Unadorned Notes: January 8-10, 2025
Strong U.S. Job Growth Continues; LA Wildfires Threaten Insurance Stability; Emerging Markets Enter Correction; Supreme Court Backs TikTok Ban; U.S. Targets China-Free Minerals
Economics, Finance, and Business
Strong U.S. Job Growth Continues: The U.S. economy added 256,000 jobs in December 2024, far exceeding the 160,000 forecast by economists. The unemployment rate declined to 4.1%, while average hourly earnings rose 3.9% year-over-year, reflecting steady wage growth. Persistent strength in the labor market has raised doubts about further Federal Reserve rate cuts, despite signs of cooling inflation. Federal Reserve officials remain divided, with some suggesting the rate-cutting cycle may soon end, particularly if labor market conditions tighten further. Upcoming inflation data will play a key role in shaping monetary policy decisions in early 2025.1
LA Wildfires Threaten Insurance Stability: The Los Angeles wildfires are projected to cause nearly $50 billion in economic losses, including over $20 billion in insured damages, according to analysts. This surpasses the $12.5 billion in insured losses (adjusted for inflation) caused by the 2018 Camp Fire, previously the nation’s most destructive wildfire. The disaster is expected to strain California’s fragile home-insurance market, potentially driving up premiums and reducing coverage availability. Insurers may face significant short-term financial pressure, and the state’s Fair Plan, a last-resort insurer, could require additional support. Reinsurers are also likely to be impacted as losses surpass thresholds typically covered by their policies.2
Alzheimer’s Drug Market Expands: The Alzheimer’s treatment market is projected to reach $13 billion by 2030, driven by ongoing developments from Biogen, Eli Lilly, Novo Nordisk, and Roche. Biogen’s Leqembi and Eli Lilly’s Kisunla, approved in the U.S., slow disease progression but carry risks of brain swelling and bleeding. Novo Nordisk is testing semaglutide for Alzheimer’s, with late-stage trial results expected in late 2025. Roche is evaluating trontinemab, using brain shuttle technology, with data on its progress anticipated in the first half of 2025. Despite historical setbacks, potential breakthroughs could significantly impact company valuations and the treatment landscape.3
Corporate Bond Issuance Surges: U.S. corporate bond issuance reached $78.75 billion in early January 2025, with firms rushing to lock in borrowing costs ahead of rising Treasury yields. High-grade credit issuers raised $62.7 billion this week alone, marking one of the busiest issuance weeks on record. Strong demand for bonds, bolstered by inflows into high-grade funds and rising annuity sales, has supported the market despite higher interest rates. Sovereign, supranational, and agency borrowers also saw record activity, raising $65.47 billion in the first week of January. Analysts expect total corporate bond issuance for January to approach $200 billion, potentially breaking historical records.4
$20B Data Center Investment Announced: President-elect Donald Trump announced a $20 billion investment in U.S. data centers by Hussain Sajwani, chairman of Dubai-based Damac Properties. The first phase will fund facilities in states including Texas, Arizona, and Ohio, supporting advancements in artificial intelligence and technology infrastructure. Sajwani described Trump’s election as “amazing news” and indicated potential for further investment based on market opportunities. Damac has expanded into data centers globally through its Edgnex division, with ongoing projects in Thailand and the Middle East. This investment aligns with surging data center demand fueled by Big Tech’s $200 billion AI-related spending in 2024.5
Bitcoin ETFs See Major Outflows: U.S. Bitcoin spot ETFs experienced $583 million in net outflows on January 8, with Fidelity, BlackRock, and Ark & 21Shares among the top contributors. Ethereum spot ETFs also saw $159 million in withdrawals, primarily from Fidelity’s fund. Despite these outflows, research from CEX.IO suggests a Bitcoin supply shock in 2025 is unlikely, as 70% of the circulating supply remains in free float. The analysis highlights declining exchange reserves and increased OTC balances, signaling redistribution of Bitcoin holdings. Long-term holder selling pressure and adherence to the four-year market cycle are expected to shape cryptocurrency trends in the near term.6
Emerging Markets Enter Correction: The MSCI Emerging Markets Index has fallen 10% since October 2, 2024, entering correction territory amid concerns over U.S. trade policies and China’s slowing growth. Chinese equities, heavily weighted in the index, have underperformed due to weak stimulus measures and decelerating consumer inflation, which has approached zero for four consecutive months. Semiconductor stocks, including Samsung and TSMC, have also declined as the U.S. expands trade restrictions. Investor sentiment remains cautious ahead of U.S. policy developments and China’s uncertain economic outlook. Goldman Sachs lowered its year-end forecast for the index but still anticipates moderate returns driven by earnings growth in select regions.7
