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This Is The Type Of Political Chaos Markets Fear

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This Is The Type Of Political Chaos Markets Fear: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Magnificent 7 Stocks Are Rising to End a Rough Week

Tom Essaye, founder of the Sevens Report, wrote on Friday that stocks weren’t down “because of the shutdown itself, but instead because this is the type of political chaos markets fear in a second Trump term.”

Also, click here to view the full Barron’s article published on December 20th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

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The Fed Provided A Legitimate Surprise

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The Fed Provided A Legitimate Surprise: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Needed a Washout. What Sentiment Says About What Comes Next.

The Sevens Report’s Tom Essaye notes that two things in particular caught investors offside. First, the shift to fewer rate cuts in 2025 means that the Fed will be less of a force for good in the market than it was heading into the meeting. The language of the statement also changed in a way that suggested rate cuts could be off the table completely next year. “Bottom line, the Fed provided a legitimate surprise,” he writes.

Also, click here to view the full Barron’s article published on December 20th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Jobs Report Preview (Markets Closed Tomorrow)

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Jobs Report Preview (Markets Closed Tomorrow): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview
  • ISM Services PMI Takeaways – Strong Data Supports Hawkish Fed Stance
  • Chart – JOLTS Jump to Multi-Month High But Still Trending Lower

Futures were slightly higher earlier this morning as traders digested disappointing data out of Europe but volatility has picked up since CNN reported that Trump is weighing emergency measures to implement new tariffs programs.

Economically, German Manufacturing Orders plunged -5.4% vs. (E) 0.0% while EU Economic Sentiment fell 93.7 vs. (E) 95.7 and Eurozone PPI declined just -1.2% vs. (E) -2.5%.

Today, traders are likely to remain keenly focused on the early tariff headlines that have roiled futures in the pre-market. Any commentary from Trump that tamps down concerns about aggressive tariffs and the threat of global trade wars will help settle markets over the course of the day.

Additionally, there are two key labor market reports to watch today, the ADP Employment Report (E: 134K), and Jobless Claims (E: 216K). After yesterday’s “hot” ISM and JOLTS data, investors will want to see a return to “Goldilocks” data consistent with a cooling labor market to help temper the recent spike in yields and help stocks stabilize.

Finally, there is one Fed speaker early in the day: Waller (8:30 a.m. ET) and a 30-Yr Treasury Bond auction in the early afternoon (1:00 p.m. ET) that cold move yields, and in turn, impact equity markets (strong demand for the long bonds is the best outcome for stocks).

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Are Credit Spreads Confirming Stock Market Weakness?

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Are Credit Spreads Confirming Stock Market Weakness?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Are Credit Spreads Confirming Stock Market Weakness?

Futures are slightly higher and are seeing a modest bounce following a generally quiet night of news.

Economically, the only notable number overnight was German Unemployment, which met expectations at 6.1%.

Politically, the House of Representatives will vote on a Speaker today and if Speaker Johnson fails to quickly win that election, it’ll be a market negative as it will raise doubts Republicans can actually pass tax cuts later in 2025.

Today is an important day for markets from a political perspective, it’s also important from an economic standpoint as we get the first of the “Big Three” monthly economic reports via the December ISM Manufacturing PMI (E: 48.5).  Markets will want to see that number in-line to slightly lower, as a much better than expected number will likely see a repeat of yesterday, as the dollar and yields should rise and this early rally in stocks should fade as investors reduce expectations for future rate cuts.  Goldilocks data is needed for this stock market dip to end.

Speaking of the Fed, we get our first two speakers of 2025 in Barkin (11:00 a.m. ET), and Daly (5:30 p.m. ET) although they shouldn’t move markets.

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Five Important Events to Watch As We Start 2025

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Five Important Events to Watch As We Start 2025: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Important Events to Watch As We Start 2025
  • The Sevens Report Q4 Quarterly Letter Will Be Delivered to Subscribers Today

Futures are moderately higher to start the new year despite disappointing global economic data.

Manufacturing PMIs from China, the EU and the UK all missed expectations, highlighting the disparity between solid U.S. growth and lackluster global growth.

The Chinese Caixin Manufacturing PMI declined to 50.5 vs. (E) 51.7, the Euro Zone reading slipped to 45.1 vs. (E) 45.2 while the UK version dropped to 47.0 vs. (E) 47.3.

Today focus turns back to economic data and as was the case at the end of 2024, markets need in-line to slightly soft economic readings to keep Fed rate cut and soft landing expectations stable.  Today, that means Jobless Claims near their 225k estimate (and not too much lower) and the S&P Final Manufacturing PMI in-line with estimates (E: 48.3).

 

Sevens Report Quarterly Letter Delivered Today

Our Q4 ’24 Quarterly Letter will be released today.

We use our strength (writing about the markets) to help you 1) Save time (an average of 4-6 hours per quarterly letter) and 2) Show you’re on top of markets with impressive, compelling market analysis

You can view our Q3 ’24 Quarterly Letter here.

To learn more about the product (including price) please click this link.

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Are H-1B Visas the Reason for this Pullback?

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What’s in Today’s Report:

  • Are H-1B Visas the Reason for this Pullback?

