January Effect Could Boost Markets Following Strong Previous Performances
This is a segment from the Forward Guidance newsletter.
Market Overview for 2025
The Forward Guidance team welcomes the New Year and looks forward to providing macro and crypto insights in 2025.
January Market Trends
Wall Street may experience a January boost after missing a December rally. Historical data shows that the S&P 500 returned 5.8% in January 2023 and 2.12% in January 2024. The Nasdaq Composite also performed positively, with returns of 1.95% in 2024 and 9.68% in 2023.
2025 introduces a Republican-majority Congress and a slower pace of rate cuts from the Fed, which could increase volatility in both equity and crypto markets. For context, the S&P 500 had a 1.21% return in January 2017, while the Nasdaq gained 3.49%. Historically, Republican wins have led to stock boosts.
Upcoming Economic Indicators
The next US employment report is scheduled for January 10, providing further insights into potential interest rate adjustments. Current odds indicate an 89% chance that the FOMC will hold rates steady later this month, based on CME Group data.
Crypto Market Outlook
On the cryptocurrency front, investor sentiment remains cautious. Euphoria from November has diminished, and investors await developments related to Trump's industry promises. Changes in SEC leadership and potential congressional movements on bills like FIT21 or a bitcoin strategic reserve bill could significantly impact the market.
Overall, uncertainty prevails regarding Bitcoin and other cryptocurrencies, suggesting a volatile 2025 ahead.