Economy

1. Port workers strike: a possible port workers strike on Jan. 15 — stemming from unresolved issues regarding automation in port operations — disrupting supply chains and potentially impacting GDP by approximately $3.1 billion per day.2. Downward revisions to payrolls may force Fed pivot: The upcoming benchmark revisions could reveal a downward adjustment of around 68,000 jobs per month, indicating a slowing job growth rate that may prompt a dovish pivot from the Fed.3. Shake up at the Fed:  The potential resignation of Vice Chair for Supervision Michael Barr could lead to significant changes in leadership, with Governor Michelle Bowman poised to take over his role and Kevin Warsh potentially being appointed as a new governor.4. Broadening out of stock market rally unlikely: despite investor hopes for a broader market rally, concentration within the index may persist, Wolfe Research said. This trend reflects a longer-term pattern where the S&P 500 has outperformed the equal-weight index in seven of the last ten years.5. President-elect Trump may opt for less harsh tariffs: after initial market reactions to tariff headlines, Trump might end his pursuit of significant tariffs. This would defy widespread investor expectations, as many anticipate increased tariffs on Chinese goods and others. More

Will GDP Growth Be Above Consensus? Goldman forecasts a 2.4% GDP growth for 2025, surpassing the 2.0% consensus. They attribute this to robust private domestic demand and business investment supported by artificial intelligence and federal incentives like the Inflation Reduction Act.Will Consumer Spending Remain Resilient? Yes, according to the investment bank. They expect consumer spending to rise 2.3% in 2025, driven by solid real income gains, a strong labor market, and wealth effects from rising equity markets.Will the Labor Market Continue to Soften? Goldman doesn’t believe so. The unemployment rate is expected to dip slightly to 4% by the end of 2025. Goldman sees strong demand growth and slowing immigrant labor supply contributing to this stability.Will core PCE inflation net of tariff effects fall below 2.4% year-on-year? Goldman anticipates core PCE inflation to fall to 2.1% by year-end 2025, barring tariff impacts, as wage pressures ease and catch-up inflation subsides.Fed Rate Cuts? Goldman predicts three rate cuts at a quarterly or every-other-meeting pace in March, June, and September 2025. This dovish stance reflects the bank’s confidence in inflation’s decline and tempered impacts from potential tariff policies.Will the Neutral Rate Estimate Increase? Goldman Sachs economists anticipate the Fed will raise its median neutral rate estimate to 3.25% or higher, reflecting broader demand influences.Will President-elect Trump try to fire or demote Fed Chair Powell? The bank doesn’t think so. They stated that the impression they have “is that the White House concluded during Trump’s first term that it cannot remove the Chair because the law only permits this for cause, and courts are unlikely to agree that failing to deliver rate cuts meets this standard.”Immigration Policy Changes? Net immigration is forecast to decrease to 750,000 annually, aligning with tighter policies under the Trump administration.Tariffs and Trade Tensions? Goldman expects higher tariffs on Chinese imports but avoids a universal tariff scenario, citing economic and political risks.Federal Budget Concerns? Deficit reduction is unlikely, according to the bank, with tax cuts and defense spending offsetting fiscal constraints.  “We also expect federal spending growth to rise somewhat, particularly on defense. A modest gain in tariff revenue, as noted earlier, would partly offset these changes,” says Goldman. More

DUBAI (Reuters) – Abu Dhabi’s Mubadala Investment Company accounted for about 20% of the almost $136.1 billion spent by sovereign wealth funds worldwide last year, overtaking Saudi Arabia’s wealth fund amid a surge in spending from Gulf countries. Mubadala and its subsidiaries deployed $29.2 billion in 2024, up from $17.5 billion invested in 2023, based on a preliminary annual report from industry specialist Global SWF, which tracks the world’s sovereign investment funds. Saudi Arabia’s Public Investment Fund lost its ranking as the world’s most active sovereign wealth fund after it cut its investment spend by 37% to $19.9 billion in 2024 from $31.6 billion the previous year, according to the report.PIF Governor Yasir Al-Rumayyan said in October the sovereign wealth fund was more focused on the domestic economy and aiming to reduce the fund’s international investments.Still, the Gulf’s sovereign wealth funds controlled by governments of Abu Dhabi, Qatar and Saudi Arabia “invested a record” $82 billion in 2024, a rise of more than 10% from 2023, the report said. Other groups such as Canada’s Maple 8, the Singaporean funds or the Australian superannuation funds were more active than in 2023, but remained below their peaks in 2021-2022, the report added.Overall sovereign wealth funds’ assets under management rose 6.1% this year to $13 trillion, a historical peak, and public pension funds rose 6% to reach $25 trillion. Norway has the world’s biggest sovereign wealth fund. Sovereign investments into digitisation, which include data centres, digital infrastructure, artificial intelligence and space investing, reached $27.7 billion in 2024.Abu Dhabi, a wealthy oil producer and longtime security partner of the U.S., is in a race to become an AI leader amid rising competition in the region as Qatar and Saudi Arabia pitch themselves as potential AI hubs outside the United States.The push is led by the government-backed G42 and MGX, a firm in which Mubadala is a partner. Emirati officials believe the Gulf state’s bet on artificial intelligence will strengthen its international clout by making it a key economic actor long after demand for oil has dried up.Real estate and private equity investment volumes by sovereign wealth funds were unchanged, while infrastructure and credit continued to rise, the report said.Deal activity by state funds rose 5% in 2024 to $216 billion. Average deal size rose to a six-year high of $370 million. More