UK Faces Debt Market Strain: The British pound has fallen to its lowest level since 2023, while 10-year gilt yields surged to 4.92%, reflecting investor concerns over the UK’s rising fiscal deficit and persistent inflation. Analysts warn that if sentiment does not improve, the Labour government may need to adopt austerity measures to restore market confidence. Comparisons have been drawn to the 1976 debt crisis, when the UK sought an IMF bailout after fiscal mismanagement. Rising borrowing costs and inflation are straining financial markets, with Labour’s spending plans adding to investor skepticism. Chancellor Rachel Reeves may face difficult decisions in March 2025, potentially involving spending cuts or tax hikes to stabilize the economy.8
U.S. Politics, Policies, and Geopolitics
Trump Avoids Jail Before Inauguration: President-elect Donald Trump was sentenced to an unconditional discharge after being convicted of 34 felony counts of falsifying business records in a hush-money payment case. The sentence spares Trump from jail time or fines, allowing him to take office as the first U.S. president with a felony conviction. The charges stemmed from payments made during the 2016 election to conceal an alleged affair, with prosecutors arguing the payments constituted election interference. Despite the trial’s media frenzy, Trump denied wrongdoing, claimed political persecution, and used the case to energize his political base. New York Supreme Court Justice Juan Merchan emphasized the unique nature of the case but ruled that unconditional discharge was the only lawful sentence to avoid interfering with the presidency.9
Trump Advocates U.S. Annexations Abroad: President-elect Donald Trump has proposed acquiring Greenland, reclaiming the Panama Canal, and merging Canada with the United States, citing national security and economic interests. Trump claims Greenland is vital due to its strategic location and U.S. military presence, while also framing the Panama Canal as critical to countering China’s influence in the Western Hemisphere. Trump has faced criticism for risking diplomatic ties with U.S. allies, but his own allies argue the proposals align with his broader geopolitical agenda. Congressional Republicans have begun advancing related legislation, including renaming Alaska’s Denali and the Gulf of Mexico.10
Supreme Court Backs TikTok Ban: The U.S. Supreme Court appears poised to uphold a ban on TikTok unless its Chinese parent company, ByteDance, divests from the app, citing national security concerns. Justices expressed skepticism over whether the First Amendment applies, with Chief Justice Roberts emphasizing Congress’s focus on foreign influence rather than free speech. The Biden administration argued that TikTok’s data collection poses risks of espionage and manipulation by China, which swayed several justices. Conservative Justice Neil Gorsuch and others raised concerns about the broader implications of the law, particularly for free speech and foreign-owned media. Unless blocked, the ban will take effect on January 19, 2025, though the incoming Trump administration has signaled it may seek to negotiate an alternative resolution.11
U.S. Targets China-Free Minerals: The U.S. Export-Import Bank has launched an initiative to finance foreign critical minerals projects that exclude China, aiming to strengthen domestic supply chains and reduce reliance on Chinese-dominated markets. The effort aligns with bipartisan concerns over China’s control of 90% of rare earth refining and follows Beijing’s recent restrictions on exporting minerals with military applications. Critical minerals are essential for U.S. technology, energy, and defense industries, and the program seeks to support projects that lack sufficient U.S. export ties for traditional financing. This initiative complements broader federal efforts, including the Inflation Reduction Act and a critical minerals marketplace announced by National Security Adviser Jake Sullivan. The U.S. has also advanced international partnerships, such as a 2023 critical minerals agreement with Japan, to diversify global supply chains.12
Chinese Economist Censored Over GDP: Prominent Chinese economist Gao Shanwen has been censored after questioning the accuracy of China’s official GDP figures, suggesting growth may be overstated by several percentage points. Gao estimated real GDP growth at around 2% annually over the past three years, compared to the official rate of nearly 5%, citing a significant loss of 47 million urban jobs. According to The Wall Street Journal, his remarks drew criticism from Chinese leader Xi Jinping, leading to a ban on Gao making public statements. Analysts have long raised concerns about China’s economic data amid challenges such as a property sector crisis, weak consumer confidence, and high youth unemployment. Despite these issues, Beijing has set a growth target of 5% and pledged further stimulus measures.13