Recent Publications

Germany's ZEW survey suggests more economic weakness ahead, despite broader improvement in the eurozone. U.K. job market weakens, while wages accelerate, but won't deter BoE from easing.

A range bound German bond yield is consistent with a neutral allocation to European Value versus Growth. Divergences in yields across the eurozone economies have underpinned the relative performance of their respective equity markets. Fundamentals favour Spain over Italy, while U.K. smaller companies look short-term oversold.

Big Mo Tape, a key breadth gauge, rebounded last week. After quick reversals, S&P 500 returns have been mixed one month later and above average 12 months later. Watch the broader Fab Five Composite to see whether recent mixed signals are resolving themselves bullishly or bearishly.

We use a macro approach for valuing 10-year sovereign securities. The formulations were challenged by the pandemic, the inflation spike of 2021-22, and the phaseout of Libor and related contracts. We tweaked the models to use forward-looking data. The U.S. and U.K. are relatively undervalued, while Germany and Japan are relatively overvalued.

U.S. industrial production up more than expected at yearend, led by energy. Housing starts rebound, but trend still subdued. China's economy meets 2024 growth goal, but 2025 will be more difficult. U.K. retail sales unexpectedly fall, adding to more signs of slowing.

The CPI and PPI reports are steps in the right direction in relieving recent inflation fears. Extended easing cycle pauses and the start of tightening cycles have been bearish for stocks and consistent with greater defensive leadership. Amid policy uncertainty and slow disinflation, we expect the Fed to pause this month and deliver future rate cuts at a slower pace than last year.

U.S. retail sales soften slightly in December, but Q4 still strong, boosting GDP growth. Initial jobless claims rise more than expected, but still range-bound, as labor market remains healthy. Philly Fed manufacturing activity jumps. Builder confidence up slightly, but level still implies weak housing starts. Import price inflation ticking up, led by fuel and food prices. U.K. economy grows less than expected in November, supporting BoE easing path. Brazil monthly GDP barely expands in November amid tighter monetary policy.

Crypto investors have several things to look forward to in the coming weeks including a crypto-friendly administration and strong February seasonality for Bitcoin.

Last week's employment report blowout saw equities slump, contrary to the historical norm of large upside surprises being good for equities. Occasionally good news is bad news, especially when it could impact inflation and monetary policy in a hawkish way. This typically means smaller gains in equities in successive months, but recession is highly unlikely.

EM Scorecard has significantly outperformed the benchmark since going live in 2014. Scorecard favors Latin American markets, except for Mexico, which is an underweight. Potential U.S. tariffs and geopolitical threats pose additional risks for Mexico.

Our breadth measures of 10-year yield increases are at or approaching 100%. Broad-based increases in 10-year yields do not necessarily point to economic weakness. But the implications for equities have been more subdued.

Extended easing cycle pauses and the start of tightening cycles have been bearish for stocks and consistent with greater defensive leadership. Conclusions of tightening cycles have been much more bullish. The evidence sides with the cyclical group of sectors from now.

New highs in gilt yields this week unconfirmed by the U.S., Germany. Yield movements exaggerated by structural factors. Despite the selloff, this is no Liz Truss moment. The BOE is likely to cut rates next month. The gilt market has been underperforming. We will look to reduce exposure into this rally.

The CPI and PPI reports are steps in the right direction in relieving recent inflation fears. The reversal in bond yields is key to the stock market's rebound. We are watching for a sustained rally beyond a day or two to prevent a reduction in our current max overweight position in U.S. stocks.

A quick look at correlations of our recommendations shows our Consumer recommendation (IEDI) has a negative correlation to our Commodity recommendation (USO). The negative correlation makes sense as higher commodity prices and inflation negatively impact consumers and consumer-related companies. We can watch Consumer vs Commodity sector trends to get a read on inflation trends. The bottom line is that rising/falling inflation expectations may force us to close one of these current recommendations.

Lower U.S. core CPI inflation at yearend, but little change over the past six months. Fed expected to pause in January. Mortgage rates keep trending up, weighing on mortgage application trends. Empire manufacturing index slides back into contraction territory. U.K. inflation slows more than expected, supporting gradual BoE rate cuts. German economy contracts in 2024, outlook still dire.

Stocks look high versus money supply. Other measures of cash are low. Short-term sentiment is more pessimistic, but more may be needed with Fab Five Stock market model turning bearish.

The BOJ is the only major developed central bank that is expected to raise rates this year. Inflation above 2% is becoming sustainable. Faster real wage growth and higher interest income should help the domestic economy, especially the banks. The yen is massively undervalued.

Softer-than-expected PPI, but inflation pressures still lean toward a cautious Fed in 2025. Small business optimism jumps, on expectations Trump policies will boost growth.

Improving global leading indicators and bullish risk indicators continue to confirm a Cyclical sector bias in European equities. And while we see signs that Cyclical sectors have become overbought, technical evidence still supports further relative upside. We list a series of indicators we are watching which could signal to become more Defensive.

The S&P 500 has been rising as Big Mo has been falling. Extended negative divergences are rare but not impossible. Will the current divergence continue? Tech relative trends may hold the answer.

