⚙️ New year, next gear?

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

• The new year is here. What can we expect from the market in January?

• Franklin Templeton eyes more ETFs, globalizing its tokenized fund in 2025. 

Happy New Year from the Forward Guidance team! We launched this newsletter in 2024 and are excited to continue delivering our readers macro and crypto insights in 2025. 

As we head into Q1, let’s take a look at where markets could be headed next. 

After getting snubbed of a Santa rally at the end of December, Wall Street may be due for a bump in January. The so-called “January effect” is not a sure thing, but it has happened. 

The S&P 500 in January 2023 had a 5.8% return for the month. The index gained 2.12% during the first month of 2024. The tech-heavy Nasdaq Composite index has also been in the green for the last two Januaries, returning 1.95% in 2024 and 9.68% in 2023. 

But 2025 brings a new — well, old — administration to the White House, a Republican-majority Congress and a slower rate-cutting pace from the Fed. It’s a situation ripe for volatility, both in equities and crypto markets. 

In January 2017 (when Trump was inaugurated the first time), the S&P 500 had a 1.21% monthly return and the Nasdaq Composite gained 3.49%. Republican wins are generally followed by a boost in stocks (remember what we saw last November?), so keep that in mind. 

Coming up: The next US employment report coming out on Jan. 10, which should give us more clarity on where central bankers may send interest rates. 

As of yesterday, the odds of the FOMC holding interest rates steady later this month sat at 89%, according to CME Group data.

On the crypto front, uncertainty is just as high. 

The euphoria from November has eased, and it seems like investors are in a holding pattern waiting to see if Trump comes through on his big industry promises. Leadership changes at the SEC, plus three new commissioners, could be a major catalyst. Any movement in Congress on a revised FIT21 bill (or a newly introduced bitcoin strategic reserve bill) would likely have a similar effect. 

But — as I’m telling my friends and family who’ve asked me countless times over the holidays — no one really knows what’s going to happen, with bitcoin or otherwise. 

Buckle up, because I’m certain we’re in for an eventful 2025.

— Casey Wagner

One word might be enough to sum up crypto investing in 2025, according to Franklin Templeton’s Roger Bayston.

Diversification.  

The asset management titan, alongside competitors, launched bitcoin and ether ETFs last January and July, respectively. The SEC earlier this month approved 19b-4s for crypto index funds (from Franklin and Hashdex) that would hold both assets — and potentially other coins in the future. 

“It feels like ETF legal staffs will be busy in the first part of the year,” Bayston, the firm’s digital assets lead, told me.“ And I think the story about blockchain and its utility — whether it’s bitcoin as a store of value or these composable chains — is what’s going to be extended in 2025.”

We’ve seen some spot crypto ETF filings focused on solana and XRP. There is optimism a new SEC administration could be friendlier to such plans, though there are no regulated futures markets for those assets, which the agency wanted to see for BTC and ETH.

David Mann, Franklin Templeton’s head of ETF product & capital markets, said his division chats with Roger’s digital assets team to figure out which other assets are exciting (and why). Such convos help guide the product path. 

Franklin Templeton’s research team continues to evaluate crypto assets like the firm has done for public equity markets and credit markets for decades.

“We have opinions for sure,” Bayston said.  

While the ETFs are essentially “taking crypto and moving it back to TradFi,” Bayston said, he noted part of boosting adoption is going where clients are comfortable holding it. 

Outside of those vehicles though, Franklin Templeton offers an OnChain US Government Money Fund (FOBXX). It had ~$430 million in assets as of Nov. 30. That segment appears ripe for growth. 

“Tokenized money funds can be both a substitute and also a complementary resource to stablecoin users,” Bayston said. 

He noted the massive use case for stablecoins as collateral in derivative transactions, for example. FOBXX offers a yield-bearing alternative.

Franklin Templeton launched the tokenized fund in 2021. It enabled peer-to-peer transfers of its shares in April and made FOBXX available on Coinbase’s layer-2 blockchain in October. 

The focus for 2025? 

“BENJI has been a US product only,” Bayston told me. “But what you’re going to see right away as we get into the new year…is an expression of BENJI in a global context.”

— Ben Strack