Weekly Market Insights | Holiday Spending Up

Stocks notched a slight gain over the holiday week. A tech-driven rally in the first half of the week was clawed back in the second half as investors took profits following the market holiday.

The Standard & Poor’s 500 Index advanced 0.67 percent, while the Nasdaq Composite Index rose 0.76 percent. The Dow Jones Industrial Average added 0.35 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.54 percent.^1,2

Ho-Ho, Then No-Go

Stocks rallied during the first half of a shortened holiday trading week. Holiday cheer won out despite news of declining consumer confidence in December, a drop in durable goods, and new home sales reporting below expectations.^3,4 The “Santa rally” lost its ho-ho-go after the midweek holiday. Mega-cap technology stocks led markets down on Friday, giving back most of the gains from the first half of the week.^4,5

The Real Santa

While Santa got the headlines, the consumer drove the holiday shopping sleigh this year. Holiday spending—defined by the period from November 1st through December 24th —rose 3.8 percent in 2024, compared with 3.1 percent in 2023. Economists closely follow consumer activity since consumer spending makes up roughly two-thirds of total gross domestic product. Market watchers attributed the steady job market and growth in household wealth as the primary drivers of consumer strength.⁶

Over in the digital space, Bitcoin continues to consolidate below $100,000 after Fed Chair Jerome Powel stated that the U.S. Central Bank has no desire to be involved in any government effort to stockpile Bitcoin on their balance sheet. However, Russia is buying Bitcoin as a sanctions hedge. Stay tuned on how the Ukraine war plays out with the coming Trump administration also weighing in on Bitcoin.  

A I, crypto and blockchain technology integration explained: AI benefits from crypto and blockchain in several ways:

Data integrity: Blockchain ensures the authenticity of data used to train AI models, reducing the risk of potential manipulation.

Decentralization: Crypto-powered networks like Fetch.ai enable A I to operate on decentralized infrastructure, reducing reliance on centralized servers.

Monetization: Cryptocurrencies allow smooth microtransactions, allowing A I models to pay for data or services without intermediaries.

Transparency: Smart contracts make A I decisions traceable and auditable in public permissionless blockchains, fostering trust in A I-powered systems. As A I interacts with other A I or humans, better data and improved sharing of monetary benefits can lead to more incentives and powerful interactions.

Why do crypto and blockchain technology need A I? A I can enhance crypto through:

1. Improved efficiency: A I can optimize blockchain networks by improving consensus mechanisms and reducing transaction costs.

2. Fraud detection: Machine learning models can detect suspicious activity and enhance security against hacks.

3. Market insights: A I-driven analytics aid investors by predicting price trends and analyzing market sentiment. Tools like Virtuals Protocol can allow anyone to create an A I agent to improve their business inexpensively, provide market research, enhance workflows, scale, and more.

What are the emerging opportunities at the intersection of A I and crypto?

* DeFi automation: A I can optimize yield farming and liquidity provision strategies.

* Tokenized A I models: Developers can tokenize and trade ownership of A I models on blockchain platforms.

* Autonomous economies: A I agents use crypto for self-sustaining operations, such as managing decentralized energy grids or supply chains.

* A I agents can provide immense value to individuals and companies by providing market research, finding good investments in the crypto world, and autonomously trading with a crypto wallet.

The Real Money of the Ages: Gold was the laggard leading into the midweek Christmas break as futures only rose narrowly to hold above gold's 2024 supporting uptrend line.  Looking ahead, the key level to watch on the charts is $2,599, which is the closing low from the steep Fed day selloff last week.

Fundamentally, the recent strength in the dollar and longer dated bond yields spiking to multi-month highs have been noteworthy headwinds for gold and highlight a still-challenged environment for gold despite the fact the yellow metal is sitting on big 2024 gains.

If the dollar and yields stabilize and inflation simmer, a resumed move higher towards the record highs just above $2,801 for gold would be well within the realm of possibility in the weeks ahead. Also, as noted in previous updates, the out of control mounting U.S. debt is a tailwind for gold. 

This Week: Key Economic Data

Monday: Pending Home Sales. 3-Month Treasury Bill Auction.

Tuesday: Case-Shiller Home Price Index.

Wednesday: Stock market closed.

Thursday: Jobless Claims. EIA Petroleum Status Report. Fed Balance Sheet. 30-Year Treasury Bond Announcement.

Friday: Motor Vehicle Sales. ISM Manufacturing Index. Federal Reserve Officials Thomas Barkin and Mary Daly speak.

^{Source: Investors Business Daily - Econoday economic calendar; December 27, 2024
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Friday: The Greenbrier Companies, Inc. (GBX)

^{Source: Zacks, December 27, 2024. Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“The strongest of all warriors are these two — