December 22, 2024

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Notable market news this past week (22-Dec-24)

Here is the Skeptivest roundup of the latest market headlines for the week

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📈 Economists have issued forecasts for the S&P500 in 2025. Let's look into their past accuracy.

Economists have underestimated the S&P500 in the recent years: Over the past eight years, market returns exceeded the range of compiled forecasts in seven instances, frequently underestimating the index's return potential.

Economists tend to estimate 5-10% returns, which is typically off: Over the past 25 years, 53% of the 376 firm forecasts surveyed by Bloomberg clustered between 0% and 10%. However, returns tend to be outside of this range, especially in recent years as seen above. This pattern extends over the past century, where large gains and losses were more common than single-digit returns, which occurred only 14 times in 97 years.

Economists tend to be too pessismistic: These errors tend to fall on the side of being too pessimistic, as 57% of all forecasts analyzed were less than the actual market returns, while 43% proved to be too high

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☕️ Quick fire happenings to note

🌏 Global macro

• US Fed indicates slower pace of rate cuts, leading to market dip...: While the US Fed has cut rates by 25bps to 4.25-4.5%, which was consistent with market consensus, the Fed has hinted slower rate cuts ahead, now projecting 2 25bps cut in 2025 vs 4 cuts forecasted in Sep'24. S&P 500 dipped >2% over the news.
• ... Nevertheless, stocks rose slightly as fresh PCE data show inflation resuming its downward trend: The so-called core personal consumption expenditures price index, which excludes food and energy items, increased 0.1% from October and 2.8% from a year earlier, according to Bureau of Economic Analysis data out Friday. The monthly advance was the slowest since May.

• UK stocks undervalued?: The UK market, with low valuations, a 4% dividend yield, and defensive sectors like staples and healthcare, is well-positioned for 2025 risks such as trade wars and inflation. Strategists see more upside for the FTSE 100 compared to other European benchmarks.
• Congressional budget standoff: A bipartisan resolution to maintain the $6.2 trillion federal budget faced backlash from Musk and Trump, leading to a revised plan that failed to pass. A government shutdown looms, risking furloughs for 875,000 workers, national park closures, and potential economic losses, including $11 billion in GDP during the 2019 shutdown.
• SoftBank’s $100b US investment pledge: SoftBank CEO Masayoshi Son pledged $100 billion for US projects, aiming to create 100,000 AI and tech jobs, despite lacking the funds. Questions loom over financing, echoing challenges from past Vision Fund investments like WeWork.

🏦 Individual stocks/companies

• Nike's turnaround gains momentum: Nike shares surged 12% on better-than-expected earnings under new CEO Elliott Hill, despite an 8% sales decline. Hill aims to refresh products, rebuild wholesaler ties, and secured a key NFL uniform deal through 2038.
• Amazon Prime Video's bet on MrBeast: MrBeast's Beast Games on Amazon Prime Video is an expensive bet by Amazon (reportedly worth $100m) that at least some of MrBeast's 337m YouTube followers will follow him over to the streaming service.
• Micron (-14.66% past 5 days) tanks with weak guidance despite EPS beat: The firm, vital for scaling AI inference, posted EPS of $1.79 on $8.71bn revenue, beating expectations. However, its guidance of $1.43 EPS on $7.9bn revenue missed the Street's $1.91 on $8.9bn.
• Darden Restaurants (+12.66%) rallies with earnings beat: The company beat earnings with in-line revenue as Olive Garden, ~40% of sales, posted 2% same-store growth vs 1.4% expected. Overall sales rose 6%, driven by increased traffic from $50–100k income diners—a positive signal for consumer spending.

🇸🇬 Singapore related

• SingPost sacks three senior executives, including group CEO, over mishandling of whistleblower's report: SingPost dismissed its CEO, CFO, and international business unit chief after a whistleblower report revealed gross negligence in handling internal investigations and misrepresentations to the audit committee. The board has initiated leadership succession plans to ensure continued operations.