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Macrosynthesis
TLDR
- Job Surge: U.S. adds 256,000 jobs; rate cuts unlikely.
- L.A. fires could cause $150 billion in damages
- Inflation Worries: Consumer expectations hit 3.3%, pressuring Fed.
- Trump’s Push: Greenland annexation, Canada alignment fuel tensions.
- Meta’s Shift: Ends fact-checking; UFC’s Dana White joins board.
- Quantum Stock Dive: Nvidia CEO predicts delayed quantum breakthroughs.
Job Surge Forces Banks to Rethink Rate Cuts
The U.S. economy added 256,000 jobs in December 2024, surpassing forecasts of 160,000 and marking the highest monthly gain in nine months. Sectors like healthcare (+46K), government (+33K), and retail trade (+43K) drove the surge, while manufacturing shed 13,000 jobs. These figures highlight a resilient labor market, with 2024 seeing an average monthly job gain of 186,000—down from 251,000 in 2023 but still signaling robust economic activity.
In response to this strong data, Bank of America and other major banks have revised their outlooks, with BoA now expecting no further rate cuts in 2025. Previously projecting two quarter-point reductions, the bank cited ongoing labor market strength and the risk of renewed inflationary pressures. Citigroup and Goldman Sachs also adjusted their forecasts, pushing expected rate cuts further into the year.
The Federal Reserve, having already cut rates by 100 basis points since September, faces mounting challenges in balancing inflation control with economic growth. With inflation still a concern, the strong job market may force policymakers to maintain or even raise rates, contrary to earlier market expectations of easing financial conditions.
As Wildfires Rage in L.A., Insurance Stocks Fall
Estimates of the damage from the various fires raging in Los Angeles are between $50-150 billion, making it the most expensive fire in U.S. history. Over 38,000 acres of land - an area 2.5 times the size of New York City - has burned. With that, over 10,000 homes are estimated destroyed. The satellite image shown above depicts the scale of the disaster. In response, stocks of Traveler's and Allstate home insurance dropped 4% and 6%, respectively last week. Chubb insurance dropped 7 percent for the week. JP Morgan estimates that insurance companies will have to pay out $20 billion to cover just the home damages.
Rising Inflation Expectations Add Pressure on Fed Policy
Compounding the implications of strong job growth, U.S. consumer inflation expectations surged to 3.3%—the highest level since 2008—according to the University of Michigan’s January survey. This rise has stoked concerns over potential tariff-related price increases under the incoming Trump administration. With inflationary pressures building, nearly one-third of consumers now anticipate that rising costs will impact household spending, especially on big-ticket items.
The survey also showed a dip in overall consumer sentiment to 73.2, reflecting growing unease about future economic conditions. These inflationary trends and a resilient labor market bolster the argument for the Federal Reserve to pause further rate cuts, as market participants reassess monetary policy expectations. Banks and investors alike will be closely watching the Fed’s next steps, as inflationary risks threaten to complicate the delicate balance between supporting growth and controlling prices.
Trump Calls for Rate Cuts as Fed Cautions on Inflation
Despite Federal Reserve signals that further rate cuts are unlikely, President-elect Trump insists that interest rates remain too high, stifling growth. Trump’s proposed policies—hardline tariffs, mass deportations, and broad deregulation—have sparked inflation fears among Fed officials. The Fed’s recent meeting minutes noted “increased upside risks” to inflation, citing these policy shifts as key drivers.
Trump has criticized the Fed’s approach, arguing that aggressive rate reductions are essential to boost business investment and counter global economic pressures. As tensions mount between the incoming administration and the central bank, markets are bracing for policy uncertainty and potential inflationary consequences and recent price movements are certainly showing this hesitancy.
Trump’s Greenland Gambit and Canada’s Political Shift
President-elect Trump is pushing to annex Greenland and make Canada the 51st U.S. state. Greenland’s strategic location and resource wealth—rare earth minerals, oil, and natural gas—make it a coveted prize for U.S. Arctic dominance. The Pituffik Space Base already monitors Russian naval activity, but Trump seeks broader control to counter China’s growing influence in the region. Denmark has firmly rejected these overtures, labeling them a violation of Greenland’s autonomy and NATO principles, straining U.S.-EU relations.
Meanwhile, Canada faces a political crossroads following Prime Minister Justin Trudeau’s resignation. Far-right Conservative leader Pierre Poilievre, a Trump ally, is poised to take power, potentially aligning Canada more closely with Trump’s agenda. Trump has mocked Trudeau as “Governor Trudeau” and floated the idea of Canada becoming the 51st U.S. state, citing economic and security benefits. Trump's main argument is that the U.S. is paying for Canada's military defense without receiving any monetary benefits from trade.
Real Estate Stocks Plummet, Healthcare Shows Promise
Last week, U.S. indices saw declines as the Dow and S&P 500 fell 1.9%, the Nasdaq dropped 2.3%, the Russell 2000 tumbled 3.6%, and the CBOE Volatility Index surged 21.1% to 19.54.
S&P 500 sectors experienced mixed performances, with notable declines in Real Estate (-4.1%), Information Technology (-3.1%), and Financials (-2.7%). Consumer Discretionary and Utilities also struggled, falling by 2.3% and 2%, respectively. Consumer Staples and Industrials saw moderate losses of -1.9% and -1%. On the positive side, Energy led gains with a 0.9% increase, while Healthcare and Materials posted modest gains of 0.5% and 0.1%. Telecom showed relative stability with a small decline of 0.7%.
