As 2024 approaches the end, markets remain optimistic—but could we see a proper correction lower in 2025? Rising yields could be a problem for stock markets, and the 10-year US yield has already risen around 70bps in 2024. “Higher for longer” yields should theoretically bring equity market weakness, and so this is certainly something that investors should keep a close eye on. 

The US Dollar consolidated its gains again, edging higher into year-end even as US Durable Goods and Housing data disappointed. Last week, the DXY index rose by 0.2%, close to just above the 108 level. 

The Euro and the Pound moved sideways without major developments or economic data.

Commodity currencies had yet another negative week, albeit a slight one. Last week, the AUD and NZD fell around 0.5% vs. the dollar, while the NOK and CAD posted marginal losses. Elsewhere in FX, the CHF, and JPY fell around 1%. 

Crude Oil bounced from support again, but we must reiterate that we are very close to a breakdown—oil longs should be careful with stops below. Last week, WTI closed 1% higher at $70.18. 

Precious Metals had a very good week but saw considerable selling pressure on low volume on Friday. This has all the signs of year-end marking, with Silver, in particular, being pushed violently lower to avoid posting a new 4-year high on the annual candle chart. These efforts are most likely in vain, as fundamentals suggest much higher prices. Last week, Gold was flat at $2,622, and Silver ended 0.4% lower at $29.38.

Bonds moved lower again, but it’s worth noting that sentiment and positioning are now very bearish. Most analysts and market participants are predicting higher yield levels in 2025, so being long bonds is now becoming a very good contrarian trade on a risk/reward basis. Last week, the 10y UST yield rose 10bps to 4.63%, and the 10y Bund fell 0.9% to close at 132.801 points. 

Equities are still unable to show any meaningful weakness, and on a technical basis, we are still in a bull market. This will eventually break, but there is no technical evidence yet. Last week, the S&P500 index rallied 0.7% to 5972 points, and the DAX gained 0.5% to close at 19984. 

Finally, crypto-currencies are trying to find a base after the sharp sell-off of the previous week. At the time of writing, Bitcoin was down 1% to $95,000, and Ethereum was up 2% to $3,400.

The Week Ahead:

It’s another short week to end the year, and liquidity should be significantly reduced. We don’t expect significant moves in the coming days, as year-end window dressing dominates flows. Data-wise, we have a wide range of PMIs but not much else. 

HAPPY NEW YEAR from the Coeus Capital team!

Market Commentary: This communication is for informational purposes only. It is not intended as an offer or solicitation to purchase or sell any financial instrument. All market prices, data, and other information are not warranted as complete or accurate and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of Coeus Capital. Coeus Capital does not assume any liability whatsoever for the content of this newsletter or make any representations or warranties as to the accuracy and completeness of any information contained in this newsletter.