Daily Brief Macro: A Stock Picker’s Guide to 2025 and more

• Equity markets have performed well in the past two years, with 2024 being another strong year
• Looking ahead to 2025, we explore the impact of inflation, interest rates, and artificial intelligence on the market
• BlackRock’s global CIO discusses the rarity of three years of 20%+ returns, opportunities in AI, and challenges facing investors in the new year.

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• Highlights ·       VFCS/PEFC certification covers 123,927 ha of rubber plantations ·       PEFC EUDR Due Diligence System shows the way for Vietnam ·       Experts point to offer of premium as new opportunity   In its efforts to align with the European Union Deforestation Regulation (EUDR), Vietnam has made significant strides through the Vietnam Forest Certification System (VFCS) and its partnership with the Programme for the Endorsement of Forest Certification (PEFC).
•   Giving Vietnam Forest Certification Office’s (VFCO’s) insights on navigating EUDR, Dr. Nguyen Hoang Tiep, Deputy Director, VFCO, said at the Vietnam Rubber Dinner 2024 Seminar held at White Palace Convention Centre in Ho Chi Minh City on December 12 that the VFCO-PEFC efforts aim to ensure sustainable forestry practices and facilitate compliance with stringent international requirements for deforestation-free commodities.
•   Vietnam became the 50th member of the PEFC in 2019, marking an important step in integrating international standards into its forestry sector.

• Happy Sunday, and welcome to my weekly editorial on all things Macro after a tumultuous week! I must admit, I’ve been surprised by the resilience of inflation and the growth momentum in the U.S. economy.
• Both indicators continue to deliver results above median/trend values, suggesting that the U.S. economy is growing in both nominal and real terms at levels typically exceeding historical norms.
• This is precisely why we’ve developed incredibly robust nowcasting models.

• Everything in markets seems to revolve around inflation, inflation expectations, and rising bond yields.
• This makes it the perfect time to revisit our outlook on inflation.
• Inflation is a critical topic because the Fed has become sensitive to prices again, as indicated in both the meeting minutes and the December economic projections.

• Term premium is a key concept in measuring bond yields and interest rates
• The global economy is experiencing fiscal pressures and political noise, impacting bond markets
• Central bank asset purchases and sell-offs, along with regulatory reforms, are influencing the bond market and interest rates

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• Trump plans to put serious tariffs on Mexico and Canada due to immigration and drug issues, impacting Asian currencies
• US and UK CPI data in focus for the week ahead, with expectations of higher inflation
• Currency depreciation pressures in Asia expected to continue, with China and Korea most vulnerable to depreciation pressures

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• The Mahakumbh Mela 2025, hailed as the largest gathering of the Hindu faith, is set to host an estimated 400-450 million devotees from India and around the world.
• The event’s estimated budget is INR 6,382 crore (USD 800 Mn) for event management and infrastructure development, 72% higher than the budget allocated in 2019 Kumbh.
• Kumbh Mela could generate financial transactions totaling INR 2–2.5 lakh crore (USD 25–30 billion) over 45 days. This accounts for an estimated 0.5–0.8% of the country’s GDP.

• Repo markets over year end were more subdued than expected, with balances reaching $473 billion in the afternoon on December 31st.
• The Fed’s balance sheet runoff, or QT, is expected to end by the first quarter of the year, with reserves holding above $3 trillion for most of last year.
• Potential delays in ending QT could be influenced by the resolution of the debt ceiling and the desired amount of reserves banks want to hold.

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• China implementing stimulus measures to boost growth
• Cold weather leading to increased demand for heating fuel oil
• Global oil inventories at record lows, with improving sentiment on China leading to potential increase in domestic demand.

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• Resilience is showing up in survey data, impacting yields and strategies in Oregon and beyond
• Rising term premium and fiscal spending expectations affecting markets, especially the dollar
• Sterling facing challenges with lower quality carry, fiscal issues, and potential growth slowdown, while Dollar remains bullish with strong US employment report and Fed outlook

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