U.S. equity futures are bouncing back from yesterday’s losses in light holiday trading as investors square books into year-end and digest mixed Chinese economic data.

China’s Composite PMI rose 1.4 points to 52.2 in December thanks to the Services PMI rising to 52.2 vs. (E) 50.2 but the Manufacturing PMI unexpectedly fell to 50.1 vs. (E) 50.3.

There are two housing market reports today: Case-Shiller Home Price Index (E: 4.3%) and FHFA House Price Index (E: 0.5%) but neither release should materially move markets and there are no Fed officials scheduled to speak today.

The limited list of catalysts should make for a quiet session to end what has been a strong year of gains in the stock market as portfolio rebalancing and year-end book-squaring are likely to be the primary drivers of money flows today.

As a reminder, stocks will trade for a full, normal session through 4:00 p.m. ET but the bond market closes early today (2:00 p.m. ET).

 

Last Day to Use Your 2024 Research Budget to Extend Subscriptions or Save Money on an Annual Subscription or Bundle!

Throughout December, we’ve been contacted by advisor subscribers who wanted to use the remainder of their 2024 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free) or add a new product (Alpha, Quarterly Letter, Technicals).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products.

If you want to extend current subscriptions or save money by upgrading to an annual subscription (across any Sevens Report product), please email info@sevensreport.com.

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Hard-Landing/Soft-Landing Scoreboard

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Hard-Landing/Soft-Landing Scoreboard: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard-Landing/Soft-Landing Scoreboard
  • Durable Goods Orders Takeaways

Futures are slightly higher with global markets as traders continue to digest last week’s volatile post-Fed selloff amid quiet news wires and low holiday-week trading volumes.

Overnight, Reuters reported that the Chinese government is planning to sell 3 trillion yuan worth of “special bonds” in 2025, up from 1 trillion in 2024, which supported a moderate risk-on rally in Asian markets.

Today should be a relatively quiet day in the markets as there is only one lesser followed Fed survey release: the Richmond Fed Manufacturing Index (E: -8.0) and no Fed officials are scheduled to speak.

There is a 5-Yr Treasury Note auction at 11:30 a.m. ET which could have an impact on the bond markets, and ultimately stocks (higher yields would put renewed pressure on stocks), however with light attendance and already low volumes, a sizeable move today is unlikely.

Finally, today is a holiday shortened session with the NYSE set to close at 1:00 p.m. ET.

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Was Last Week A Preview of 2025?

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What’s in Today’s Report:

  • Was Last Week A Preview of 2025?
  • Weekly Market Preview: Can the Santa Rally Re-start?
  • Weekly Economic Cheat Sheet: A Quiet Week, But Claims Thursday Matter

Futures are slightly weaker following a quiet weekend of news and ahead of the holiday-shortened trading week.

Economically, the only notable number overnight was UK GDP which was slightly weaker than expected, rising 0.9% vs. (E) 1.0%.

Politically, a U.S. government shutdown was averted as Congress passed a bill to fund the government but only through March, which adds complication to Republican plans to pass aggressive pro-growth legislation.

Today the only notable economic report is Consumer Confidence (E: 113.0) and barring a major surprise, it shouldn’t move markets.

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Can the Trump Trade Outperform in 2025?

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What’s in Today’s Report:

  • Can the Trump Trade Outperform in 2025?

Futures are sharply lower following another failed attempt at a short-term government funding agreement.

A Republican plan for a new short-term government funding agreement was soundly defeated in a House vote and a government shutdown starting today is looking likely.

Specifically, futures aren’t down because of the shutdown itself, but instead because this is the type of political chaos markets fear in a second Trump term (that hasn’t even officially started yet).

Today politics will dominate the headlines and any positive news towards a funding agreement will fuel a bounce, while no progress will continue to weigh on stocks.

Beyond Washington, however, there is an important economic report today, the Core PCE Price Index (E: 0.2% m/m, 2.9% y/y).  This is the Fed’s preferred measure of inflation and given the Fed’s hawkish decision on Wednesday, this number needs to come in at or under expectations, otherwise it’ll just add to the selling pressure.

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Did the Fed Decision Weaken the Bull Market?

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What’s in Today’s Report:

  • Four Reasons the Fed Decision Caused Such a Big Selloff
  • Did the Fed Decision Weaken the Bull Market?

Futures are seeing a bounce following yesterday’s steep selloff despite more negative news overnight.

Politically, government shutdown risks spiked on Thursday after support for the stop-gap funding bill collapsed and a government shutdown on Friday is becoming more likely.

On earnings, Micron (MU) posted disappointing guidance and the stock is down –15% pre-open.

Today is another busy day of economic data and policy decisions.   The Bank of England has a rate decision (E: 25 bps cut) while there are numerous U.S. economic reports including, in order of importance,  Jobless Claims (E: 232K), Philly Fed (E: 2.5), Final Q3 GDP (E: 2.8%) and Existing Home Sales (E: 4.05 million).  The market needs Goldilocks data to help it hold this early bounce and any data that’s “Too Hot” (meaning much stronger than expected) will only increase hawkish Fed worries, push yields higher and likely hit stocks, again.

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