Nonfarm payrolls rose more than expected at yearend and the unemployment rate slid to 4.1% Wage growth eased slightly, but has been little changed over the past several month. Consumer inflation expectations jumped, weighing on sentiment. These reports practically confirm that the Fed will not cut rates at its January meeting.

Tougher comps, elevated estimates, and lower beat rates imply a tougher earnings environment in 2025. December turned risk-off after the Fed indicated only two rate cuts were likely next year, causing the S&P 500 to fall 2.5%. Downside risks from a global economic standpoint are emanating from political uncertainty and a possible trade war could significantly hinder growth in 2025.

Starting off the new year strong, the NDR Trump Trade Index rebounded to a new high, with diversified financials in a good position to benefit from a steeper yield curve and potential deregulation.

It is taking a long time for rent growth to slow to levels consistent with 2% inflation. Construction delays and sticky house price growth have inhibited the slowdown. With backlogs receding and house price trends cooling, we could see some downside surprises to the inflation data in 2025, which would bode well for financial assets such as bonds.

More Chinese stimulus is needed to kickstart the economy. German industrial production rises more than expected, but outlook weak. Japanese wage growth back to 1990's levels, allowing room for more BoJ normalization.

The global economy ended the year on solid footing, according to the latest global PMIs. Supported by leading indicators and other macro data we follow, this reinforces our overweight position in global equities. But downside risks emanating from political uncertainty and possible global trade war could significantly hinder growth in 2025.

Current weight of the evidence supports bullish gold position and overweight equity allocation. Broad bond yield advance would threaten both positions. Gold and equity uptrends well intact for now.

Tougher comps, elevated estimates, and lower beat rates imply a tougher earnings environment in 2025. As Mag 7 EPS growth slows from extremely high levels, the rest of the market needs to make up the difference. Soaring interest expenses could make for difficult capital allocation decisions moving forward.

December turned risk-off after the Fed indicated only two rate cuts were likely next year, causing the S&P 500 to fall 2.5%. Outperformance was weak with only 12 of 48 (25%) themes outperforming the S&P 500, the third-worst breadth in 11 months. Tech was a bright spot, accounting for nine of the 12 outperforming themes. More than 50% of Tech themes outperformed (4th straight month), the best since 2020.

For long-term, value-oriented investors, we recommended buying the 10-year Treasury around 5.00% +/- 25 bp. The yields rise is all about the term premium. We attribute the rise in the term premium to expected changes in Treasury supply, primarily due to upcoming changes in fiscal policy. Trading conditions are conducive for a reversal.

Initial jobless claims in the U.S. drop to lowest level in nearly a year, even as ADP payrolls growth slows. Indicates a cooling, but still healthy, labor market that will keep the Fed cautious in early 2025. Mortgage rates back up to near 7%, weighing on mortgage applications and expectations of home sales in the near-term. Used car prices normalizing and no longer a source of disinflation for the CPI. Wholesale inventories dip and will likely be a drag on U.S. Q4 GDP growth. German manufacturing orders slump, dampening economic outlook. French consumer confidence slides to lowest level in over a year.

ETF inflows have been among the highest on record over the last two months. ETF flows are seasonal, with the strongest weeks clustered from November to January, especially after elections. When ETF flows have reversed lower from extremely high levels, S&P 500 returns have tended to be below average for several months.

The S&P 500 finished the year up more than 20% for the second-straight year despite falling 2.5% in December. Returns for both cyclical and defensive Value sectors were much worse than the overall market. Several of the top-performing sectors post-election faded in December, including Energy and Financials.

Job openings increase more than expected, but hires and quits decline. Mixed signals to keep the Fed cautious in early 2025. ISM Services PMI shows solid services growth at yearend. Cost pressures jump. U.S. trade deficit widens in November and will likely be a drag on Q4 GDP growth. Eurozone inflation accelerates, but likely won't alter ECB easing path.

There has been a weak positive correlation between European equity returns in January and the remaining 11 months of the year. A similar correlation can be found using the first five trading days of the year. A lack of momentum in December, combined with mixed indicators across a range of variables suggests a neutral outlook for European equities. But risk indicators, leadership trends and seasonality, mean that we remain bullish.

Risk #1 - Inflation expectations break out to the upside. Risk #2 - The Fed is too complacent on unemployment. Risk #3 - USD remains strong.

The Catastrophic Stop model entered December fully invested. The International Equity Core model is overweight Japan and Switzerland, while underweighting China, Germany, France, and the U.K. The Explore model favored India, Peru, Mexico, South Africa, and South Korea.

Led by strong services activity, the S&P Global U.S. Composite PMI shows solid economic growth at yearend. Price pressures remain contained. Vehicle sales finish 2024 strong, led by light trucks. Factory orders weaken, led by durable goods.

The All-Country World ex.-U.S. Total Return Index declined over 190 basis points in December. The International Equity Core model is overweight Japan and Switzerland, while underweighting China, Germany, France, and the U.K. The Explore model favored India, Peru, Mexico, South Africa, and South Korea.

During December, global stocks underperformed U.S. bonds by more than 70 basis points. The Global Allocation model's equity weighting remains above benchmark allocation. The model has an above benchmark weighting for Canada, Japan, and the U.S., while holding below benchmark allocations for Pacific ex. Japan, Emerging Markets, Europe ex. U.K., and the U.K.