The average price of new homes across 100 cities edged up 0.37% from a month earlier, compared with the 0.36% rise in November, according to data from property researcher China Index Academy.On a year-on-year basis, the average price rose 2.68% in December, versus 2.40% growth in the previous month.Official data for home prices will be released by China’s statistics bureau on Jan. 17.China’s policymakers in recent months doubled down on their efforts to revive the sector, which crashed in 2021 after a government-led campaign to rein in indebted developers left them severely cash-strapped.Since September, measures aimed at encouraging homebuying have included cutting mortgage rates and minimum down-payments, as well as tax incentives. More

NEW YORK (Reuters) -Investors are expecting more gains for the U.S. stock market in 2025 after two straight standout years, fueled by a solid economy supporting corporate profits, moderating interest rates and pro-growth policies from incoming President Donald Trump.The benchmark S&P 500 was up 23.31% in 2024, even with a recent speed bump, marking its second-straight year of gains exceeding 20%, lifted by megacap tech stocks and excitement over the business potential of artificial intelligence.The index soared 53.19% over the last two years, the biggest two-year percentage jump since 1998. Investors are more confident about the economy than this time a year ago, with consumers and businesses having absorbed higher interest rates and the Federal Reserve now lowering them – albeit by not as much as hoped. Corporate profits are also expected to be strong, with S&P 500 earnings per share projected to rise 10.67% in 2025, according to LSEG.On the other side of the ledger, inflation remains stubborn, and Wall Street is wary of a rebound that could lead the Fed to change course on its easing cycle. Indeed, stocks pulled back sharply earlier in December after the central bank projected fewer rate cuts next year as it braced for firmer inflation.Such prospects could become more likely if Trump implements tariffs on U.S. imports that lead to higher consumer prices. Stock valuations, meanwhile, are around their steepest levels in more than three years, leaving greater potential for turbulence.”We’ve been on quite the tear coming off the lows back at the end of 2022. It’s been pretty eye-watering,” said Garrett Melson, portfolio strategist at Natixis Investment Managers. “Animal spirits … are certainly running pretty wild right now, but you might need to temper that a little bit as you start to move through the year,” said Melson, who thinks the stock market could still produce solid gains of around 10% in 2025 if not the returns of the prior two years.Wall Street firms are mostly projecting gains for the market next year, with S&P 500 year-end targets ranging from 6,000 to 7,000 points. The index ended 2024 at 5,881 on Tuesday.Optimistic investors can point to a bull market that is neither old nor over-extended by historic measures.The current bull market for the S&P 500 that began in October 2022 is less than half as long as the average length of the 10 prior ones, according to Keith Lerner, co-chief investment officer at Truist Advisory Services. The S&P 500’s roughly 64% gain during this latest run trails the 108% median gain and 184% average rise of the prior bull markets, according to Lerner.”If you zoom out a little bit, yes, we have a lot of gains, but if you look at a typical bull market, it suggests that we still have further gains to go,” Lerner said.Other historic signs also bode well. The S&P 500 has gained an average of 12.3% following the eight instances of back-to-back 20% annual gains since 1950, according to Ryan Detrick, chief market strategist at Carson Group, compared to a 9.3% overall average increase over that time. The index increased six of the eight times. ECONOMY WEATHERING RATES Bolstering the upbeat sentiment is the prevailing sense on Wall Street that the economy has weathered the rate hikes the Fed implemented starting in 2022 to quell inflation.A Natixis Investment Managers survey conducted in recent weeks found 73% of institutional investors said the U.S. will avoid a recession in 2025. That is a sharp turnaround from a year ago, when 62% projected such a downturn in the coming year. Citigroup (NYSE:C)’s economic surprise index, which measures how economic data performs versus expectations, has been solidly positive for the past two months, another rosy sign for investors.Adding to expectations of a solid economy, Trump is expected to pursue an agenda that includes tax cuts and deregulation that supports growth.”We’re leaving 2024 on pretty good footing, and we think there is some re-acceleration in 2025,” said Sameer Samana, senior global market strategist at Wells Fargo (NYSE:WFC) Investment Institute. “Markets tend to front-run the economy, so they will position for that economic re-acceleration sooner rather than later.”However, stocks are also leaving 2024 at elevated valuations: the S&P 500 was trading at 24.82 times expected earnings over the next 12 months, according to LSEG. That is well above its long-term average of 15.8, and not far from the 22.6 level it reached earlier this month, its highest since early 2021. Investors maintain that valuations can stay high for long periods and do not necessarily indicate imminent declines. But future gains may rest more on earnings growth, while higher valuations could make stocks more easily rattled by any disappointments.Risks include policy uncertainty such as Trump’s expected push to raise tariffs on imports from China and other trading partners, which analysts estimate could hurt corporate profits. Higher tariffs could also increase inflation, which is another worry for investors. The pace of inflation has fallen dramatically since hitting 40-year highs in 2022, but remains above the Fed’s 2% target. The latest reading of the consumer price index found a 2.7% annual inflation rate.”How low we can get rates is really going to be dependent on how low we can get inflation,” said Michael Reynolds, vice president of investment strategy at Glenmede. “If we see inflation settling out to the 3-ish percent range, we think the Fed’s not going to be as aggressive next year.”Glenmede is recommending investors take a neutral posture on overall portfolio risk, including for equities. “Investors should be what I would call cautiously optimistic,” Reynolds said. “We … have an economy that’s showing signs of late-stage expansion alongside valuations that are pretty rich.” More

