According to Zhitong Finance APP, GTJA released a Research Report stating that the strong closing of US Stocks in 2024 will enter 2025, with Global market trading themes still revolving around the "Trump Trade" and "American Exceptionalism." Based on past experiences, market expectations for Federal Reserve interest rate cuts have always been dynamically adjusted, and the current good performance of the US economy has become a key factor supporting US Stocks. Compared to last April, the market is more optimistic about the US economy and US Stocks, which means a more pessimistic outlook on the Bond market. Whether Stocks and Long Bonds will exhibit a seesaw effect again will be the first question investors need to await the answer to in 2025.

GTJA's main opinions include:

The US Stocks had a strong closing in 2024, achieving the best consecutive two-year performance in 25 years.

Entering 2025, the Global market trading themes still revolve around the "Trump Trade" and "American Exceptionalism." Such trading has driven up the US dollar and US Bond yields, but the recent market focus has shifted to US Stocks, specifically whether US Stocks will adjust like they did last April amidst strong rises in US dollar interest rates.

Based on past experiences, expectations for Federal Reserve interest rate cuts have always been dynamically adjusted.

With the current expectation of about 1-2 interest rate cuts, a 2-Year T-Note yield around 4.2% is relatively reasonable, which is also the safest area in the current US bond market. The fluctuation of Long Bonds reflects the market's entanglement on one hand, and on the other hand, it may become a source of market volatility. Taking the 10-Year T-Note as an example, it rose about 100 basis points after the Federal Reserve's rate cut in September, which not only surprised the market but also became the biggest macro risk factor for US Stocks' adjustment.

The reason supporting the continued strength of American stocks is still the "American exceptionalism".

The strong performance of the USA economy will be a key factor supporting American stocks, thus they will not fear pressure from interest rates. However, whether this view can hold true still needs to be examined. Looking back at the situation in April of last year, the performance of the USA economy was also quite good, with the GDPNow forecast steadily rising until it peaked and began to decline in May. In fact, the performance of American stocks was relatively sluggish during the entire month of April, only regaining momentum gradually after the yield of the 10-Year T-Note fell.

Another point worth comparing is the expectations for interest rate cuts.

Investor feedback at the end of March suggested that the Federal Reserve may not cut interest rates in 2024, primarily due to the strong performance of the USA economy and high inflation. From this perspective, the consensus formed by the market at a certain point—although it may later be proven false—serves as the dominant force driving market changes, and this remains true now.

The bank’s intuitive feeling is that compared to April of last year, the market is clearly more optimistic about the USA economy and American stocks, which to some extent also implies a more pessimistic view of the bond market. Whether stocks and long bonds will exhibit a seesaw effect again will be the first answer that investors will need to wait for in 2025.