THE FED CUTS INTEREST RATES BY ANOTHER 25 BASIS POINTS AND FORECASTS FEWER REDUCTIONS IN 2025

The Federal Reserve of the United States wrapped up the year with another interest rate cut during its final monetary policy meeting of 2024.

This marks the final rate cut under Biden's administration before Trump takes office. It’s worth noting that during his first term (2017–2021), Donald Trump had a contentious relationship with the Fed and its chair, Jerome Powell.

Analysts warn that Trump’s economic policies could generate inflationary pressures, complicating the central bank’s battle against inflation. They now expect a more cautious approach to interest rate reductions moving forward.

BULLISH MARKET OUTLOOK FOR 2025

Analysts believe the long-term outlook for the U.S. market remains decidedly bullish.

“Although the market may be vulnerable to short-term weaknesses, the fundamental drivers of the long-term bull market remain intact. These include strong earnings growth, a robust economy and labour market, and a Federal Reserve still planning to lower interest rates," they stated.

"Interest rates matter, but they’re not everything. For instance, investors initially expected five or six rate cuts in 2024. By May, those expectations had dropped to zero cuts, yet the S&P 500 continued its upward climb, hitting all-time highs in 10 of the 12 months this year," said Bret Kenwell, an investment analyst at ETORO.

Any significant correction in U.S. equities is likely an opportunity for investors.

WHAT WORRIES INVESTORS ABOUT TRUMP?

The main concerns among major investors are that the tariffs announced by incoming U.S. President Donald Trump could trigger a global trade war, and that his policies could fuel inflation, forcing the Federal Reserve to hike interest rates.

Despite these concerns, investors remain optimistic and do not foresee a U.S. recession over the next 18 months.

A potential trade war caused by Trump’s tariffs is seen as the greatest risk by 37% of surveyed fund managers.

The same percentage fears a possible inflation surge in the U.S. could result in fewer interest rate cuts or even rate hikes.

EUROPE AND THE U.S.: TENSE RELATIONS AWAITING TRUMP

Amid the anticipation surrounding Donald Trump’s actions, Ukrainian President Volodymyr Zelensky called for unity between Europe and the U.S. to contain Russia and "save Ukraine" during remarks in Brussels on Thursday.

"We must rely on the unity between the U.S. and Europe. It’s very challenging to support Ukraine without American aid, and we will discuss this with President Trump when he is in the White House," Zelensky stated, referring to Trump’s upcoming term beginning January 20.

DROP IN ELECTRIC VEHICLE SALES IN EUROPE

New car sales in Europe fell in November, with a noticeable slowdown in electric vehicle sales, according to industry data published on Thursday.

This decline follows slight growth in October and is attributed to significant drops in France and Italy, as well as stagnation in Germany.

European automakers are grappling with several challenges, including weak demand, high production costs, and the transition to EVs. Additionally, they face stiff competition from China.

DECLINE IN INVESTMENTS ACROSS EUROPE

Foreign investments in Central, Eastern, and Southeastern Europe are "plummeting," primarily due to the withdrawal of German firms and uncertainty from the war in Ukraine and Donald Trump’s return to power.

These are the findings of a report by the Vienna Institute for International Economic Studies (wiiw), which states that "international investors are increasingly avoiding Central, Eastern, and Southeastern Europe."

The uncertainty caused by the war in Ukraine and sanctions against Russia has been compounded by the policy shifts anticipated from Trump’s second term, including potential tariffs on European goods.

The number of new projects announced for the region in the first three quarters of this year dropped by 44% compared to the same period in 2023.

CHINA: GROWTH THAT NEVER ARRIVES

China ends 2024 with uncertainty over its recovery and disappointment with its stimulus efforts.

Analysts point to factors such as weak domestic demand. Post-COVID, Chinese citizens are more cautious than ever, with 62% planning to save more in the future—a near-record figure that reflects reluctance to spend.

Only 13.3% of respondents intend to invest, the lowest rate on record. This has led to a collapse in consumer confidence, which has hovered near historic lows in recent months.

Analysts expect a short-term rebound from the stimulus measures but remain unconvinced that these policies will prevent further economic slowdowns in 2025, according to Capital Economics.

Tensions are expected to rise further in the U.S.-China trade war as Donald Trump returns to the White House. Trump initiated the trade war in 2018 and has recently pledged additional tariffs on China.

AND WHAT ABOUT THE TECH GIANTS?

AMAZON'S KEY IN 2025: AMAZON WEB SERVICES

Bernstein, a Wall Street stalwart, highlighted Amazon’s cost-management initiatives, particularly its efforts to lower entry fees and encourage seller adoption, as key factors driving margin expansion.

Operational margins are expected to rise to 11.4% in 2025, fuelled by improved retail efficiencies and favourable prospects for AWS.

Advertising revenue also stands out, with projections of nearly 20% annual growth thanks to its high margins and scalability.

AWS offers scalable solutions for customers, who can access resources without investing in infrastructure. Instead, customers pay a monthly subscription to connect to a server or database.

Remember, AWS is a cloud service platform offering more than 200 services.

CITI BETS ON NVIDIA

On Wednesday, Citi, one of the largest financial services firms in the U.S., reaffirmed its positive stance on NVIDIA Corporation (NASDAQ: NVDA), maintaining a Buy rating with a $175 target price.

The total addressable market (TAM) for AI accelerators is projected to reach $380 billion by 2028, with AI GPUs dominating 75% of the market.

NVIDIA introduced a new product, the Jetson Orin Nano, a compact AI computer designed for robotics and AI processing on devices—a powerful yet accessible tool for developers and researchers.

The market is expected to respond positively to its high performance, low energy consumption, and affordable price.

COCA-COLA: A GOOD TIME FOR LONG-TERM INVESTMENTS?

The past three months have been challenging for Coca-Cola shareholders.

The company sold 1% fewer beverage cases last quarter compared to the same period last year, mainly due to resistance to recent price hikes.

Consequently, shares have dropped 14% since their September peak—a significant decline for a consumer goods stalwart.

Analysts, however, view this as a buying opportunity, considering Coca-Cola’s slow but steady growth as an unstoppable force.

WALMART: UNSTOPPABLE

The world’s largest retailer, with a market capitalisation of $754.74 billion, has undergone a significant transformation in recent years, emerging as a formidable player in the rapidly evolving retail landscape.

Analysts highlight Walmart’s strong financial health and impressive returns, with stock gains exceeding 86% over the past year.

Its strategic focus, e-commerce growth, and high-margin revenue streams have drawn praise from both investors and analysts.

AND THE CRYPTO SECTOR?

RLUSD: THE KEY TO SUCCESS FOR XRP

Ripple’s new stablecoin is now on the market.

Its launch coincides with a stablecoin market capitalization surpassing $211 billion.

Ripple markets RLUSD on social media as an "enterprise-grade stablecoin designed for everyone," boasting features such as instant global payments 24/7, enabling access to real-world asset value.

Moreover, it has received approval from NYDFS, a regulatory body known for its strict standards. This positions RLUSD as a safe, globally compliant option.

Ripple hopes its licenses in Europe, the U.S., and Singapore will position RLUSD as one of the market’s leading regulated stablecoins.

This stablecoin launch could further boost XRP prices in 2025.