Despite the overall negative sentiment, there were a few standouts. Amazon-backed Vital Farms (VITL) rose 4% on elevated egg prices caused by Bird Flu outbreaks. Delta airlines was up 13% on positive earnings. MP Materials - an American rare earth minerals company - rose 19% on renewed fears of China prohibiting export of rate earth minerals which are used in just about every electronic product. OPFI stock was also up 13% Friday and 10% for the week on stronger expected demand for personal loans as inflation chips away at savings rates.
Upcoming Stock Market Events Next Week
The U.S. earnings season kicks off with JPMorgan Chase, Wells Fargo, Goldman Sachs, and Citigroup reporting quarterly results. Inflation updates, including CPI and PPI, will guide Federal Reserve expectations. Globally, China will unveil Q4 GDP, trade data, industrial output, and retail sales, offering critical economic insights.
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Natural Gas
+7% (1D Chg)
+18% (1W Chg)
Gold
+2% (1W Chg)
-1.04% (1M Chg)
Corn
+3.19% (1D Chg)
+2.8% (YoY Chg)
Eggs
+2.75% (1W Chg)
+55.87% (1M Chg)
Company News
LevelFields AI Stock Alerts Last Week
ALCO shares surged 19.22% in a single day after the company announced mass layoffs, a move seen by investors as a strategic effort to cut costs and improve margins. Meanwhile, RPRX climbed 12% following a series of shareholder-friendly announcements, including a new acquisition plan, a 5% dividend increase, and a $3 billion stock buyback. TZUP also made headlines, jumping 7.5% after revealing plans to purchase $1 million in Bitcoin, signaling its shift toward digital asset investments and exciting the market.
Foxconn and Taiwan Semiconductor Results Refuel AI Trade
Taiwan's Foxconn, the world's largest contract electronics manufacturer and Apple's primary iPhone assembler, reported record-high revenue for the fourth quarter, surpassing expectations. Revenue surged 15.2% to 2.13 trillion New Taiwan dollars ($64.72 billion). The growth was driven by strong demand for AI servers, boosting the performance of its cloud and networking products division, which serves major clients like AI chipmaker Nvidia.
Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chipmaker, reported fourth-quarter 2024 revenue of T$868.42 billion ($26.36 billion), surpassing market forecasts and achieving its own expectations. This represents a 34.4% year-on-year growth, significantly higher than the $19.62 billion recorded in the same period last year. TSMC benefited from strong demand for artificial intelligence chips, from clients such as Apple and Nvidia, which helped offset declining demand for consumer electronics.
The positively results, paired with Microsoft's announcement they would be putting $80 billion into new AI-focused data centers, sent Nvidia and other AI-linked stocks like Vertiv (VRT) and DELL higher.
Zuckerberg's Content Moderation Retraction Signals New Era for Social Media
CEO Mark Zuckerberg recently appeared on The Joe Rogan Experience, where he criticized the Biden administration’s handling of content moderation during the pandemic, stating officials pressured Meta to take down posts critical of vaccines, including satire. He announced the elimination of its third-party fact-checking program in favor of a community-based moderation system, similar to Elon Musk’s approach with X. Additionally, Meta appointed UFC President Dana White, a known Trump ally, to its board of directors, further cementing its ties with the incoming administration.
The implications are far reaching. Left-leaning media outlets - including Facebook - had the market share of viewership for many years prior. This provided support for democratic-led policies for two decades. But the tides have shifted. Right-leaning Fox News now commands a 69% market share of news viewers. Elon Musk's X now enables free flow of information, and while the platform alleges no bias, Elon Musk's 200M+ followers enables him to shape exposure to content and ideas more heavily favored by conservatives.
With Facebook and Instagram now following X's approach, the media landscape is shaping up to be much more supportive of the republican agenda: smaller government, lower taxes, decreased regulation, strict immigration policies, higher spending on defense, lower spending on social welfare programs, fewer incentives for renewable energy technology, and less involvement in foreign wars. As the policies unfold, we'll be picking out the beneficiaries for our Level 2 members.
Quantum Stocks Plunge After Nvidia CEO's Comments
Quantum computing stocks took a sharp dive following Nvidia CEO Jensen Huang’s remarks at the company’s analyst day stating, “Useful quantum computers are likely 15-30 years away.” His comments cast doubt on the sector’s immediate viability, triggering a market selloff. IonQ shares dropped 39%, Rigetti fell 45%, and D-Wave Quantum plummeted 43%. The Defiance Quantum & AI ETF also declined 4%.
The selloff follows a surge in quantum stocks spurred by Google’s recent Willow chip breakthrough. Investors, initially drawn by the technology’s transformative potential, may now reassess timelines and valuations.
Palantir Sinks 11% Following 350% Run
Palantir (PLTR) stock plunged 11% last week. The drop was amplified by Morgan Stanley’s “underweight” rating and a $60 price target, citing overvaluation concerns after Palantir’s 350% surge in 2024. The downgrade highlighted a lack of substantial revenue growth despite the stock’s inflated multiple.
Getty Images Acquires Shutterstock in $3.7 Billion Deal
Getty Images announced its acquisition of Shutterstock, creating a $3.7 billion visual content powerhouse. This merger aims to strengthen their collective portfolios in still imagery, video, music, and 3D assets. Amid rising competition from AI-generated visuals, the companies plan to streamline operations, promising annual cost synergies of $150–$200 million. Getty CEO Craig Peters will lead the combined entity, which will operate under the Getty Images name and continue trading on the NYSE as "GETY." Shutterstock shares surged over 30% following the news, while Getty saw a 58% gain. The deal signals a strategic move to adapt to evolving technological and market dynamics.
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