Macro Memo: January 2025

Rate Hikes Back or Another Scare?

The Upshot: Schrödinger’s soft landing still intact despite wobbles. It’s a Fed skip not a Fed pause.

• We got our 10y yield forecast wrong: 10y yield surged after the Fed rate cuts and a string of hot jobs and inflation prints and stocks have been wobbly as a result over Christmas. But, the continuation of the disinflationary factors we identified remains intact (further shelter disinflation anchored by slowing wage growth) and was validated in the latest inflation print.
  
  

• While the broader stock market indices have erased their post-election gains, a few of our central thematic baskets (AI, Trump trade etc) have held onto their post-election gains and notched new ATHs, suggesting the unique macro environment in which key investment themes may dominate traditional macro forces incl higher rates.