During December, global stocks underperformed global bonds by more than 18 ba sis points. The model's equity allocation remains above benchmark weighting, with U.S. Large Caps, U.S. Growth, and U.S. Small Caps each receiving more than 15% allocation. The largest fixed income allocations were Emerging Market bonds and U.S. High Yield, both with more than 8% weights.

The Fixed Income Risk Management model was steady last month and entered January with a fully invested allocation to fixed income sectors. Emerging Market bonds, U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade are above benchmark weight. U.S. Investment Grade Corporate, U.S. Long-Term Treasurys, and U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are below benchmark weight.

The Bloomberg Barclays U.S. Aggregate Bond Total Return Index was down -1.6% in December. Emerging Market bonds, U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade are above benchmark weight. U.S. Investment Grade Corporate, U.S. Long-Term Treasurys, and U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are below benchmark weight.

The Catastrophic Stop model was steady last month and entered January with a fully invested equity allocation. Financials, Information Technology, Communication Services, Consumer Discretionary, and Utilities are above benchmark weight. Real Estate, Materials, Energy, and Consumer Staples are below benchmark weight.

After a strong upward move post-election, the S&P 500 Total Return Index dropped -2.38% in December. Financials, Information Technology, Communication Services, Consumer Discretionary, and Utilities are above benchmark weight. Real Estate, Materials, Energy, and Consumer Staples are below benchmark weight.

After a Q1 scare, disinflation never reversed, leaving the primary driver of the bull market in place. The Mag 7 led broad-based gains, resulting in record concentration and valuations high versus history and Europe, but not versus bonds. Skepticism thwarted incumbents globally, but investors grew increasingly bullish on stocks, with record flows and allocations.

Breadth diverging from uptrends in major benchmarks. After abundant record highs, records tend to recede with more subdued market performance. Weak Decembers have been followed by recoveries during secular bulls, more weakness during secular bears.

The ISM Manufacturing PMI surprises to upside, but still in contraction territory at yearend. New orders and production pick up, while employment falls. Cost pressures remain muted.

We upgraded commodities from neutral to bullish. The S&P 500 posted back-to-back 20% gains for the fifth time on record while logging 57 record highs in 2024. Growth sectors led stocks higher for the second-straight year, but divergences developed in Q4.

Upgrading commodities from neutral to bullish. The NDR Commodity Model moved to its most bullish monthly reading since May 31. We upgrade our view to align with the model. USD weakness would add conviction to our view.

When the 10-year Treasury yield peaked last April, we saw ETF flows to TLT improve about six weeks later. Not only is there a lack of TLT buying currently, it looks like significant selling is being fueled by a move to the short end of the curve.

Immigrant labor is most heavily represented in agriculture, construction, leisure/hospitality, and professional/business services. These industries could face rising labor costs from mass deportations and a potential squeeze on profits. More generally, tighter labor markets from deportations create an upside risk to wage growth and inflation.

The S&P 500 posted back-to-back 20% gains for the fifth time on record while logging 57 record highs. While most asset classes gained, relative strength in large-cap Growth meant U.S. stocks outperformed bonds, cash, commodities, and international equities. Exceptions include long bonds, Materials sector, and some large emerging markets.

Our forward-looking equity risk premium is one basis point away from favoring 10-year Treasurys. But our preferred ERP measure using Baa corporate yields still has a 50 bp cushion before credit is favored. Allocators should continue to favor equities over bonds. It was the third worst December for Treasury bond futures going back 45 years. Repo market tightened up toward yearend.

Global Stock/Bond Composite decline not warranting equity allocation cut. Rally Watch aggregate downtrend hasn't been followed by bear market warning from Bear Watch aggregate. Risk-On/Risk-Off and Growth/Value ratios also indicate that it's not yet time to cut back.

A decline in jobless claims in final week of the year shows labor demand remains healthy. S&P Global U.S. Manufacturing PMI comes in above the flash estimate but still in contraction territory. Construction spending growth decelerates, led by the nonresidential sector. Rising mortgage rates sap mortgage application activity.

There are many ways that Japan's economy has changed in recent years, especially on the inflation front. But many elements remain unchanged, held down by poor demographics. There's limited evidence that economic change has impacted Japanese equities given that the long-term narrative remains uncertain. Instead, the yen has been the predominant driver of cyclical performance.

As we analyzed the top 10 themes in 2024, there were really three broad themes that stood out in 2024 - Consumer, Tech Titans and Crypto. In this publication we take a top-down look from the three broad themes to the largest ETFs and stocks that drove their returns. The launch of Bitcoin ETFs, bullish comments by Trump at a crypto conference, and Trump looking to appoint a crypto-friendly SEC chair all helped Bitcoin soar over 100% and make crypto-related the top broad theme for 2024.

Economic growth narrowed across states in November, but recession risk remains low. Existing home price growth has normalized to pre-pandemic rates.

Investors were very optimistic about stocks in 2024, showing higher risks going into 2025. The high optimism was similar to 2021, which marked the end of a cyclical bull market. Investors are highly allocated to stocks.

