The consumer inflation came in as expected, but the future seems to be getting more complicated. The latest CPI stands higher at 2.7%, raising alarm for reinflation. Wall Street seems certain—with a 98% probability—that the Federal Reserve will cut interest rates at their upcoming December 18th meeting. What's fascinating is that even with these economic stresses, American households are showing unsettling optimism, reporting the most positive financial outlook in nearly five years, according to the New York Fed's recent survey. The Fed aims to support employment while trying to cool down inflation without triggering a recession. This could be the last rate cut we see until there is a clearer reason to adjust, with markets now expecting a pause in January.
EQUITY
Nasdaq printed a new all-time high after CPI prints, marking a year-to-date 30% gain. Nvidia, Apple, and Alphabet led the charge, with some stocks jumping over 5% on recent developments like Google's new AI model and quantum computing breakthroughs. The inflation report that reinforced the Federal Reserve rate cut only further excited investors. However, the tech rally only grew in risk, as the top 10 companies now dominate 59% of the Nasdaq's value, raising concerns about market concentration and monopoly that may trigger government oversight.
GOLD
Gold continues to reject going lower, climbing back over $2,700 per ounce in renewed investor interest after a pullback in November. The rally is supported by Federal Reserve rate cuts, which the market is sure will be 25 basis points lower next week. China's continued gold purchases and central bank easing measures are also good reasons for long investors. Analysts at OCBC see gold as a compelling hedge, noting its potential as a safe harbour during geopolitical storms in 2025. Technical indicators are also looking promising, with chart patterns suggesting bullish momentum that could potentially push gold toward the $2,800 resistance level.
OIL
Oil prices are climbing after the EU tightens sanctions on Russian crude, pushing WTI futures above $70 per barrel. Geopolitical tensions have been driving market anxiety on supply side, with expected US sanctions that could worsen the situation. China's plans for a looser monetary policy in 2025 offer additional hope for its future consumption. OPEC, however, is cutting its global oil demand growth forecasts for the next two years. US inventory data shows gasoline and distillate stockpiled, showing lower domestic fuel consumption.
CURRENCY
The U.S. dollar gained for the fourth session with major central bank decisions in line. This compounded with reports suggesting China might deliberately weaken its currency to counter U.S. trade tariffs, probably abandoning its strict 7 yuan a dollar policy. The European Central Bank and Swiss National Bank are preparing for their own rate cuts, while the Australian dollar jumped after strong jobs data.
