Stock Market Rally Faces Inflation, Policy Hurdles Post-Election
The S&P 500 fell 2% last week, trimming over half its post-election gains fueled by optimism around Donald Trump’s pro-growth agenda. While still up 23% for the year, rising bond yields and uncertainty over Trump’s policies have dampened investor enthusiasm.
The 10-year Treasury yield hit a five-month high, as inflation fears linked to tax cuts and tariffs grew. Fed Chair Jerome Powell’s comments on steady growth and persistent inflation further unsettled markets, signaling limited room for rate cuts.
Sector-specific pressures, including setbacks for pharmaceutical and defense stocks, add to the uncertainty. Yet, gains in Tesla shares and Bitcoin, along with historical year-end stock strength in election years, provide a glimmer of optimism as 2024 winds down.
Source: https://www.theguardian.com/us-news/2024/nov/04/presidential-election-bettingodds-polling https://www.reuters.com/markets/us/headwinds-hit-trump-fueled-rallyus-stocks-2024-11-18/
Dollar higher, boost to safe-haven currencies fades
The U.S. dollar index edged higher to 106.25 after earlier reaching 106.63, as initial gains from heightened safe-haven demand subsided. This demand was sparked by Russia's decision to lower its nuclear strike threshold and Ukraine’s use of U.S.-made ATACMS missiles to strike Russian territory. However, calming comments from Russian and U.S. officials tempered market reactions, including Russian Foreign Minister Lavrov’s statement emphasizing efforts to avoid nuclear war and the U.S. confirming no changes to its nuclear posture.
The Japanese yen rose slightly to 163.74 per euro after hitting a six-week high, while remaining steady at 154.68 per dollar. Meanwhile, the Swiss franc and sterling saw minimal changes against the dollar, and the Russian rouble weakened to 100.57 per dollar, marking its lowest level since October 2023.
The dollar's broader strength is supported by expectations that the Federal Reserve may slow its rate cuts, with markets pricing a 59.1% chance of a 25-basis-point cut in December. European Central Bank officials echoed dovish signals, suggesting further rate cuts to support economic growth as inflation pressures ease. These dynamics, along with geopolitical tensions, are shaping a cautious
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Photo: Reuters
Fed to lower rates in Dec but slow pace in 2025 on inflation risks: Reuters poll
The U.S. Federal Reserve is expected to lower interest rates by 25 basis points in December, bringing the federal funds rate to 4.25%-4.50%, according to a Reuters poll of economists. However, expectations for rate cuts in 2025 have been scaled back due to inflationary risks associated with President-elect Donald Trump's proposed policies, including tariffs, tax cuts, and deregulation.
Nearly 90% of poll respondents anticipate a December cut, though market pricing reflects less than a 60% likelihood. Persistent economic strength, inflation running above target, and record-high stock markets are limiting the scope for deeper cuts. Economists predict that personal consumption expenditures (PCE) inflation will remain above the Fed’s 2% target until at least 2027, with 85% of respondents seeing rising inflation risks in 2024.
Trump’s anticipated tariffs, particularly on Chinese imports, are expected to significantly impact the U.S. economy and spur inflation. The Fed’s terminal rate for 2025 is now forecast at 3.50%-3.75%, higher than prior estimates. While the U.S. economy is projected to grow faster than the Fed's long-term neutral rate, inflation concerns are likely to keep the Fed cautious about prolonged rate cuts.
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Trump gains ability to fill four appellate judge seats under US Senate deal
In a significant political compromise, U.S. Senate Democrats and Republicans reached a late-night agreement allowing President-elect Donald Trump to fill four appellate court vacancies after Senate Republicans blocked votes on President Joe Biden's nominees. In exchange, Democrats secured votes for over a dozen district court judges, including those already awaiting confirmation and others pending Judiciary Committee advancement.
The deal halts confirmation efforts for four appellate nominees, including Adeel Mangi, who would have been the first Muslim federal appellate judge on the 3rd Circuit Court of Appeals. This decision has drawn criticism from progressive groups like Demand Justice, which argue that relinquishing judicial appointments to Trump undermines public trust and the judiciary's impartiality.
While Senate Democrats have confirmed 221 judicial nominees during Biden’s presidency, Republican resistance has intensified since Trump’s election victory. The compromise reflects the challenges of a narrowly divided Senate and Republican efforts to delay confirmations.
As the Senate returns post-Thanksgiving, it will confirm seven additional district court judges and consider five others. This resolution highlights strategic concessions and sets the stage for Trump to shape the appellate judiciary with nominees aligned to his administration's priorities
Trump Gave Bitcoin a Bump. But Is Crypto a Good Investment?
Cryptocurrencies like Bitcoin have surged in popularity, offering quick riches and high-tech appeal. Early adopters, including over 100,000 crypto millionaires, have driven its growth, while lobbying efforts, such as Fairshake, have influenced U.S. elections, reportedly helping elect 253 pro-crypto candidates. However, cryptocurrencies pose ethical challenges.
Bitcoin mining consumes 0.9% of global electricity, causing significant environmental harm. Cryptocurrencies also enable anonymous transactions, making them the preferred method for illicit activities like money laundering and ransomware, which costs victims an estimated $1 billion annually. The industry has also fostered a predatory culture, exemplified by schemes like Bitconnect.
Despite claims of democratizing finance, wealth remains concentrated: 0.01% of Bitcoin holders control 27% of its value. While efforts like the Crypto Climate Accord and Ethereum's shift to "proof-of-stake" aim to address environmental issues, Bitcoin remains energy-intensive. Regulatory measures in the U.S. and Europe seek to curb illegal activities and protect investors, but ethical concerns persist.
Ultimately, cryptocurrency's promises of inclusion and innovation clash with its environmental and societal harms, raising questions about its role as an ethical investment.
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https://www.usnews.com/opinion/articles/2024-11-21/trump-win-bitcoin-crypto-invest