Factory activity improves in Texas, but sinks further in the Chicago region. Most other regions are also in contraction, confirming broad manufacturing sector weakness at yearend. Pending home sales surprise to the upside, pointing to a sustained modest pickup in existing home sales in the near-term.

The top-level equity allocation remains at 72%. The model shifted 7% allocation from fixed income to cash. U.S. Large Caps, U.S. Growth, and U.S. Small Caps each have over 13% weightings.

The top 10 stocks account for a record high 39% of the S&P 500. The average stock has done fine, up 8% YTD versus the average of 6%. Recent lower highs in several breadth gauges suggest risks are rising.

Weekly talking points and key visuals from NDR strategists' insights.

Japanese data for the end of the year, ranging from inflation to the consumer, indicate that the economy is poised for another BoJ rate increase in early 2025. U.S. jobless claims point to normalizing labor market. U.S. goods trade deficit widens amid resilient economy.

Sentiment for Healthcare Services stocks is highly negative, but rising healthcare services PCE has been bullish for the sector. Will sentiment soon start to reverse?

Poor December breadth has had limited impact on intermediate-term technical indicators. Market-based macro indicators have turned negative, but they could be reflecting year-end positioning more than economic foreshadowing. The longer market-based macro conditions are weak, the more our disciplined approach would dictate a reduction in equity exposure.

Extreme pessimism suggests that Europe/U.S. underperformance is reaching its limits, at least in the short-term. But macro and fundamental tactical indicators favour the U.S., as do longer-term technical indicators. We still recommend a U.S. overweight and explain what would change our view.

Investor sentiment has been excessively optimistic about stocks. But Macro sentiment has been cautious until now. And valuation and positioning very bubbly.

On a relative basis, the current cyclical bull market has been one of the best on record for Technology and Communication Services. For Energy, Industrials, Discretionary, Staples, Financials, and Utilities, it has been one of the worst. For Materials, Health Care, and Real Estate, it has been the worst.

Despite the fall in confidence, the reading is still consistent with ongoing economic expansion. New home sales rebound, following hurricane-induced slump. Durable goods orders fall more than expected, but capex grows. National activity index points to improving economic activity.

Assets in MMFs were not the bullish fuel for bonds and stocks that many had expected, expanding by $750 billion in 2024. Cash handily beat bonds. Intermediate-term TIPS offer a reasonable alternative to cash for 2025 with nominal returns expected to exceed 5.00%.

Santa Claus rally could still be alive, with strong seasonality into the end of the year. The S&P 500 looks short-term oversold and excessive optimism has been relieved. There has been some trend damage, but the Fab Five stock market model is not yet bearish.

Weekly talking points and key visuals from NDR strategists' insights.

Despite solid income and spending growth, PCE inflation came in below expectations. Services inflation remains sticky, keeping the Fed on a slower rate cut path. Consumer sentiment jumps at yearend. Japan's CPI accelerates, setting stage for more BoJ rate hikes. U.K. retail sales confirm softening in the economy.

Total single-family home sales finally turned positive (Y/Y %) after 39 months of declines, however, the recent rise in rates has kept home-related stocks under pressure. If current inflation fears prove unfounded, it could be a great buying opportunity.

In recent years, the native-born labor force has fallen compared to pre-pandemic, due to early and more widespread retirement. Foreign workers have made up for the slack. This has positive implications for potential growth and long-term equity performance. But proposed deportations could shave 3.2% off of the labor force, drastically reducing potential growth.

U.S. existing home sales and prices rise in November, amid strong demand and some improvement in inventory. Leading economic index increases for the first time since 2022, pointing to continued expansion. Initial jobless claims come down, as the labor market remains healthy. Philly Fed factory activity slumps, a sign of manufacturing weakness nationwide. Q3 real GDP revised up, but profits soften. European confidence remains weak, weighing on the outlook.

U.S. Dollar Index breakout has lacked confirmation from breakdown in other major currencies and gold. Confirmation also lacking among interest rates, rate differentials, and emerging market currencies. While dollar optimism excessive, pessimism extreme on currencies and gold. We remain bullish on gold and neutral on the dollar, yen, euro and pound.

Removing 2% from Energy and adding 1% to both Technology and Communication Services. Energy has given back all its post-election gains and has broken down on a relative basis. Crude prices have remained rangebound and we could re-upgrade the sector on better price action and model confirmation.

The core eurozone economies are struggling, while many of those countries in the periphery are outperforming on numerous levels. While this has helped narrow yield spreads, equities in the region haven't outperformed. Partly to blame is the long-term outlook for all the eurozone economies, which remains subdued due to weak demographic and productivity trends.

Decliners have exceeded advancers for 12 consecutive days for only the third time since 1972. If breadth does not improve during the bullish Santa Claus Rally period, it would warn the cyclical bull is at risk. Excessive optimism and macro risks add to breadth concerns.

We move Video Games to overweight, recommending the Global X Video Game & Esports ETF (HERO) relative the SPDR S&P 500 (SPY), with a 12-month, 22% relative upside price target.

The median participant sees 50 bp of rate cuts in 2025, with a longer run rate of 3.0%. Policy remains restrictive. In a technical adjustment, the FOMC reduced the RRP rate by 5 bp relative to the range. The SEP showed higher inflation expectations with greater uncertainty.

