Thursday's Markets Update (January 30, 2025)

31 Jan 2025 by rate3

On Thursday stocks ended higher in a volatile session, despite mixed earnings, as traders reacted to the economy slowing down below forecasts and ignored a strong job report and rising PCE. Meta rose on strong results and AI investments. Microsoft dropped due to a weak revenue forecast, and Apple dipped ahead of its earnings. The ECB cut its rate 5th time as the EU economy continues to decline. Gold reacted by reaching a new ATH. BTC, ETH, and SOL followed the main markets' spike of optimism. In other news, Grayscale filed for an XRP ETF.

Details

The economy grew 2.3% annualized in Q4 2024, its slowest pace in three quarters, down from 3.1% in Q3 and below forecasts of 2.6%. Personal consumption surged 4.2%, driving growth, while fixed investment fell for the first time since Q1 2023. Residential investment rebounded, but private inventories and trade dragged on growth. Government spending slowed. For 2024, the economy expanded 2.8%. Source: 1Y trend: "Up" (BEA)
Initial jobless claims dropped by 16K to 207K for the week ending January 25, well below forecasts of 220K and reversing a near 2-month high. This aligns with the Fed's view, supporting prolonged restrictive rates. 1Y trend: "Down" (DOL)
The core PCE price index rose 2.5% in Q4 2024, matching Q3's increase, while the headline index climbed to 2.3%, up from 1.5% in Q3, according to advance estimates. 1Y trend: "Down" (BEA)

Crypto

Grayscale has filed a 19b-4 application with the SEC to launch an XRP ETF. Approval appears probable, but Grayscale’s application might face delays as the SEC undergoes realignment.

World Markets

The European Central Bank cut key interest rates by 25 bps, as expected. The deposit rate fell to 2.75%, refinancing to 2.90%, and marginal lending to 3.15%. The decision reflects easing inflation, though domestic pressures persist. Wage growth is slowing, and corporate profits are absorbing some inflation. The ECB remains cautious, focusing on data to achieve its 2% inflation target without committing to a fixed rate path. 1Y trend: "Down" (ECB)
In Q4 2024, the Eurozone economy unexpectedly stalled, recording its weakest performance of the year after 0.4% growth in Q3. Germany and France contracted, while Spain, Portugal, and Lithuania saw strong growth. YoY GDP rose 0.9%, with a 0.7% annual expansion. 1Y trend: "Up". The Euro Area's unemployment rate rose to 6.30% in December 2024, up from 6.20% in November. Historically, the average rate since 1995 is 9.25%, peaking at 12.20% in January 2013 and hitting a record low of 6.20% in November 2024. 1Y trend: "Down". (Eurostat)

Commodities

Gold climbed above its October 2024 record high of $2,790, supported by easing monetary policies globally. The Fed held rates steady, hinting at potential rate cuts later this year. The Bank of Canada reduced rates and ended quantitative tightening, while the ECB, Swedish Riksbank, and central banks in China (PBoC) and India (RBI) signaled looser policies and increased liquidity. These moves bolstered gold's appeal. 1Y trend: "Side"

Comment: The Rise of the Underdog

For the last 200 years, the world economy has been on a relentless march toward higher productivity. From steam engines to the Internet, each tech breakthrough sidelined low-productivity individuals as "non-competitive" while serving up economic glory to the ultra-efficient. Yet here's the kicker—these same low-productivity folks made up 99% of consumers.

Governments, naturally, didn’t address this mismatch. Instead, they leaned into propaganda, inflating a dystopian gap between what low-productivity people earn and what they're pressured to consume. The result? Populist waves, fueled by frustration, eroding the promise of decentralized, less aggressive societal progress.

Dark times ahead? Not so fast. The very tech that once excluded the "unproductive" is now flipping the script. LLMs and crypto are leveling the playing field. Coding, creating, and tailoring products for niche audiences is now easy. Suddenly, those low-productivity individuals—dismissed for decades—can serve close-knit consumer groups far better than bloated, bureaucrat-infiltrated corporations.

This shift is personal. These small creators offer products that are 'just what I need,' 'cool,' and made by someone consumers actually know and trust. As decentralized finance grows, individuals could soon secure small but stable incomes, freeing them from reliance on manipulative governments and corporate overlords.

Add in the preservation of personal freedoms (let's not forget the 2nd amendment), and the future looks a whole lot brighter for the underdog. The megalomaniacs can't keep their dystopian empires—because the independent creators are rising.