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The Economic Calendar:
MONDAY: Consumer Inflation Expectations (10:00a CT)
TUESDAY: NFIB Business Optimism Index (7:00a CT), Fed Hammack Speech (7:50a CT), Redbook (7:55a CT), Fed Chair Powell Testimony (9:00a CT), WASDE Report (11:00a CT), 3-Year Note Auction (12:00p CT), Fed Bowman Speech (2:30p CT), Fed Williams Speech (2:30p CT)
WEDNESDAY: MBA Mortgage Applications (6:00a CT), CPI (7:30a CT), Fed Chair Powell Testimony (9:00a CT), EIA Petroleum Status Report (9:30a CT), Fed Bostic Speech (11:00a CT), 10-Year Note Auction (12:00p CT), Monthly Budget Statement (1:00p CT), Fed Waller Speech (4:05p CT)
THURSDAY: Jobless Claims (7:30a CT), PPI (7:30a CT), EIA Natural Gas Report (9:30a CT), Total Household Debt (10:00a CT), Fed Balance Sheet (3:30a CT)
FRIDAY: Import/Export Prices (7:30a CT), Retail Sales (7:30a CT), Industrial Production/Capacity Utilization (8:15a CT), Business Inventories (9:00a CT), Retail Inventories (9:00a CT), Baker Hughes Rig Count (12:00p CT)
Key Events:
The initial inflation data for 2024 challenged the expectation that easing supply chain issues alone would quickly bring inflation back to the Federal Reserve’s 2% target.
Stronger-than-anticipated inflation figures in January and throughout the first quarter meant that while the 12-month inflation rate did decrease over the year, it remained stubbornly close to where it began. This pattern was mirrored in the PCE price index, with core PCE finishing the year significantly above initial consensus estimates.
Looking ahead to 2025, the first major inflation report is projected to show continued strength. Estimates suggest a 0.3% increase in the January CPI (0.34% before rounding), leaving the year-over-year rate unchanged at 2.9%.
Source: TradingEconomics
Gold prices have surged over 9% since the start of the year, hitting a series of record highs. This impressive performance can be attributed to several factors, primarily concerns over trade tensions and their potential impact on the global economy.
The recently imposed tariffs on Chinese goods and the lingering uncertainty surrounding trade negotiations with Canada and Mexico have fueled safe-haven demand for gold. Investors are seeking refuge from potential economic and financial instability, driving up the price of gold.
While a trade deal has been reached with Canada and Mexico, the broader issue of trade tensions persists. If these tensions escalate further, leading to additional retaliatory measures, the demand for gold as a safe haven asset will likely persist, pushing prices even higher.
Analysts believe that the current market conditions support further price increases, with a target of $3,000 per ounce within reach. This bullish outlook is based on the expectation that trade uncertainties and the associated economic risks will continue to drive investor demand for gold.
Source: TradingView
A pattern that has been working – “Sell the rips and buy the dips” has continued to work here, and stocks are currently in the middle of the recent range.
The S&P 500 has traded sideways for three months, fluctuating within a tight range. This period has seen a mix of influences, including trade policy developments, interest rate volatility driven by inflation concerns, signs of strength in manufacturing, and solid earnings growth countered by high investor positioning, particularly in mega-cap tech.
Equities have remained resilient despite trade tensions, but further escalations could trigger pullbacks. These pullbacks, however, should be viewed in the context of past geopolitical shocks, where selloffs have been sharp but short-lived, with recoveries occurring even as the triggering event persisted.
Earnings season has shown above-average beats and strong growth. However, stocks have generally underperformed after reporting, likely due to previously high equity positioning.
While positioning has moderated somewhat, it remains above average. Similarly, high positioning in mega-cap growth and tech stocks has resulted in sideways trading despite strong earnings reports.
Goldman’s flows show sector trends in the first month of the year.
Source: Goldman Sachs
10-year Treasury yields have sliced below 4.5% – dropping more than 10 basis points at one point last Wednesday to their lowest of the year.
The market currently anticipates the Federal Reserve will maintain its current interest rate through March, followed by a potential two rate cuts later in the year. This would bring the terminal rate to around 3.90%, where the Fed’s easing cycle is expected to conclude.
