharply amid fears of competition from DeepSeek. Regional indexes reflecting the level of business and manufacturing activities rose, reinforcing expectations that the Fed will hold rates steady on Wednesday. The dollar increased in response to Trump’s threats to impose tariffs on Colombia. Chinese manufacturing activity slumped to a 6-month low ahead of the Lunar New Year festival. BTC, ETH, and SOL tumbled by 2–3%, following the stocks.
Details
- Building Permits decreased by -0.70% MoM in December 2024, following a 5.20% increase in November. This marks a decline from the historical average of +0.22% (1960–2024; ATH = +33.9% (Jan 1967); ATL: -24% (Feb 1990)). 1Y trend: “Up” (Census)
- The Chicago Fed National Activity Index increased to 0.15 in December 2024, the highest in seven months. Production and employment indicators contributed positively to the index. Sales, orders, inventories, and personal consumption and housing categories contributed negatively. The three-month moving average also increased. 1Y trend: “Down”. (CFed)
- The Dallas Fed’s Texas manufacturing activity index rose significantly in January, reaching a 4-year high. New orders, capacity utilization, and shipments improved. Business conditions were strong, with employment growing slightly. Price pressures increased, while future manufacturing expectations were very positive. 1Y trend: “Up”.(DFed)
Crypto
- A crypto project supported by Donald Trump, World Liberty Financial, purchased $10M worth of ETH during a market dip, acquiring 3,247 ETH. This follows a $47M ETH buy on Trump’s inauguration day, bringing its total ETH holdings to 59,265. (source)
World Markets
- China’s NBS Composite PMI fell to 50.1 in January, the lowest since August, missing forecasts of 52.0. Manufacturing shrank, and services slowed amid Trump’s tariff threats. Beijing may introduce support measures, but risks of overcapacity and deflation persist. 1Y trend: “Side”. (NBS)
Currencies
- The dollar index rose above 107.7, rebounding from last week’s losses as Trump’s tariffs on Colombia reignited trade concerns. The Fed is expected to hold rates this week, but pressure for cuts persists. Traders await the PCE inflation report. 1Y trend: “Up”
On Tuesday, stocks rebounded as tech rose from an AI-driven sell-off. Nvidia surged +8%, while Apple and Microsoft also gained. The dollar is up again due to new tariff threats. BTC, ETH, and SOL’s recoveries were reversed under the pressure of bearish technicals, with ETH being affected the most heavily.
Details
- Durable goods orders fell 2.2% to $276.1B in December, missing forecasts of a 0.6% rise, driven by a 7.4% drop in transportation equipment. Excluding transportation, orders rose 0.3%, while business investment proxy increased 0.5%. 1Y trend: “Side” (Census)
- The Dallas Fed service sector index fell to 7.4 in January from 10.8, reflecting a broader slowdown in business activity due to higher rates. Employment and wages rose, while input costs and price increases eased. Future expectations for orders and shipments declined. 1Y trend: “Down” (RFed)
World Markets
- Zimbabwe’s monthly inflation surged to 10.5% in January, driven by higher food, housing, and utility costs amid drought and after bureaucrats imposed taxes on “excessive spendings” such as sport betting and fast-food. Dollar inflation rose to 11.5%, while the gold-backed ZIG currency depreciated nearly 2%. 1Y trend: “Up”(RBZ)
Currencies
- The dollar rebounded as Trump announced tariffs on imported chips, pharmaceuticals, and metals to boost domestic production. Traders remained cautious ahead of the February 1 deadline for tariffs targeting China, Mexico, and Canada. 1Y trend: “Up”
On Wednesday, stocks closed in the red as the Fed kept rates steady, followed by Powell’s hawkish comments, noting steady growth and a strong labor market but omitting previous remarks on inflation progress. Nvidia slid amid concerns about AI competition, while T-Mobile surged on strong earnings. The trade deficit hit ATH due to pre-tariff stockpiling. Gold holds near its ATH@ in anticipation of expected easing from the ECB. BTC (103K), ETH (3.1K), and SOL (231) wobbled around their weekly lows without notable progress, despite a short spike triggered by Powell’s statement that it is up to banks to decide whether to serve the crypto market.