U.S. housing starts approach pandemic lows, but there are reasons for optimism next year. Architecture billings trend points to a pickup in nonresidential construction spending in 2025. Mortgage purchase applications improve but to a still low level, a sign that home sales will remain subdued. U.K. inflation accelerates, complicating BoE policy path. Eurozone inflation revised lower, allowing room for more ECB easing. Japan exports rise, led by Asia.

After peak in earnings sentiment, consistent with other signs of excessive optimism, increasing earnings pessimism is a market risk. Earnings beat rate momentum and earnings revisions are broadly negative across regions and sectors. Beat rates holding up better for major global Value sectors than biggest Growth sectors. ACWI Growth/Value ratio downturn would be consistent with market decline.

U.S. retail sales surprise to the upside, as consumer strength continues to drive overall economic growth. Industrial production still shrinking. Builder confidence unchanged, pointing to subdued housing starts in the near-term. Business inventory-to-sales ratio holds steady, a sign of balanced supply/demand conditions. German business confidence falls, but investors more optimistic. U.K. wage growth unexpectedly accelerates, complicating BoE easing path.

The flash U.S. Composite PMI rose to highest level since early 2022, led by robust services growth. Manufacturing, however, remains in the doldrums. Flash PMIs pick up elsewhere, confirming strength in the global economy. Chinese consumer disappoints, setting stage for more stimulus.

The Fed will reduce rates by 25 bp this week and will pause sometime in Q1. Policy is restrictive, so the Fed will want to proceed carefully as it approaches the neutral rate. Look for the RRP to match the bottom of the fed funds target range. Too much optimism on bonds and stocks.

The Leading Indicator Model for stocks remains bullish. However, there is some deterioration in the model from Utilities and Financials relative strength and short-term momentum. The economic trend and interest rates are supportive of stocks.

Weekly talking points and key visuals from NDR strategists' insights.

The Nasdaq composite has hit 37 new all-time highs (ATHs) so far this year, but it may take a dot-com type run to keep the new ATHs coming.

Firmer U.S. import prices round the picture of broad disinflation stalling. Supports a slower pace of Fed rate cuts in 2025. More signs of softness in the U.K. economy. Japan's business confidence continues to improve, making room for BoJ rate hike.

The wealth effect is a big part of why economists have underestimated consumption and GDP. Net worth is taking on an increasingly larger role in the economy. As long as stocks remain buoyant, the economy should do well. But should equities enter a bear market sometime in 2025, the economy could take a bigger-than-expected hit.

Producer price inflation surprises to the upside. Supports expectations of slower Fed rate cuts in 2025. Jobless claims increase, a sign of cooling labor market conditions. India's inflation eases, teeing up RBI rate cut.

With VIX reflecting complacency, reversal would be a warning. Current outlook supported by model and breadth improvement, outperforming Growth and Risk-On indices, and defensive retreat. Yields not currently a threat; watch correlations if they rise.

The NDR S&P 500 Cycle Composite for 2025 shows a strong first half, third quarter pullback, and year-end rally. Years ending in five have been the strongest of the 10-year cycle because bear markets and recessions have been rare. Whether the second half follows the more bullish Cycle Composite or the cautious four-year cycle may depend on inflation and EPS growth.

CPI inflation comes in line with expectations, supporting a Fed rate cut next week. Employment outlook for Q1 2025 remains steady, pointing to continued payroll gains.

We highlight five themes on our radar as we head into 2025. A crypto-friendly SEC, more datacenters, cool video games, and a warming housing market could be key drivers. We highlight ETFs to gain exposure to themes we are watching including FinTech (FINX), Space (ROKT), Video Games (HERO), AI Software (ARTY), and Home Construction (ITB).

Sentiment evidence continues to point to elevated investor optimism. Positioning data and investor allocation surveys provide confirmation of elevated optimism. Equity allocations among hedge funds, active managers, and individual investors indicate relief of excessive optimism may be required for significant gains in the new year.

NFIB Index soars to a three-year high on post-election optimism about the U.S. economy and sales. Steady U.S. productivity and unit labor cost growth support core inflation near current levels. Chinese trade surplus surges. Brazil's inflation remains above central bank target.

We enter the year bullish on stocks and with a cyclical tilt on sectors and themes but could rotate defensively as the year progresses. Disinflation, EPS acceleration, and broad participation could give way to Fed uncertainty, tariff and deportation risks, and an EPS slowdown. Key estimates: 6600 S&P 500, 4.625% 10-year fair value, 2-2.5% real GDP, and 2.75-3.25% inflation.

China's core prices appear to be bottoming, but stimulus is needed for a meaningful recovery. The U.S. Employment Trends Index suggests firmer economic growth in early 2025.

The global economy showed continued acceleration in November, according to the latest PMIs. Services is still leading the expansion, but there are burgeoning signs of recovery in the manufacturing sector. Global breadth is strong, led by the U.S. and India. But renewed signs of weakness in Europe.

