U.S. Stock Outlook | Three Major Index Futures All Decline, Société Générale's Big Short Warns the U.S. Stock Market Party is About to End

Pre-Market Market Trends

1. As of December 30 (Monday), U.S. stock index futures are all down before the market opens. As of the time of writing, Dow futures are down 0.11%, S&P 500 futures are down 0.17%, and Nasdaq futures are down 0.20%.

1. As of the time of writing, the German DAX index is up 0.02%, the UK FTSE 100 index is down 0.17%, the French CAC 40 index is up 0.10%, and the Euro Stoxx 50 index is down 0.02%.

1. As of the time of writing, WTI crude oil is down 0.08%, priced at $70.54 per barrel. Brent crude oil is down 0.12%, priced at $73.70 per barrel.

Market News

Can the U.S. stock market bull run be stopped? Société Générale's big short takes a contrary view: the party is about to end, it's time to exit. In 2024, the U.S. stock market achieved remarkable success, with the benchmark S&P 500 index rising over 25% year-to-date. Most analysts expect the unstoppable bull market to continue into 2025. However, Albert Edwards of Société Générale, known for his bearish views on the market and economy, has also issued some warnings. Edwards, a global strategist at Société Générale, stated in a research report: "Those who are weary of the exceptionalism of the U.S. stock market can draw strength from some signs that indicate the party is about to end, and it's time to exit." This long-time bear emphasized two main reasons for his view: the end of the yield curve inversion and the huge expectations for the high-tech sector. Edwards noted: "The yield curve between the 10-year and 2-year U.S. Treasury bonds has now turned positive, as has the yield curve between the 10-year and 3-month Treasury bonds. The end of the yield curve inversion could be an early signal of an impending economic recession, but if the inversion ends, it’s like the starting gun has been fired." The strategist added: "One factor that could 'burst' the stock market bubble is a further rise in U.S. bond yields. The last time the U.S. stock market's price-to-earnings ratio reached such a high level was in 2021, when the 10-year Treasury yield was at 1%. With the 'Ice Age' of bond/stock correlation now ended, any further rise in yields will pose problems for the stock market."

Inflation clouds linger, Trump's policies become a key variable for the U.S. economy in 2025. Inflation is undoubtedly a major concern for the U.S. economy in 2024, and this issue is expected to persist into 2025. Deutsche Bank's chief economist Matthew Luzetti predicts that although price growth will gradually slow, it will still be above the Federal Reserve's target level Luzetti pointed out that the service industry is the main force driving inflation, including core services such as healthcare, insurance, and airfare. Although the housing inflation rate is expected to decline next year, it may still remain at a certain level. Nancy Vanden Houten, chief U.S. economist at Oxford Economics, warned that the Trump administration's policies on tariffs and immigration could be a major part of the inflation rise risk. Economists generally believe that the policies proposed by Trump, such as imposing high tariffs on imported goods, reducing corporate taxes, and restricting immigration, could pose inflation risks and further complicate the Federal Reserve's future interest rate path.

2025 Federal Reserve voting committee rotation: Three hawks and one dove will join, policy direction may change. The Federal Open Market Committee (FOMC), which sets interest rates, will rotate four new voting members next year, three of whom are considered hawks. The new voting members in 2025 will include Boston Fed President Susan Collins, Chicago Fed President Austan Goolsbee, St. Louis Fed President Alberto Musalem, and Kansas City Fed President Jeffrey Schmid. According to a report from InTouch Capital Markets, Goolsbee is the only dove among the four. The firm lists Collins and Musalem as mild hawks, while Schmid is considered a moderate hawk. The latest Summary of Economic Projections (SEP) released by the FOMC on December 18 shows that committee members expect the pace of rate cuts to slow next year and beyond due to persistently high inflation. Given that the benchmark federal funds rate is 4.25% - 4.5% at the end of this year, the latest median forecast in the SEP indicates a 50 basis point cut in 2025, down from the previously expected 100 basis points.

