Unadorned Notes: December 24-27, 2024
U.S. Jobless Claims Decline Slightly; 2024 Markets Post Stellar Gains; Merger-Arbitrage Investors Eye Rebound; Trump Seeks Delay on TikTok Ban; Trump Targets Opponents, Eyes Canada
Economics, Finance, and Business
U.S. Jobless Claims Decline Slightly: Initial U.S. jobless claims fell by 1,000 to 219,000 for the week ending December 21, 2024, in line with the labor market’s overall stability. However, continued claims, a measure of long-term unemployment, rose by 46,000 to 1.91 million, the highest since November 2021. The average duration of unemployment reached 23.7 weeks in November 2024, reflecting challenges in reemployment despite muted layoffs. Economists attribute these trends to slower hiring rather than increased firings, as businesses retain workers amid labor supply concerns. Federal Reserve officials are expected to maintain a cautious stance on interest rates, citing balanced risks between the job market and stalled progress on inflation.1
U.S. Equity Funds See Inflows: U.S. equity funds attracted $20.56 billion in net inflows during the week ending December 25, 2024, recovering from $49.7 billion in outflows the previous week. The reversal was driven by a favorable inflation report, a government funding bill, and the “Santa Claus rally”. Large-cap funds led gains with $31.67 billion in inflows, while small-, mid-, and multi-cap funds experienced outflows totaling nearly $5 billion. Sectoral equity funds saw net outflows of $2.14 billion, particularly in healthcare and consumer discretionary sectors. U.S. bond funds faced $5.42 billion in outflows, but money market funds rebounded with $41.72 billion in inflows.2
Money-Market Funds Continue Growth: U.S. money-market fund assets grew by over $800 billion in 2024, bringing total gains since late 2022 to approximately $2 trillion, according to ICI data. Investors have been drawn to money funds for their competitive yields, with a 7-day annualized yield averaging 4.39% in December 2024, significantly higher than traditional bank savings accounts. Much of the growth reflects a shift from bank deposits, supported by rising corporate cash balances and government spending. While inflows may slow in 2025, strategists expect balances to remain robust, helping stabilize short-term yields amid rising Treasury supply.3
2024 Markets Post Stellar Gains: The S&P 500 surged 24.3% in 2024, marking its second consecutive year of over 20% gains, driven by economic growth and Federal Reserve rate cuts. Bitcoin surpassed $100,000, gold rose 26.7%, and Nvidia’s AI-driven revenue hit $91.2 billion, cementing its position as a market leader. Tesla set a record above $420 per share, benefiting from investor optimism and political ties. U.S. economic growth remained resilient despite inflationary pressures, with annualized GDP growth exceeding expectations in the first three quarters. Meanwhile, challenges persisted in housing and office real estate markets, reflecting broader structural adjustments.4
Global Markets Face 2025 Volatility: Global markets are expected to experience heightened volatility in early 2025 due to significant policy shifts under the new U.S. administration, according to Sanjay Mookim of JPMorgan India. Key areas of focus include tariffs, immigration, and deficit reduction, with potential global economic repercussions. Emerging markets, including India, face uncertainty as investors adopt a cautious “wait-and-watch” approach. Central banks in emerging economies may turn to rate cuts to counter slower growth and currency pressures. While India’s growth remains a focus, it is increasingly viewed alongside other emerging markets, with China’s performance hinging on stimulus efforts.5
Greek Bonds Outperform Amid Risks: Greek Government Bonds (GGBs) now yield near parity with French bonds, driven by their scarcity and improved fiscal management, including a projected 2% primary surplus for 2025. Greece’s liquidity position is strong, with government deposits exceeding €40 billion, reducing the likelihood of a payments crisis. However, the current account deficit has widened since the pandemic, reflecting eroded competitiveness and heightened external vulnerabilities. While an investment boom has supported growth, private savings remain insufficient to fully offset these imbalances. Sustained deficits may require external financing to prevent economic setbacks reminiscent of the 2010 crisis, per
.6Merger-Arbitrage Investors Eye Rebound: Merger-arbitrage funds faced a difficult 2024, gaining only 3.3% amid regulatory hurdles and high-profile deal failures, including Tapestry’s and Kroger’s acquisitions. Optimism for 2025 is growing as President-elect Donald Trump’s pro-business agenda and anticipated changes at the FTC and DOJ could boost merger activity and reduce regulatory uncertainty. U.S. transaction values rose 11% in 2024, but high enforcement rates from antitrust regulators limited investor confidence. Analysts expect more predictable outcomes under new leadership, though scrutiny of specific industries like Big Tech may persist. Some funds, such as Glazer Capital, navigated challenges successfully, benefiting from market volatility and deal dispersion.7
Saks Acquires Neiman Marcus: Saks Global has finalized its $2.7 billion acquisition of Neiman Marcus Group, bringing Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman under one corporate umbrella while maintaining distinct branding for each. The deal, supported by investors such as Amazon, Authentic Brands Group, G-III Apparel Group, and Salesforce, aims to innovate the luxury shopping experience through data-driven personalization and AI. This acquisition occurs amid declining department store popularity, as shoppers increasingly favor boutique-style retail experiences. Neiman Marcus, which filed for bankruptcy in 2020, will now operate alongside Saks, its former competitor, in a consolidated luxury retail portfolio. Saks Global’s strategy seeks to redefine high-end retail and address changing consumer preferences.8