The Fab Five Sentiment Component has been bearish 70% of the time this year. However, the Monetary and Combo Components have been consistent offsets, while the Tape Component has been stuck in neutral. Assuming inflation remains on its downward trajectory, the positive monetary message should persist for much of 2025.

Payrolls rebound in November from weather and strike related distortions. But the trend in hiring has clearly moderated. The unemployment rate ticked up to 4.2% amid more baby boomers exiting the labor force. Consumer sentiment increased in December, but so did inflation expectations. Wholesale used vehicle prices rise from a year ago for the first time since 2022. These reports should keep the Fed on its rate normalization path in December, but support a slower pace of rate cuts in 2025.

Weekly talking points and key visuals from NDR strategists' insights.

Following China's announced stimulus in Sept., a burst of enthusiasm led to $2.1b of inflows for ETF's that comprise our China Theme, with rolling 5-day accumulated inflows peaking at a record high on Oct. 1. As enthusiasm faded, and additional stimulus in November underwhelmed, investors were reminded of the structural challenges China faces (demographics, deglobalization, and debt), pulling out over $1b from the theme. However, as valuations relative to the U.S. revert, the potential for additional stimulus, and net flows stabilize, we're neutral on the theme while on watch for shorter-term tactical opportunities.

Consumer confidence on the economy and stocks gets barely to extreme optimism. But other measures of macro sentiment still show healthy levels of skepticism. Measures of what consumers and margin traders are doing still bullish.

Jobless claims and layoff announcements remain range-bound, signaling robust labor demand. In a sign of continued U.S. consumer strength, vehicle sales increase, nearly catching up to pre-pandemic annual rate. U.S. trade deficit remains on a widening trajectory amid a strong dollar and stellar domestic demand. Eurozone retail sales fall, as consumers grow nervous about the outlook. Germany's factory orders fall less than expected, but outlook still dim.

India's economy demonstrates long-term resilience and strength. Technical indicators show strength for equities, with a high technical score in our ACWI Scorecard. However, fundamentals are concerning, with low earnings yields and valuation score in our scorecard. We maintain a neutral stance on Indian equities, balancing the promising long-term outlook with current valuation challenges.

The Catastrophic Stop model entered December fully invested. The International Equity Core model is overweight the U.K. and Canada, while underweighting China, Germany, France, and Australia. The Explore model favored Hong Kong, Peru, Taiwan, South Africa, and Thailand.

The All-Country World ex.-U.S. Total Return Index declined over 480 basis points in October. The International Equity Core model is overweight the U.K. and Canada, while underweighting China, Germany, France, and Australia. The Explore model favored Hong Kong, Peru, Taiwan, South Africa, and Thailand.

During November, global stocks outperformed U.S. bonds by more than 270 basis points. The Global Allocation model's equity weighting remains above benchmark allocation. The model has an above benchmark weighting for Canada, Europe ex. U.K., and the U.S., while holding below benchmark allocations for Japan, Pacific ex. Japan, Emerging Markets, and the U.K.

During November, global stocks outperformed global bonds by more than 340 basis points. The model's equity allocation remains above benchmark weighting, with U.S. Large Caps, U.S. Growth, and U.S. Small Caps each receiving more than 15% allocation. The largest fixed income allocations were Emerging Market bonds and U.S. High Yield, both with more than 8% weights.

The Fixed Income Risk Management model was steady last month and entered December with a fully invested allocation to fixed income sectors. Emerging Market bonds, U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade are above benchmark weight. U.S. Investment Grade Corporate, U.S. Long-Term Treasurys, and U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are below benchmark weight.

The Bloomberg Barclays U.S. Aggregate Bond Total Return Index was flat in November. Emerging Market bonds, U.S. Floating Rate Notes, U.S. High Yield, and International Investment Grade are above benchmark weight. U.S. Investment Grade Corporate, U.S. Long-Term Treasurys, and U.S. Mortgage-Backed Securities, and U.S. Treasury Inflation-Protected Securities are below benchmark weight.

The Catastrophic Stop model was steady last month and entered December with a fully invested equity allocation. Consumer Discretionary, Financials, and Utilities are above benchmark weight. While Communication Services improved to marketweight, Information Technology, Real Estate, Industrials, Materials, Energy, Consumer Staples, and Health Care are below benchmark weight.

The S&P 500 Total Return Index rebounded over 5.8% in November. Financials, Information Technology, Consumer Discretionary, and Utilities are above benchmark weight. Real Estate, Communication Services, Materials, Energy, and Consumer Staples are below benchmark weight.

Global market risk highest since 2022. For global fixed income, policy differences should result in weaker correlations. Global economy should grow in line with pace of 2024 but tariff uncertainties pose downside risks to growth and upside risks to inflation.

The weight of the evidence favors stocks on an absolute basis and relative to bonds and cash. The macro backdrop favors small-caps, but technicals have yet to confirm. The macro setup should favor Value, but technicals side decisively with Growth.

November was decidedly risk-on after the election, especially for Tech which saw 13 of 17 (76%) themes outperform the S&P 500. The highest returns were in "Trump Trades," led by Blockchain, Bitcoin, and FinTech, all of which were up more than 27% in November. The key will be for momentum to continue after Trump takes office and makes his legislative agenda known.