Details
- Powell maintained the fed funds rate at 4.25%-4.5% in January, pausing after three 2024 cuts totaling 1%. Chair Powell emphasized no rush to lower rates, citing solid economic growth, stable unemployment, and elevated inflation. 1Y trend: “Down” (Fed)
- The trade deficit in goods hit a new record $122.11B in December, surpassing forecasts of $105.4B and rising from November’s revised $103.5 billion. Imports jumped 3.9% to $289.6B, likely due to pre-tariff stockpiling, with gains in industrial supplies, consumer goods, and capital goods. Exports fell 4.5% to $167.5B, led by declines in industrial supplies, capital goods, and consumer goods. 1Y trend: “Down, Deficit is growing” (Census)
Crypto
- Speaking after the FOMC meeting, Powell stated that banks can engage with crypto if they manage associated risks effectively. He noted a higher threshold for banks in crypto due to its novelty but affirmed the Fed’s openness to financial innovation. Powell dismissed claims of crypto firms facing banking access issues, clarifying the Fed does not aim to cut off legal customers. He emphasized the Fed’s role in scrutinizing banks’ crypto ties and acknowledged the need for a stronger regulatory framework to address industry challenges. (source)
World Markets
- The Indian rupee fell beyond 86.6, nearing January’s record low of 86.7, as aggressive RBI liquidity injections fueled rate cut expectations. RBI’s forex interventions to defend the rupee drained bank reserves, heightening expectations of a rate cut this quarter, with debate over the timing. Slowing economic growth, contrary to earlier optimism, led investors to shift from Indian markets to other Asian assets, increasing pressure for looser policy. 1Y trend: “Up”
Commodities
- Gold fell below $2,750 after hitting ATH earlier in the week, as markets reassessed the Fed’s policy stance. Safety demand waned as mixed Trump’s tariff signals eased concerns. However, dovish moves by other central banks, including rate cuts by the BoC and Riksbank, along with expected ECB easing and signals from the RBI and PBoC, limited gold’s decline. 1Y trend: “Up”
On Thursday stocks ended higher in a volatile session, despite mixed earnings, as traders reacted to the economy slowing down below forecasts and ignored a strong job report and rising PCE. Meta rose on strong results and AI investments. Microsoft dropped due to a weak revenue forecast, and Apple dipped ahead of its earnings. The ECB cut its rate 5th time as the EU economy continues to decline. Gold reacted by reaching a new ATH. BTC, ETH, and SOL followed the main markets’ spike of optimism. In other news, Grayscale filed for an XRP ETF.
Details
- The economy grew 2.3% annualized in Q4 2024, its slowest pace in three quarters, down from 3.1% in Q3 and below forecasts of 2.6%. Personal consumption surged 4.2%, driving growth, while fixed investment fell for the first time since Q1 2023. Residential investment rebounded, but private inventories and trade dragged on growth. Government spending slowed. For 2024, the economy expanded 2.8%. Source: 1Y trend: “Up” (BEA)
- Initial jobless claims dropped by 16K to 207K for the week ending January 25, well below forecasts of 220K and reversing a near 2-month high. This aligns with the Fed’s view, supporting prolonged restrictive rates. 1Y trend: “Down” (DOL)
- The core PCE price index rose 2.5% in Q4 2024, matching Q3’s increase, while the headline index climbed to 2.3%, up from 1.5% in Q3, according to advance estimates. 1Y trend: “Down” (BEA)
Crypto
- Grayscale has filed a 19b-4 application with the SEC to launch an XRP ETF. Approval appears probable, but Grayscale’s application might face delays as the SEC undergoes realignment.
World Markets
- The European Central Bank cut key interest rates by 25 bps, as expected. The deposit rate fell to 2.75%, refinancing to 2.90%, and marginal lending to 3.15%. The decision reflects easing inflation, though domestic pressures persist. Wage growth is slowing, and corporate profits are absorbing some inflation. The ECB remains cautious, focusing on data to achieve its 2% inflation target without committing to a fixed rate path. 1Y trend: “Down” (ECB)
- In Q4 2024, the Eurozone economy unexpectedly stalled, recording its weakest performance of the year after 0.4% growth in Q3. Germany and France contracted, while Spain, Portugal, and Lithuania saw strong growth. YoY GDP rose 0.9%, with a 0.7% annual expansion. 1Y trend: “Up”. The Euro Area’s unemployment rate rose to 6.30% in December 2024, up from 6.20% in November. Historically, the average rate since 1995 is 9.25%, peaking at 12.20% in January 2013 and hitting a record low of 6.20% in November 2024. 1Y trend: “Down”. (Eurostat)
Commodities
- Gold climbed above its October 2024 record high of $2,790, supported by easing monetary policies globally. The Fed held rates steady, hinting at potential rate cuts later this year. The Bank of Canada reduced rates and ended quantitative tightening, while the ECB, Swedish Riksbank, and central banks in China (PBoC) and India (RBI) signaled looser policies and increased liquidity. These moves bolstered gold’s appeal. 1Y trend: “Side”
On Friday, equities closed the week in the red after large morning gains, as the White House confirmed tariffs on Mexico, Canada, and China. Core PCE inflation met estimates, showing slight growth and keeping expectations of two Fed rate cuts this year intact. The dollar rose along with gold, which hit a new ATH following the reaffirmed tariffs. Argentina’s central bank cut the rate to a 4-year low as inflation reached a 2-year low, demonstrating the efficiency of Milei’s anti-bureaucratic, free-market policies. BTC and SOL rose before correcting sharply, while ETH outperformed with a sudden rally.
