In today’s briefing:
- Trump 2.0: Transformation and Disruption Present Economic Policy Challenges
- Trump’s Messy Governing Challenges
- A Failed Santa Claus Rally, What Now?
- Copper Tracker 6th Jan 2025: What Lies In Store For The Year
- Iron Ore Tracker (6-Jan-2025): What Does the New Year Hold in Store For Iron Ore
Trump 2.0: Transformation and Disruption Present Economic Policy Challenges
- Surprises in the global economy were limited in 2024. The second Trump administration aims to enact significant economic transformation, increasing the chances of major divergence between the US and Europe.
- President-Elect Trump promised higher oil output to lower energy prices, although US production is already at an all-time high. Restrictions on technology exports to China are likely to remain intact.
- The prospect of significant US economic disruption raises the chances of the Fed having to reduce its policy rate more aggressively in 2025 than currently discounted in financial markets.
Trump’s Messy Governing Challenges
- We reiterate our belief that in the absence of a recession the S&P 500 should register low single-digit gains for 2025.
- However, the emergence of policy implementation risk by the incoming Trump Administration makes us believe the market will experience several volatility shocks during the year.
- Be prepared for a choppy but mildly positive year for stock prices in 2025.
A Failed Santa Claus Rally, What Now?
- The first day of the Santa rally window was December 24 and the last day was January 3, and Santa Claus didn’t appear this year.
- We believe investors need to consider short- and intermediate-term market conditions separately. Current market weakness has left the market poised for a reflex rally.
- The key to the intermediate term outlook is the market’s behaviour during the anticipated rebound. Can breadth broaden out and more stocks participate on the upside?
Copper Tracker 6th Jan 2025: What Lies In Store For The Year
- We expect copper demand to have ended FY24 at around 27.1 million tons (up 4% year over year). FY25 could be an interesting year in which copper demand outstrips supply.
- We expect China to have about 15.3 million tons of demand (flattish year over year) in FY24. The stimulus will be crucial for growth in overall copper FY25 demand.
- We continue to expand our coverage of pure copper play names, with our favorites being Southern Copper (SCCO US) and Antofagasta PLC (ANTO LN)
Iron Ore Tracker (6-Jan-2025): What Does the New Year Hold in Store For Iron Ore
- We expect iron ore to remain rangebound between 90 and 110 USD/ton in FY25, which is in line with the band it has maintained over the past six months.
- Iron ore players like Vale (VALE US) and Fortescue Metals (FMG AU) can maintain high single-digit dividend yields at USD 100/ton. We see short-term opportunities in these names.
- For small-cap specialists, check out our research on Fenix Resources (FEX AU): Positive Developments At Iron Ridge And Other Catalysts. The company (trailing 5x PE) is poised to triple its production.
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