On Monday (December 23, Beijing time), the global market embraced a dynamic interweaving of multiple factors: gold prices continued to climb, supported by a softening dollar and U.S. Treasury yields, with spot gold trading near $2,623 per ounce. Meanwhile, U.S. crude oil prices oscillated around $69.55 per barrel, as cautious market sentiment on demand forecasts capped gains. Additionally, former U.S. President Trump's weekend promise to remove existing restrictions on energy production and exports, along with his claim to "reclaim" the Panama Canal, heightened market focus on the future of energy policy.
Impact of Federal Reserve Policy and Economic Data on Market Expectations
The Federal Reserve announced its third rate cut of the year last week but projected only two rate cuts of 25 basis points each in its economic forecast for 2025. This hawkish rate cut stance initially led to heavy selling in the stock market. However, the U.S. Personal Consumption Expenditures (PCE) Price Index for November, released last Friday, showed a year-on-year increase of 2.4%, lower than the expected 2.5%. Along with stronger consumer spending growth data, these reports indicated a robust economy, which tempered market sentiment.
Subsequently, Federal Reserve officials made relatively dovish statements, with some considering fiscal policy uncertainties, such as tariff changes, in their policy outlook. This prompted the market to adjust its expectations for the future interest rate path, with traders predicting the Fed might cut rates twice in 2025, in March and October, increasing from the previous expectation of just one cut within the year.
Gold Prices Benefit from a Weaker Dollar, Oil Prices Watch Demand Changes
Driven by a weakening dollar and U.S. Treasury yields, gold prices continued to rise, with spot gold peaking at $2,623 per ounce. Meanwhile, the crude oil market remained subdued due to uncertainties in demand outlook. Trump's declaration to lift current restrictions on energy exports may suppress oil price growth in the short term, but the market remains cautious regarding the practical implementation.
Stock Market Rebounds After Major Fluctuations
Last Friday, U.S. stocks ended two consecutive days of sluggish performance, with the Dow Jones Industrial Average and the S&P 500 Index recording the largest single-day gains since November 6. Previously, excessive reaction to the Fed's hawkish rate cut had caused the S&P 500 to drop 1.99%, the Nasdaq down 1.78%, and the Dow down 2.25%, all seeing significant weekly losses.
Boosted by lower-than-expected inflation data and dovish Fed remarks, the real estate sector led the S&P 500's 11 major sectors, gaining 1.8%. The Russell 2000 Index of small-cap stocks also rose by 0.9%, benefiting from lower interest rates. Notably, last Friday coincided with the "triple witching" of quarterly derivatives expiration, significantly increasing trading activity and heightening market volatility.
Market Outlook
In the coming weeks, market trends will continue to be driven by macroeconomic data and policy dynamics. The Fed's rate path, the specifics of Trump's energy policy, and consumer spending trends will be closely monitored by investors. Additionally, volatility in the gold and oil markets may further escalate due to policy changes, testing the resilience of the stock market under multiple factors. Investors need to remain cautious and adapt flexibly to market uncertainties.
