Welcome to the Forward Guidance newsletter, brought to you today by Casey Wagner and Felix Jauvin. Here’s what you’ll find in today’s edition:

• Felix unpacks the shifts we saw from the Fed this year. 

• It’s a quiet trading day, but buckle up for a wild 2025. 

Recapping the Fed’s 2024

I sit reflecting on the year and what has transpired, especially in relation to the recent FOMC meeting that surprised hawkish and shocked markets. Over one year it felt like we’ve been through five different versions of the Fed. 

In the winter of 2024, the Fed got spooked by surprisingly elevated inflation prints in the first quarter. This led them to reverse their dovish inclinations they had set up in the fall of 2023. Then, in June, the FOMC surprised the market with a hawkish dot plot that implied hardly any cuts in 2024. 

Then, a concerning jobs report in August flipped the entire narrative on its head. The Fed became concerned about a growth scare and losing the labor market, and once again flipped dovish, climaxing in a September cut of 50bps to kick off the rate-cutting cycle. We’ve now had 100bps of cuts and the Fed has once again flipped hawkish. The outlook for 2025 is uncertain, with a forecast of only two cuts occurring next year. 

If that all sounded like a rollercoaster of confusion, trust your instinct — it was.

Now, with January priced for a pause and no meeting in February, I’m once again expecting another flip-flop as we head into the new year. Additionally, I see the potential for more cuts than what is currently expected in 2025 to be priced in during the first quarter.

So as we head into the new year, I give you my parting thoughts: Expect to continue hearing the noise of flip-flops in the distance. 

Enjoy the holidays and see you in 2025!

— Felix Jauvin

Stocks traded sideways — stalling their pre-Christmas rally — and cryptos dipped Thursday, making one of the final trading days of the year a relatively quiet one. 

The S&P 500 was down 0.06% and the Nasdaq Composite gained 0.02% at 2 pm ET. Bitcoin and ether were down 3% and 3.8%, respectively, over the past 24 hours at that time. 

The post-holiday moves came as investors unpacked one of the only economic data reports of the week: initial jobless claims. 

There were 210,000 first-time filers for the week ended Dec. 21, marking a slight decrease from the week prior and coming in lower than median expectation of 224,000. Continuing claims, however, came in at 1.9 million, slightly higher than the anticipated 1.88 million. 

The mixed report did not budge odds of an interest rate cut from the Fed next month. Fed funds futures markets on Thursday called for a 91% chance central bankers hold rates on Jan. 29, per data from CME Group.  

“One factor that pressures equities is the behavior of the fixed income market,” Pepperstone research strategist Quasar Elizundia said. “The continued rise in bond yields, driven by the reassessment of less restrictive monetary policy expectations, creates some concern.” 

Stocks are going to face additional headwinds, Elizundia added, given that investors seem certain interest rates in 2025 will not fall as much as previously anticipated.

On the crypto front, the real market-movers in 2025 are likely to revolve around regulatory news. New leadership at the SEC and CFTC, combined with a Republican-majority Congress and campaign promises from President-elect Donald Trump, could set the stage for a breakout in the first half of the new year. 

Still, though, it would be foolish to count out the role macroeconomic conditions and monetary policy have on crypto prices, so we’d suggest keeping an eye on just about everything (or at least your inbox) next year.

— Casey Wagner