This outlook presents an interesting opportunity for bond investors. If the disinflationary trend continues as anticipated, bonds could offer a favorable risk/reward profile, especially given the low probability of further Fed rate hikes under Chairman Powell’s leadership.
Several factors have contributed to the recent decline in US Treasury yields, including easing trade tensions, moderating inflation, and the Treasury’s decision to maintain the size of its debt auctions in the near term. Comments from Treasury Secretary Bessent, emphasizing the administration’s preference for lower long-term yields rather than direct Fed intervention, have also supported the bond market.
A quick snapshot of last week:
Oil prices dropped following a leaked story about a potential peace plan between Russia and Ukraine, allegedly crafted by Donald Trump. The plan suggested a ceasefire by Easter and was detailed enough to seem credible. The leak might have been intentional in initiating discussions. In response, Russia indicated openness to negotiations, which could lead to lifting sanctions on Russian oil, potentially stabilizing or increasing oil prices.
The natural gas market displayed mixed signals:
EIA Report: The U.S. Energy Information Administration (EIA) reported that working gas in storage was 2,397 billion cubic feet (Bcf) as of January 31, 2025, a decrease of 174 Bcf from the week before. This number is 208 Bcf less than last year and 111 Bcf below the five-year average of 2,508 Bcf, placing it within but at the lower end of the five-year historical range. This significant deviation from the average could impact prices, especially if cold weather persists.
Natural gas futures at the CME closed above a key resistance level, suggesting bullish sentiment. However, bearish traders are waiting for a potential downward gap to be filled before expecting sustainable upward movement. Trend followers might be holding long positions, but the market’s direction could hinge on weather forecasts for February, highlighting the weather’s influence on natural gas demand and pricing.
Source: TradingView
It was an eventful week for U.S. trade policies!
We anticipate that President Trump’s tariff threats against Canada and Mexico will persist until at least the conclusion of the USMCA review in mid-2026. The existing 10% tariff on imports from China is expected to continue indefinitely, with an additional increase of approximately 10 percentage points likely in the future. This escalation has already triggered retaliatory measures from China.
Currency futures: Higher U.S. tariffs will bolster the Dollar, and the EUR/USD to drop below parity in the coming months.
Treasury futures: The imposition of tariffs is likely to flatten the Treasury yield curve. This is due to markets potentially pricing in a delay in Federal Reserve rate cuts due to increased inflation risks and pushing down longer-term yields. We predict that 10-year U.S. Treasury yields will end the year around the current level or slightly higher.
The Bank of England (BOE) cut interest rates by 0.25% to 4.5% as anticipated, but the unanimous 9-0 vote surprised markets, causing the British pound to decline. Economists had expected a split vote.
In addition to the rate cut, the BOE lowered its growth forecast for 2025 and indicated that the UK economy may already be in a recession. This combination of a surprisingly dovish rate cut and a gloomier economic outlook has led to a decline in the pound’s value.
Copper’s on Fire! 🔥 This red-hot metal is breaking out like a teenager at curfew! 🚀
Gold’s Still Got It! ✨ Even after hitting a record high every day this week, gold’s showing no signs of slowing down. Is this the golden age? 🥇
Bitcoin’s Feeling Blue! 😥 The OG crypto is struggling to hold its ground. Maybe it needs a nap? 😴
Silver’s Shining… Kinda? 🤨 We’re taking a second look at silver, but this time through the lens of a bull move in corn. (Don’t ask us why, we just work here! 🤷♂️)
Ethereum’s Looking Fine! Laggard! 😎 The second-largest crypto is looking very interesting indeed. Could this be #2s time to shine?
Navigating a market dominated by headlines can be tricky.
One strategy is to avoid rushing into trades within the first 15 minutes of the trading day.
This period is often characterized by “fake outs.” If you choose to trade during this volatile window, we recommend reducing your position size to manage the increased risk.
These performance charts track the daily, weekly, monthly, and yearly changes of various asset classes, including some of the most popular and liquid markets available to traders.
