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In recent days, financial markets have experienced a notable influx of capital. According to a report by Bank of America, capital flows amounted to $8.2 billion into equities, $4.9 billion into bonds, and $3.0 billion into cryptocurrencies. This marks the largest four-week inflow into cryptocurrencies, totaling $11.0 billion.
Capital inflows into U.S. equities continued for the ninth consecutive week, totaling $8.2 billion. Additionally, a $4.6 billion investment in small-cap U.S. stocks pushed the 2024 inflows to record highs.
Over the 12 months ending in November, an average of 186,000 new jobs were created each month. On a monthly basis, the highest job growth was observed in healthcare, leisure, and government sectors. Employment in the transportation equipment manufacturing sector also saw a boost following the resolution of labor strikes.
Recent economic data continues to highlight contractionary pressures and their effects on the U.S. economy. At first glance, November’s NFP employment report indicates a resilient and strong labor market, with the U.S. economy adding approximately 227,000 jobs. This growth was largely due to the recovery of jobs lost to recent hurricanes in the Southeast and the resolution of Boeing labor strikes, both of which had reduced employment figures in October. The October report was also revised upward to 36,000 jobs.
Unemployment rose to 4.2%, while labor force participation declined. Despite this, unemployment remains relatively low, though it may rise in the coming months if contractionary pressures persist.
This week, major events in global central bank policies are expected to take place. Dubbed by some as the “central banks’ decisive week,” it begins with the Reserve Bank of Australia (RBA) decision. Key U.S. economic data, particularly the Consumer Price Index (CPI), will play a pivotal role in shaping Federal Reserve policies.
Investors are primarily focused on inflation data. The November CPI report is set to be released on Wednesday, followed by the PPI report on Thursday. These figures will serve as a precursor to the Federal Reserve’s interest rate decision next week.
Projections indicate that annual CPI may rise from 2.6% to 2.7%, while core CPI is expected to remain steady at 3.3%. If no stronger-than-expected data emerges, the Federal Reserve is likely to lean toward reducing interest rates, with the possibility of halting monetary easing in the January meeting.
The December 2024 global economic outlook report by Fitch highlights rising inflation risks in the U.S., driven by stronger-than-expected consumer spending, upcoming tariff increases that raise import prices, and slowed labor force growth due to reduced net migration.
Fitch forecasts that global growth will decline to 2.6% in 2025, a figure largely unchanged from its September report. However, this global stability masks significant shifts in the economic growth forecasts of major countries. U.S. economic growth for 2025 has been revised up by 0.5% to 2.1%, while the Eurozone’s growth forecast has been reduced by 0.3% to 1.2%. Similarly, China’s growth forecast for 2025 has been lowered by 0.2% to 4.3%.
The persistent inflationary trends observed in recent months are unlikely to change significantly with the November CPI report. The CPI data, due on Wednesday, is one of the final and most important indicators ahead of the December 18 Federal Reserve meeting. It may influence FOMC members’ decisions on whether to reduce or halt interest rate cuts.
Currently, there is a strong probability of a 25-basis-point cut in the upcoming meeting.
Meanwhile, Donald Trump, the U.S. President-elect, stated in an interview with NBC’s “Meet the Press” that he has no plans to request the resignation of Jerome Powell, the Federal Reserve Chairman. Trump emphasized that he does not intend to replace Powell and will continue to work with him.
In recent years, financial and tech markets have witnessed remarkable shifts. One such change is the shift in focus from semiconductor companies to AI-related software firms. After a significant rally in semiconductor stocks like NVIDIA and AMD, market enthusiasm has now shifted toward software companies such as Snowflake and Palantir. This reflects a growing realization that AI’s true potential lies in its applications across industries, rather than solely in the hardware enabling it.
Semiconductor firms were the initial beneficiaries of this AI boom, but the market is now gravitating toward companies implementing AI in practical and operational ways.
