• Investing
  • Stock
  • Editor’s Pick
  • Economy
The Significant Deals
Stock

Fed delivered ‘a much needed reality check to euphoric Trump trades’: Barclays

by December 20, 2024
written by December 20, 2024

Investing.com — The Federal Reserve’s hawkish stance at the latest FOMC meeting has delivered “a much-needed reality check to euphoric Trump trades,” according to Barclays (LON:BARC) strategists.

“Euphoria in some parts of the US equity market was starting to flash red,” strategists led by Emmanuel Cau said in a Friday note.

They highlighted the Conference Board’s survey, which showed consumer expectations for rising stock prices at their highest since 1987. This optimism coincided with record highs in assets like Bitcoin and a pronounced outperformance of the US Tech & Growth sectors, overshadowing other market sectors.

Barclays notes the market breadth had been deteriorating, as indicated by a record number of daily decliners versus advancers.

But despite the retail enthusiasm and systematic buying, institutional investors had begun to exhibit caution, with some reducing their market exposure.

“Indeed, while we met a large majority of US bulls in our recent marketing, who didn’t want to go against the Trump trade, many had de-grossed portfolios and worried about retail exuberance,” strategists said.

“So the latest Fed-induced pull-back may not come as a big surprise to all, and could ultimately make it easier to deploy capital in the new year, with policy expectations now reset,” they added.

Barclays pointed to the Fed’s recent hawkish stance as a potential catalyst for a market pull-back. The central bank’s pivot this week has been a reminder to investors that reflationary policies could slow disinflation, implying fewer rate cuts ahead.

The US 10-year yields have risen to the 4.5% level, which is considered a threshold that may start to negatively affect equities, both in terms of breadth and direction.

“With the Fed removing its put and signaling higher for longer, we think this issue will be a key risk in 2025 and could slow/cap the market’s ascent from here,” strategists cautioned.

“The degree and speed at which Trumponomics materialize may indeed alter the growth, inflation and policy paths, and fuel more volatility.”

However, policy uncertainty is not limited to the Fed only. According to Barclays, the early revival of the debt ceiling debate, even before the new administration takes office, suggests that policy volatility and brinkmanship could become a consistent feature over the next four years.

This uncertainty and desynchronization are likely to reshape markets in 2025, strategists said, potentially benefiting Europe.

European equities have lagged significantly behind US markets since the election, creating a sharp performance gap. However, the Fed’s hawkish stance could limit further divergence next year.

Moreover, Europe’s underperformance has left its markets less crowded, with valuations and market dynamics appearing less stretched, compared to the extreme conditions seen in the US.

This post appeared first on investing.com
0 comment
0
FacebookTwitterPinterestEmail

previous post
Swiss inquiry castigates failings of Credit Suisse oversight, but pins most blame on bosses
next post
European stocks slide as Trump’s warning to EU spooks investors

You may also like

BASF results down on impairments, restructuring

January 27, 2025

European chipmakers slump as traders gauge DeepSeek AI...

January 27, 2025

Nasdaq futures tumble as China’s AI push rattles...

January 27, 2025

China Vanke’s CEO, chairman resign amid growing liquidity...

January 27, 2025

Fuji Media, rocked by sexual misconduct allegations, says...

January 27, 2025

Italy’s MPS shares fall ahead of Mediobanca board...

January 27, 2025

British Land stock drops following stake sale

January 27, 2025

UMG shares rally after new multi-year pact with...

January 27, 2025

BASF shares indicated 3% lower as impairments drag...

January 27, 2025

Ryanair cuts 2026 traffic forecast amid ongoing Boeing...

January 27, 2025
Fill Out & Get More Relevant News








    Stay ahead of the market and unlock exclusive trading insights & timely news. We value your privacy - your information is secure, and you can unsubscribe anytime. Gain an edge with hand-picked trading opportunities, stay informed with market-moving updates, and learn from expert tips & strategies.

    Recent Posts

    • Trump implies government could cut contracts and subsidies to Musk’s companies

      June 7, 2025
    • Procter & Gamble to cut 7,000 jobs as part of broader restructuring

      June 6, 2025
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

      June 6, 2025
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

      June 5, 2025

    Categories

    • Economy (245)
    • Editor's Pick (3,646)
    • Investing (505)
    • Stock (6,426)

    Latest News

    • Trump implies government could cut contracts and subsidies to Musk’s companies
    • Procter & Gamble to cut 7,000 jobs as part of broader restructuring

    Popular News

    • Earnings results, inflation data should rejuvenate bank stocks: BofA
    • ECB cuts interest rates for fourth time this year

    About The Significant deals

    • Privacy Policy
    • Terms & Conditions

    Copyright © 2025 thesignificantdeals.com | All Rights Reserved

    The Significant Deals
    • Investing
    • Stock
    • Editor’s Pick
    • Economy