Market Musings - New Year, More Volatility

Welcome back to Market Musings, our weekly memo covering timely market happenings. It has been a while since our last publication and a lot has certainly happened. Let’s get straight into it.

Market Musings

Markets have been extremely choppy and volatile over the last several weeks. It has been a brutal period for active participants, and it has been in stark contrast to the multi week rally into new all time highs coming in the wake of the November election.

Since November, the market has seemingly turned one jumping from catalyst to catalyst. After the election, markets were able to speculate on what the optimal future might look like under a new administration. And we know just how much markets (crypto specifically) like to speculate. But after a few weeks markets began to lose steam, and starting to look past this speculation (the new administration is still 2 months away) toward what the next catalyst for upside could be.

Markets would get their catalyst, with the final FOMC meeting of the year on December 18th. Unfortunately, this wasn’t the catalyst markets were hoping for. With macroeconomic data prints beginning to pose threats to the Fed’s outlook, Powell and the committee delivered the expected 25bps rate cut coupled with an extremely hawkish press conference and outlook, signaling fewer than expected rate cuts throughout 2025.

⚠️SUMMARY OF FED FOMC STATEMENT:

1. The Fed delivered a ‘Hawkish Cut’.

2. The FOMC cut rates by 25 basis points to 4.50%, and signaled fewer cuts in 2025.

3. The Fed’s dot-plot projected another 50bps of rate cuts in 2025, which would take interest rates to 3.9%.

The… pic.twitter.com/Y8qjlhrpdi

— Jesse Cohen (@JesseCohenInv) December 18, 2024

Needless to say, this was a crushing blow to risk assets as markets have been pricing in a much different interest rate landscape prior to this meeting.

After the SPY’s 6.5% rally from November – December, the FOMC’s “hawkish cut” sent equity markets spiraling, retracing much of those gains.

BTC and crypto markets were not spared by the wider market sell off which wiped out almost 20% of global BTC open interest with BTC falling from $105K to $92K.

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