Both ISM and S&P Global U.S. Services PMIs comfortably above 50. Price indexes show inflation pressures have cooled. ADP payrolls growth moderates, but to a still healthy pace. Factory orders disappoint, as manufacturing activity remains weak. Mortgage purchase applications rise, despite elevated mortgage rates. Australia's GDP growth slows, putting RBA in a tough spot.

The S&P 500 posted its biggest monthly gain of the year in November as the market responded to election results. While all sectors registered monthly gains for the first time since March, leadership in November was decidedly more cyclical than defensive. The reactions from several sectors since the election have followed the 2016 script closely.

U.S. tariffs on Canada and Mexico would effectively be a breach of the USMCA and could lead to counter tariffs. About 1/3 of U.S. imports and exports could face higher costs. Given substantial supply chain linkages, tariffs could be a negative supply shock for the region and could lead to slower growth and higher prices.

Our short-term NDR Daily Trading Sentiment Composite came into December showing extreme optimism. On average, December returns for the S&P 500 were positive when optimism was high. Overall, our Fab Five Sentiment Component is bearish, which could mean trouble early next year.

The model maintained its bullish reading for the second consecutive month. Deteriorating breadth and economic surprises, copper weakness, and USD strength kept our view neutral. Oil and copper trend improvement coupled with USD weakness would likely move our view to bullish and align with the model.

U.S. job openings pick up, while layoffs drop. But labor demand is still broadly in line with supply, supporting continued Fed policy normalization. Brazil's economy grows more than anticipated, confirming further rate hikes.

The top-level equity allocation remains at 72%. Although the PMI breadth indicator turned bullish on equities, the global equity market breadth indicator deteriorated. U.S. Large Caps, U.S. Growth, and U.S. Small Caps each have over 15% weightings.

Manufacturing PMIs rise from the prior month, led by stronger new orders, but overall activity still in contraction territory. Nonresidential construction spending up modestly.

The S&P 500 has made 53 record highs in 2024, tied for the seventh most on record. Returns the year after at least 50 record highs have been weak, with 1995-96 being an exception. The rally has started to narrow; watch for further divergences to signal a weaker 2025.

Weekly talking points and key visuals from NDR strategists' insights.

Trump's pick for Treasury Secretary Scott Bessent is a prominent pro-crypto investor and is seen as bullish for crypto investing. So why did Bitcoin decline 6% after the pick was announced? Perhaps the pick was too bullish for Bitcoin. We noticed that other cryptocurrencies like Ether rallied as Bitcoin sold off, indicating investors may have used BTC profits to invest in other cryptos. Bitcoin is up nearly 80% since September 6, while Ether is up only 60% so Bitcoin could consolidate while other cryptocurrencies catch up. BTC falling below $86k would grab our attention.

Dollar strength has both pros and cons for the U.S. economy. It's typically disinflationary, but could weigh on manufacturing output and widen the trade deficit. A negative correlation with the S&P 500 implies a headwind to stocks from dollar strength.

Personal income and spending start Q4 strong, adding some pressure to PCE inflation. Fed still expected to cut rates in December. Initial jobless claims fall to a seven-month low, as labor demand remains healthy. Pending home sales rise more than expected. Durable goods orders disappoint. Along with a weaker Chicago PMI, it points to continued sluggish manufacturing activity into yearend. Q3 real GDP unrevised at a 2.8% annualized rate. Profits soften, but margins still elevated. German and French consumer confidence plunges, adding to downside risk for the eurozone economy.

Upgrading Canada to overweight; downgrading Emerging Markets to underweight. Global Regional Equity Model calls for more exposure to U.S. and Canada, less to Emerging Markets. Megacaps have helped U.S. dominate global market cap while Financials and Energy have most weight in Canada. Broad emerging market weakness.

Strong gains through November tend to be followed by additional gains in December. The broad rally means few tax-loss selling candidates. The Russell 2000 is near a critical juncture.

In this publication we highlight themes with healthy trends and good breadth. First, we screened themes that are on a relative strength golden cross. Next, we screened ETFs within golden cross themes that had at least 70% of constituents on a golden cross. We show the results and spotlight bullish trends for Infrastructure, Space, Video Games, Travel, and E-commerce.

Multiple long stretches of optimism are common in bull markets. The end of previous long streaks has been marked by worsening macro conditions, breadth divergences, and eventually major selloffs. Extended optimism proved warranted in 2024; it may not be justified in 2025.

Indicator evidence is less compelling than when we upgraded last month but shows insufficient deterioration to warrant a downgrade. U.S. oil and gasoline inventory data are bullish, and seasonality turns more favorable moving into next year. For now, the weight of the evidence aligns with major producer's goals of higher prices, and we maintain our bullish view.

Rising consumer optimism supports a positive outlook for spending growth into yearend. New home sales plunge to a two-year low, reflecting hurricane impact. Existing home price growth moderates. Richmond Fed factory activity still shrinking, but services improve.

Compared to the 2016 election analog, several Trump Trades are nearing inflection points. Like this year, Energy, Industrials, and Financials were strong initially following Trump's 2016 victory, but momentum for all began to fade by early December. Health Care, Technology, and Communication Services were weak post-election in 2016 but quickly regained their footing.