Details
- The US core PCE price index, excluding food and energy, increased by 0.2% in December 2024, meeting expectations and rising from a six-month low of 0.1%. Annual core inflation held at 2.8%, exceeding the Fed’s 2% target. 1Y trend: “Side” (BEA)
- The Chicago PMI increased to 39.5 in January — the first rise after three declines, up from a six-month low (36.9) but below expectations (40). Still it remains below November 2024 levels and the 2024 average. New orders surged, reversing prior declines, while production rose. Inventories jumped, entering expansion for the first time since November 2023. Employment fell, hitting the lowest since June 2020. Prices paid dropped, the fourth consecutive decline and the lowest since July 2024. 1Y trend: “Down” (ISM)
World Markets
- Argentina’s central bank cut its benchmark rate by 300bps to 29%, as inflation eased to 117.8% annually and 2.7% monthly — third consecutive month below 3. Inflation reached the lowest level since July 2023, down from 166% in November. This ninth cut under Milei lowered borrowing costs to October 2020 levels, aligning with a reduced currency depreciation rate. 1Y trend: “Down” (Bcra)
Currencies
- The dollar index surpassed 108.3 as the White House confirmed 25% tariffs on Mexico, Canada, and China, reversing earlier pressure from delay rumors. The greenback gained on inflation and Fed hawkishness expectations, despite muted Core PCE growth. Dovish moves by other central banks also supported the dollar. 1Y trend: “Up”
Commodities
- Gold surged to a new record $2,805 per ounce on tariffs and as major central banks adopted looser policies. 1Y trend: “Up”
On Week 6, the jobs report and ISM PMIs will be highlights, alongside Trump’s 25% tariffs on Canada and Mexico starting Feb 1st. Earnings from Amazon, Alphabet, PepsiCo, AMD, and others are due. China reopens post-Lunar New Year, while the RBI and BoE may cut rates. Global PMIs, Eurozone inflation, German factory orders, Canadian jobs, and GDP data for Indonesia and Hong Kong will also be watched.
Comment: The Rise of the Underdog.
For the past 200 years, the world economy has been on a relentless march toward higher productivity. From steam engines to the Internet, each tech breakthrough sidelined low-productivity individuals as “non-competitive” while serving up economic glory to the ultra-efficient. Yet here’s the kicker — these same low-productivity folks made up 99% of consumers.
Governments, naturally, didn’t address this mismatch. Instead, they leaned into propaganda, inflating a dystopian gap between what low-productivity people earn and what they’re pressured to consume. The result? Populist waves, fueled by frustration, eroding the promise of decentralized, less aggressive societal progress.
Dark times ahead? Not so fast. The very tech that once excluded the “unproductive” is now flipping the script. LLMs and crypto are leveling the playing field. Coding, creating, and tailoring products for niche audiences is now easy. Suddenly, those low-productivity individuals — dismissed for decades — can serve close-knit consumer groups far better than bloated, bureaucrat-infiltrated corporations.
This shift is personal. These small creators offer products that are ‘just what I need,’ ‘cool,’ and made by someone consumers actually know and trust. As decentralized finance grows, individuals could soon secure small but stable incomes, freeing them from reliance on oppressive governments and corporate overlords.
Add in the preservation of personal freedoms (let’s not forget the 2nd amendment), and the future looks a whole lot brighter for the underdog. The megalomaniacs can’t keep their dystopian empires — because the independent creators are rising.