Major banks are bullish, hedge funds are pouring in, will U.S. bank stocks soar next year? Regardless of the standard used, this year has been a bumper year for U.S. bank stocks. For investors in the industry, better days may still be ahead. Wells Fargo analyst Mike Mayo stated that net interest income could climb to record levels by 2025. Barclays' Jason Goldberg indicated that earnings per share will grow at nearly double-digit rates over the next two years. Many believe that if expectations for deregulation and tax cuts under the incoming Trump administration become a reality, there is still significant upside potential for bank stocks—even if the Federal Reserve keeps interest rates higher for longer than expected. Meanwhile, according to compiled 13F data, hedge funds significantly increased their exposure to financial company stocks in the third quarter, raising it to over $340 billion, a 50% increase from three months ago. Market observers expect that most of the factors that drove bank stocks up over 33% this year will continue to be major drivers for bank stocks in the coming months, including a rebound in capital market activity and loan growth.

U.S. credit card default rates hit a new high since the financial crisis! According to industry data compiled by BankRegData, credit card lenders wrote off $46 billion in severely delinquent loan balances in the first nine months of 2024, a 50% increase from the same period last year, marking the highest level in 14 years Charge-offs occur when lenders believe that borrowers are unlikely to repay their debts, which is a closely monitored indicator of significant loan distress. Mark Zandi, chief economist at Moody's Analytics, stated, "High-income households are doing well, but the bottom third of American consumers have run out of money. Their current savings are zero." The sharp rise in default rates indicates that consumers' personal financial situations are becoming increasingly strained due to years of high inflation and the Federal Reserve keeping borrowing costs elevated. Odysseas Papadimitriou, head of consumer credit research firm WalletHub, noted, "Consumers' purchasing power has weakened."

Individual Stock News

Boeing (BA.US) fell nearly 4% in pre-market trading due to the crash of Jeju Air in South Korea. A Boeing 737-800 (the predecessor of Max) from Jeju Air ran off the runway at Muan International Airport on Sunday without lowering its landing gear and crashed into a concrete wall. Of the 181 passengers on board, all but two were killed, and the plane exploded into a fireball after the crash.

Google (GOOGL.US) CEO: Gemini will be the company's "biggest focus" in 2025. Google CEO Sundar Pichai told employees that 2025 will be a "critical" year for the company. At a strategic meeting on December 18, Pichai and other executives outlined priorities for the coming year. Pichai stated, "I believe 2025 will be crucial." "We need to recognize the urgency of this moment and accelerate our actions as a company. The stakes are high." Currently, tech companies like Google are heavily investing in artificial intelligence, but the results are often mixed. Pichai acknowledged that the company still has some catching up to do in AI. He mentioned that the Gemini application (based on the company's namesake AI model) has "strong momentum," while also admitting, "We need to do some work in 2025 to close the gap and establish leadership there." He stated at the meeting, "Next year, scaling Gemini for consumers will be our biggest focus."

Intel (INTC.US) leads tech layoffs, going against industry trends. Intel has laid off about 15,000 employees this year, making it the leader in tech industry layoffs. According to Layoffs.fyi, as of December 27, the total number of tech employees laid off has decreased by 43% year-on-year, from 264,220 in 2023 to 150,034 in 2024. Cisco (CSCO.US) is the second-largest tech company for layoffs in 2024, having cut 5% of its global workforce in February, amounting to about 5,000 employees; the company then announced a restructuring in August, laying off about 5,500 employees, or 7% of its total workforce. Inflation, high interest rates, and concerns about a recession have also led to a surge in layoffs in 2023. However, as the oversupply issue is corrected, broader economic indicators show signs of stability, and the Federal Reserve lowers interest rates, layoffs are expected to slow in the second half of 2024. This trend of slowing layoffs seems likely to continue into 2025 unless unexpected market disruptions occur Novartis Pharmaceuticals (NVS.US): New experimental drug improves motor function in children with SMA. Novartis Pharmaceuticals stated that a new experimental drug has improved the motor function of children with spinal muscular atrophy (SMA) in a late-stage study. Novartis Pharmaceuticals indicated that the study subjects included children with type 2 diabetes who had never received treatment, aged two years or older, who could sit but had never walked independently. Novartis Pharmaceuticals claimed that this new therapy has the same active ingredient as the company's previously launched gene therapy Zolgensma. This may help Novartis Pharmaceuticals expand its offerings in the lucrative niche market of rare disease therapies.

Important Economic Data and Event Forecast

Beijing time 22:45 US December Chicago PMI

Beijing time 23:00 US November seasonally adjusted existing home sales index month-on-month