India's economy remains one of the strongest in world, maintaining its role as a notable driver of global growth. Compared to earlier this year, however, trends have slowed due in part to still-tight monetary policy and crackdowns on excessive lending. But the outlook is constructive amid near-term monetary and fiscal support and greater resiliency to U.S. protectionism.

After a strong first nine months of the year, European equities have faltered, but the case for a rally in December and January remains. If European equities fail to rally from here into January, this will signal to become more cautious. This will especially be the case, if we see spreads widening, leading indicators deteriorate, and economic sentiment fall further.

Hurricanes and Boeing strike weigh on Chicago Fed National Activity Index in October. German business confidence falls, indicating rising recession risk.

Bessent is thoughtful and a good listener - two traits he will need as Treasury Secretary. Expect Bessent to aim for a stable dollar and avoid the more extreme policy proposals. Bond investors should have some confidence that yields won't explode to the upside. As we have said previously, a 5.00% 10-year Treasury is a good place to buy bonds for the long term.

Composites assess the weight of the evidence, which has receded from highs. Trends are similar to those in 2021-2022, as is the bearish breadth indication. Lower lows in composites would make a bear market more likely.

Weekly talking points and key visuals from NDR strategists' insights.

Led by stronger services growth, the Flash U.S. Composite PMI jumps in November. Other Flash PMIs show a mixed global outlook. U.S. consumer sentiment still up post-election. U.S. state economic conditions argue for continued growth in Q4. Japan's inflation remains above BoJ target. U.K. retail sales collapse, adding to 2H weakness.

Since the S&P 500's low on September 6, two renewable energy themes have outperformed the index - Uranium/Nuclear (overweight via URA) and Lithium/Battery. Lithium moved to a buy on our Six Indicator Trend Composite last week and saw the second-best Scorecard rank improvement over one-week and four-week periods. Bears will point to weak EV sales in Europe and dour outlooks from suppliers like SQM earlier this week. We're neutral for now as we assess how long lithium can holds its charge.

A Republican clean sweep has historically been one of the best scenarios for equities. But economic growth has been one of the weakest historical scenarios under a Republican clean sweep, as well as inflation. Higher instances of recession and policies associated with smaller fiscal multipliers could be to blame.

Gold uptrend well intact after correction. Bullish gold position supported by weight of the evidence described by Gold Watch Report. Report enhanced with indicator removals and additions.

Existing home sales rise from a year ago for the first time since 2021. Tight inventories continue to boost price growth. Initial jobless claims decline to a seven-month low, as labor demand remains healthy. Philly Fed factory activity softens, but optimism surges. LEI declines more than expected. But NDR Economic Timing Model still points to continued expansion.

All Mag 7 components beat on bottom line estimates in Q3, with operating cash flows collectively hitting a record high. Investing and financing flows also reached records, as the companies continued to reinvest at high rates while increasing share buybacks and dividend payouts. Elevated capex spending could represent a risk for the Mag 7 during the next equity downturn.

The bond market seems resigned to inflation expectations settling above the Fed's inflation target. The risk is that expectations accelerate. For IG spreads to compress to CDS, Financial spreads need to contract further on potential deregulation. Worries about the death of foreign buyers is premature.

The S&P 500's post-election gain is similar to 2016, but breadth and small-cap strength have been less impressive. Financials has tracked its 2016 cycle even as the yield curve steepening has stalled. Gold, the dollar, and Bitcoin have tracked their 2016 patterns, with Bitcoin's rally much stronger in 2024.

A recent rise in consumer sentiment and consumer cyclical stocks has us optimistic that Millennial theme outperformance can continue. We acknowledge that Tesla and Amazon have been key drivers of consumer returns since September 6, but other areas like Consumer Services are also showing promise. We are considering making MILN our favored Millennial Spending ETF, which has meaningfully less exposure to Consumer Staples than our current favored ETF, IEDI.

ABI trend bodes well for nonresidential construction spending in the U.S. in 1H 2025. Elevated mortgage rates keep application volume subdued. U.K. inflation picks up more than expected, putting BoE on a more caution rate cutting path. Canadian inflation accelerates, likely slowing the pace of future BoC rate cuts.

The U.S. Dollar Index has reached the upper end of its range with excessive optimism. The euro and yen have reached the lower end of their ranges with excessive pessimism. The pound and gold have relieved excessive optimism, with gold maintaining its long-term uptrend. We remain bullish on gold, and neutral on the dollar and currencies.

High mortgage rates and hurricane impact weigh on housing starts in October.

European Q3 earnings have been robust and been received positively by investors. Banks have had the highest beat rate again. Further, euro economic surprises are now net positive, suggesting that economic forecasts have become too pessimistic, broadly bullish for equities. But longer-term, survey data suggests that geopolitical uncertainty could weigh on European equities.

Credit spreads continue to tighten with HY the lowest since pre-GFC and IG the smallest since pre-LTCM. Recommend loans over fixed-rate debt over the intermediate term. Greater optimism among banks with respect to the lending outlook.

Rising HMI implies a pickup in housing starts in the near-term.

The presidential election cycle shows the best two years are the last two. Valuations argue for limited upside. Other technical indicators suggest some risks ahead.