Trail 173 — Inauguration Day

Markets Update by Aashish Singh Business Update by Sylvia Lo

Financial markets are fascinating. They are constantly evolving, they follow no predetermined path and much like humans, their behaviour at times is completely irrational. Every day their movements are thoroughly analysed, yet their next steps are a complete mystery. They follow a random walk and therein lies their beauty. Each week I briefly recap a few stories that captured my interest.

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Another swift shift in market sentiments this week, driven by a softer than expected CPI print which suggested inflation is normalising in the US. While headline inflation ticked up slightly, core CPI which excludes the volatile food and energy categories, declined to 3.2%, after remaining stuck at 3.3% for three months in a row. It was enough for rate cut bets to gain momentum, further supported by the Israel Gaza cease fire announcement (which is a huge win on humanitarian grounds).

US treasury yields slipped across the curve with the 10yr yield closing 20 bps lower for the week. The S&P 500 climbed to close a whisker under the $6k mark. Bitcoin is back up to $105k (lifetime high of $108k). The Dollar index was a tad lower, providing some respite to EM/G10 peers who have been seeing their currencies depreciate for weeks. Gold climbed closing above the $2,700 level. Oil prices remained firm, keeping their gains from prior weeks, as the latest U.S. sanctions on Russian energy trade hit supply, pushing up spot trade prices and shipping rates.

All in all, realised volatility was up like we expected and will continue through the first couple of weeks of Trump in the white house. Interest rates have still not found clear direction and are still uncomfortably high for mortgage holders and commercial real estate. Regional banks (most exposed to CRE) stock under performance in the last month shows the market is concerned, if not panicking about a banking crisis. Overall calls for diversification are growing as a clear consensus grows on the limited upside for US equities in 2025 even if the crisis has been averted. For now, price action will be dictated by every comment coming out of the White House over the next few days.

Second Wind

In the euphoric markets of 2024, the biggest sin was scepticism. A white-hot run up in risky assets made life miserable for anyone buying into the frenzy of fresh products that Wall Street was hawking to hedge and diversify. Three weeks into this year’s market whiplash, it’s starting to look like the sales pitch was simply too early. Big, lockstep moves have become the norm on the eve of Donald Trump’s inauguration. The latest example: this week’s stock-bond rally comes right after an equally large swoon just last week, marking the biggest reversal of its kind in 18 months.

Bank of Japan Is Set to Raise Interest Rates

Bank of Japan Governor Kazuo Ueda will size up the need to raise interest rates on Friday amid heightened expectations of a hike — and barring a market shock triggered by Donald Trump’s first few days in the White House. While the rest of the central banking world has been focusing on the pace of cuts, especially those at the Federal Reserve, Ueda and his board are still heading in the other direction as they look to gradually pull Japan back in the direction of conventional policy settings.

After decades of weak prices and feeble economic growth, Japan appears close to achieving stable inflation with solid wage growth, enabling the BOJ to push borrowing costs up toward levels seen in other major economies.

Rising Treasury Yields

US Treasury yields have trended up since late last year, and commercial real estate distress risk is straining regional banks’ balance sheets again. Stocks are already reacting to the higher borrowing costs. Smaller bank shares have fallen about 8.2% since late November after the 10-year Treasury yield began trending up. The risk of default by borrowers who bought office buildings before the pandemic sent values plummeting, and also increases when the cost of credit rises.

In The World of Business

This week, LinkedIn’s new 2025 Jobs on the Rise report shows security guards climbing to the top ten. Demand for security is rising among Fortune 500 CEOs and executives.

Hindenburg Research — the short seller whose investigations spawned fraud charges against 65 people, criminal indictments against 24 individuals, and foreign sanctions and fraud charges against 7 others — is disbanding.

Microsoft and Amazon are using employee performance metrics and reviews to decide who gets the boot in their waves of layoffs — and career experts say there are certain red flags that could put workers directly on the chopping block.

Security Guards in a High-Tech World

LinkedIn’s 2025 Jobs on the Rise report highlights the fastest-growing roles in the U.S., with technology-driven positions like AI engineers and consultants leading the list amid the AI boom. However, a surprising entry is the rise of security guards, ranking tenth for the first time, fuelled by the reduced police force, growing demand in the cannabis industry, and heightened corporate concerns following high-profile security incident of the UnitedHealthcare CEO’s shooting. This trend reflects a broader emphasis on employee safety and executive protection, as boards and CEOs reassess their security measures and seek enhanced services.

Beyond security guards, the list captures a post-pandemic resurgence in roles tied to travel, in-person experiences, and sustainability. Travel advisors and event coordinators, both new entries, indicate the return of entertainment and business travel, while sustainability specialists highlight increasing green initiatives. Other notable roles include workforce development managers, physical therapists, and outside sales representatives, showcasing a blend of technological innovation and renewed focus on physical presence and employee development.

Hindenburg Research Closes Its Door

Hindenburg Research, the renowned short-selling firm known for exposing corporate misconduct, is shutting down after a six-year run of high-impact investigations. Founder Nate Anderson announced the decision, citing the personal toll of the firm’s relentless work, though he emphasised there was no single factor driving the closure. Over its tenure, Hindenburg gained credibility for its rigorous investigations, contributing to nearly 100 civil and criminal allegations against individuals and uncovering significant corporate fraud. The firm’s reports, often supported by months of meticulous research, led to the downfall of high-profile figures like Nikola’s Trevor Milton and Lordstown’s Stephen Scott Burns, among others.

Hindenburg’s closure leaves a gap in the financial world, as its fearless approach and influence with regulators and investors set it apart from other short sellers. While Corporate America may feel some relief, experts warn that other firms are poised to fill Hindenburg’s shoes. Anderson, reflecting on his team’s dedication and unconventional backgrounds, expressed pride in their work and plans to focus on his personal life. Despite its closure, the firm’s legacy as a watchdog against corporate fraud remains unparalleled, and its exit has sparked both admiration and concern about who will take up the mantle of accountability in its absence.

Layoff Playbook

Microsoft is preparing for another round of layoffs, with under performing employees likely to be the focus, according to sources familiar with the plans. While the company has not disclosed specifics on the number of cuts , the move mirrors strategies employed by other tech giants, such as Amazon, which utilised performance improvement plans (PIPs) before letting go of 27,000 workers between 2022 and 2023. As performance metrics take center stage in layoff decisions, career experts emphasised that the definition of “performance” can be subjective and influenced by various factors beyond just hitting key performance indicators (KPIs).

Experts outline several behaviours that could put employees at risk during such workforce reductions. Missed deadlines, resistance to change, and poor collaboration are clear red flags. However, subtler missteps, such as failing to self-promote or disregarding constructive feedback, can also make employees vulnerable. Career coaches advise workers to stay engaged, adaptable, and communicative while consistently showcasing their value to safeguard their positions. As Microsoft prepares for cuts, it serves as a reminder for employees across industries to prioritise reliability and proactive communication to navigate uncertain times.

Until next time.