Nordstrom Goes Private in Deal: The Nordstrom family, alongside Mexican retailer El Puerto de Liverpool, announced a $6.25 billion deal to take Nordstrom private, expected to close in early 2025. Shareholders will receive $24.25 per share in cash, a 42% premium to its March 18, 2024, price, with an additional $0.25 special dividend upon completion. The move comes amid struggles for department stores, as consumers shift to online shopping or reduce spending due to inflation and high interest rates. Nordstrom’s privatization follows earlier unsuccessful attempts and reflects broader industry challenges, including store closures and bankruptcies by competitors such as Macy’s, Big Lots, and Party City. Nordstrom shares, up 31% year-to-date, closed Monday at $24.17.9
U.S. Politics and Geopolitics
Biden Signs Key Final Bills: President Joe Biden signed 50 bills into law, including measures designating the bald eagle as the national bird and stripping pensions from convicted lawmakers. Other legislation established federal anti-hazing standards and increased oversight of youth treatment facilities, a cause supported by Paris Hilton. Earlier, Biden vetoed a bill to expand federal judgeships, commuted 37 death row sentences to life without parole, and pardoned his son Hunter. The actions come as Biden finalizes priorities before President-elect Donald Trump takes office on January 20, 2025. He is also advancing infrastructure funding and military aid for Ukraine in his final weeks.10
Trump Seeks Delay on TikTok Ban: President-elect Donald Trump urged the Supreme Court to delay the January 19, 2025, implementation of a TikTok ban to allow for a negotiated resolution addressing national security concerns and free speech rights. The Biden administration defended the ban, citing TikTok’s ties to China as a “grave” threat due to data collection and potential content manipulation. The Supreme Court, set to hear oral arguments on January 10, 2025, faces the question of whether the ban violates free speech protections. TikTok and advocacy groups argue the ban suppresses Americans’ access to foreign speech and violates First Amendment principles.11
Trump Targets Opponents, Eyes Canada: President-elect Donald Trump used his Truth Social platform to criticize political opponents and foreign leaders in his Christmas message. Trump reiterated controversial proposals, including purchasing Greenland and seizing control of the Panama Canal, claiming China has illegal influence over the waterway. He also attacked Canadian Prime Minister Justin Trudeau, calling him a “governor” and suggesting Canada should become the 51st U.S. state to reduce taxes. The president-elect announced Kevin Marino Cabrera as his choice for ambassador to Panama, accusing the country of profiting unfairly from the canal. Trump’s posts reflected heightened polarization following his recent election victory.12
Immigration Debate Divides Trump Coalition: A rift emerged within President-elect Donald Trump’s coalition as far-right activists criticized his pick of Indian-born Sriram Krishnan as senior AI adviser, citing his support for expanding skilled-worker visas. Elon Musk and other tech leaders defended the H-1B program, arguing it is essential to maintaining U.S. competitiveness in fields like artificial intelligence. Critics, including Laura Loomer and pro-Trump figures, opposed the policy, sparking online clashes involving racist rhetoric and calls to prioritize American workers. Trump has historically limited skilled immigration but faces pressure from Silicon Valley allies to expand legal pathways for foreign talent. The debate highlights tensions between Trump’s nationalist base and tech industry leaders within his incoming administration.13
South Korea Faces Increasing Political Turmoil: South Korea entered uncharted territory as acting President Han Duck-soo was impeached, just two weeks after President Yoon Suk Yeol’s removal for attempting to impose martial law. Choi Sang-mok, the new acting president, urged stability and heightened military vigilance amid fears of North Korean provocations. Han’s impeachment, backed by 192 legislators, stemmed from his refusal to fill Constitutional Court vacancies, while legal debates continue over procedural thresholds. The Constitutional Court is now reviewing Yoon’s impeachment, with a final decision expected within 180 days. The crisis raises concerns about South Korea’s political stability and potential impacts on its global economic standing.14
Finland Probes Russian Cable Sabotage: Finland seized the Eagle S oil tanker, suspected of cutting undersea power and internet cables in the Baltic Sea, and linked the vessel to Russia’s shadow fleet. Finnish authorities and NATO have increased vigilance, with Estonia deploying its navy to protect critical infrastructure and NATO pledging a stronger presence in the region. The incident severed the Estlink 2 power cable and telecommunications lines between Finland and Estonia, though energy and internet services remain stable. Finnish and EU officials have condemned the attack, calling it part of a pattern of suspected assaults on critical infrastructure amid the Ukraine war.15
Israel Strikes Houthis Amid Escalation: Israel conducted airstrikes on Houthi-controlled sites in Yemen, targeting what it described as military infrastructure linked to missile and drone attacks. The strikes, which hit Sanaa’s airport and Red Sea ports, killed at least four people, according to Yemeni authorities, and damaged facilities critical for humanitarian operations. The Houthis vowed to escalate attacks on Israel in solidarity with Gaza, launching missiles intercepted by Israeli defenses. The UN condemned the strikes for endangering civilians, including a WHO delegation at Sanaa airport. The conflict risks further destabilizing the region and disrupting critical maritime trade routes.16
