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Week in Review: 20-24 January 2025

Financial Markets

This week started with Trump's inauguration and the equity markets celebrated. The S&P500 and the NASDAQ 100 gained 1.7% and 1.6%, respectively. The small cap index (Russel 2000) fell ~1%. Trading volumes were average.

The metals were positive: gold and silver gained 2.5% and 0.6%, respectively. Gold closed the week at 2770$, close to all-time-highs - this level should be short-term resistance. Silver will likely continue trading sideways as it doesn't show any prominent price trend.

WTI fell to 74.5$/bbl and will likely trade in the 71-76$ range in the near future.

Bitcoin temporarily made a new all-time high of 109k$, but these levels seem to be near-term resistance - a lot of profit taking is probably going on.

The relative strength of the US dollar (DXY) fell considerably this week (~107). The EUR/USD is around 1.049$, the GBP/USD is at 1.248$, and the USD/JPY is at 155.95 JPY.

US M2 money supply at the date of 25th November 2024 was up by 0.64%.

The national financial conditions index (NFCI) for the week of 13th January 2025 loosened by 1.95%, which shows a continuous loosening of financial conditions. Note that this indicator is delayed by a week.

US bond yields were down slightly this week, and now sit at 4.248% for the 2-year and 4.581% for the 10-year.

With the stock market rally, the VIX returned to ~14.8, indicating a moderation in fear and less search for put options from the part of investors/speculators.


Comment Section

President elect Trump will try to de-regulate the oil and gas industry, making it easier to drill ("drill, baby drill") - but why would companies increase supply if demand is not increasing? Neither US companies nor the OPEC producers are interested in very low oil prices, because that compromises the profitability of the operations. Thus, we believe that new exploration and production volume will only increase if the demand is there - not because of new policies. Expect energy prices to be relatively constant.
 
Regarding tariffs, it remains to be seen whether they are just negotiation tools or whether lots of actual tariffs are going to be implemented over this new Trump's mandate.

We didn't pay much attention to the yearly meeting in Davos - that's only politics speech and there is not much we can learn from it.

Next week, we have several earnings releases and the so-awaited FED meeting. This could change the tone of the markets! Let's wait and see...



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