1/21/2024

Good Morning.

On Monday President Trump was sworn into office as the 47th president of the United States. His administration is promising swift changes and is embracing executive orders to carry out policy goals including massive deportations, leaving the Paris Accords, and growing energy production. Tariffs still remain the elephant in the room with Trump calling for studies on the effects of tariffs instead of day one action. Investors and economists have worried that sweeping tariffs could be harmful to the economy. 

The inauguration was filled with tech CEOs. This is a significant shift from his first administration where many CEOs distanced themselves and were attacked by Trump. Now many notable tech CEOs and business leaders are flocking to Trump. Major tech companies have donated millions to the inauguration budget. These donations amounted to over $200 M, a record.

TikTok restored service to 170 M U.S. users after a temporary blackout. Trump signed an executive order giving TikTok’s Chinese parent company, ByteDance, 75 days to divest from the social media platform. The future of the platform remains uncertain because ByteDance has not been willing to sell and few investors could afford the estimated $50 B price tag of TikTok. 

The World Economic Forum's Annual Meeting is currently underway in Davos, Switzerland. The theme this year is "Collaboration for the Intelligent Age". The meeting will aim to bring together global business and political leaders to discuss pressing issues such as clean energy, artificial intelligence, and economic inequality. Significant changes in global affairs including Trump's election and the Russia-Ukraine conflict will be very influential in the meetings.

In today’s newsletter we will cover: 

• Markets

• December's CPI Release

• Bank Earnings

• What to look out for this week

Markets 

Stock Indices: After a slow start to the week, stocks surged on Wednesday and Friday, driving the major U.S. indexes to weekly gains of 2% to 4%. This marked only the second positive week for the S&P 500 in the past six, with the index closing on Friday less than 2% below its record high set on December 6.

Bond Yields %: Yields on U.S. government debt declined, retreating from their highest levels in over 14 months and pausing a surge that had been underway since last September. This volatility is the direct result of monetary policy and economic data.

Bitcoin Rebound: The price of the most widely traded cryptocurrency surged close to its record high from a month ago. Bitcoin climbed to $104,700 during Friday afternoon trading, up from $94,500 at the previous week’s close. Its all-time high of around $108,000 was reached on December 17.

December's CPI Release

The December consumer price index (CPI) rose faster than expected, markets focused on the core CPI, which strips out the volatile food and energy categories. Core CPI increased by 0.2% in December, slowing from its consistent 0.3% monthly gains over the previous four months. This moderation offered investors some reassurance about underlying inflation trends.

Stocks rallied following the release of the CPI report, with the benchmark S&P 500 climbing 1.8%. Meanwhile, the 10-year Treasury yield reversed the losses triggered by last Friday's robust jobs report, falling to 4.66% as bond prices rose. 

In the wake of the data release, traders in interest-rate futures continued to anticipate that the Federal Reserve will hold off on delivering its next rate cut until June. However, expectations shifted to include about even odds of a second rate cut by the end of the year. Prior to the report, market bets had largely priced in only a single rate cut for 2025, signaling a shift in sentiment.

Bank Earnings

Some of the largest U.S. banks reported significant revenue growth in the fourth quarter. Investment banking and trading were the drivers of this growth. A strong economy, lower fed fund rate, increased dealflow, and an influx of investors are benefiting these core revenue drivers for U.S. banks. 

Lower interest rates effects on dealflow have begun to materialize. With the largest U.S. banks reporting an increase of 25% and more. Morgan Stanley said clients are “raising capital in a more constructive environment”. U.S. corporate bond issuance has more than doubled from a year ago. 

Morgan Stanley: Investment Banking and Trading revenue grew 49%.

Goldmans Sachs Investment Banking revenue grew by 68%.

JPMorgan: The bank reported record earnings and revenue for Q4, solidifying its position as the most profitable U.S bank ever.

BlackRock: Reached record $11.6 T aum. 

A strong banking system means an increase in financing, dealflow, and investing, all signals of a strong economy. Strong economic growth is expected to promote healthy earnings for the continued future. In addition, proposed banking deregulations from President Trump will further aid growth in U.S. banking revenue. 

 (KBW Nasdaq Bank Index)

What To Look Out For This Week

Monday: Markets were closed for Martin Luther King Jr. Day

Earnings:

• Tuesday: Netflix, 3M, Charles Schwab, Capital One, United Airlines,

• Wednesday: Procter & Gamble Johnson & Johnson, Discover Financial Services 

• Friday: American Express, Verizon Communications, NextEra Energy

We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Authors: Ben Banchik, Zachary Singer

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