JERUSALEM (Reuters) – Israeli Prime Minister Benjamin Netanyahu got up from his hospital bed to call on unruly coalition partners to fall in line and back his government’s 2025 budget after hardline rebels threatened to pull support for the bill. Netanyahu, recovering from prostate surgery, came to the Knesset against the recommendation of his doctors to ensure the passing of legislation aimed at increasing state revenues after the far-right public security minister Itamar Ben Gvir and ultra-Orthodox parties said they might vote against the law or abstain. The bill, a wartime austerity package of tax hikes and spending cuts, passed narrowly but the opposition was another sign of ever-widening cracks in Netanyahu’s coalition, the furthest right in Israel’s history.In an initial vote earlier this month, Israeli lawmakers narrowly approved the budget bill despite a rebellion by coalition partners demanding he fire Israel’s attorney general.”I expect all the members of the coalition, including Minister Ben-Gvir, to stop rattling the coalition and endangering the existence of a right-wing government,” Netanyahu said on Tuesday.Ben Gvir has demanded more funding for the Israeli police which his office oversees, and ultra-Orthodox parties have expressed opposition to legislation that would force some members of its communities to enlist in the military. The budget next goes to the Knesset finance and other committees, where it could face changes. It is not expected to be fully approved until at least January. Failure to approve the budget by March 31 would trigger new elections.Netanyahu in September sought to bolster his coalition, which had a 64-56 edge in the Knesset, by bringing in opposition lawmaker Gideon Saar and his four seats in the New Hope (OTC:NHPEF) party, enabling him to be less reliant on other members of his ruling coalition. Saar last month was named foreign minister.Israel’s economy has taken a hit since the Oct. 7, 2023, attack by Palestinian Hamas militants and the ensuing war in Gaza and on other fronts.There has been zero growth but supply issues have pushed up inflation, and the cost of living for Israelis has soared.($1 = 3.6402 shekels) More

Despite being at war with Russia, Ukraine still transited Russian gas to Europe through pipes on its territory under the terms of a deal signed in December 2019.    Ukraine has repeatedly said it will not sign a new deal to replace the one expiring on Dec. 31 due to Russia’s full-scale invasion of its territory, now approaching its third year.    2025 could prove to be the first year since the collapse of the Soviet Union in 1991 when no gas will be transported through Ukraine to Europe.    Russia used to supply a little under half of the European Union’s gas before the 2022 war. But Europe has turned away from Russian gas while as yet unexplained attacks on the Nord Stream pipeline have reduced Russian supplies.     Russia supplied a total of around 63.8 billion cubic meters (bcm) of gas to Europe by various routes in 2022, according to Gazprom data and Reuters calculations. That volume decreased by 55.6% to 28.3 bcm last year. In 2024 transit could total less than 14 bcm of gas.    At their peak in 2018-2019, annual flows to the European region reached between 175 bcm and 180 bcm.     In pre-war years Ukraine received several billion dollars a year from transit, but in 2024 the payments could  drop to about $800 million due to a significant reduction in pumping volumes.      The Soviet-era Urengoy-Pomary-Uzhgorod pipeline brings gas from western Siberia via Sudzha in Russia’s Kursk region. It then flows through Ukraine in the direction of Slovakia.     In Slovakia, the gas pipeline is divided, with one of the branches going to the Czech Republic and the other to Austria. The main buyers of gas are Hungary, Slovakia and Austria. More

Wang Xiaohong, who is also the director of the national narcotics control committee, called for “eradicating the soil that breeds and spreads the drug problem” in a meeting, according to Xinhua.The United States has been pressuring China to help reduce U.S. fentanyl deaths. China says it has some of the strictest drug laws in the world, and that the U.S. needs to curb narcotics demand at home. More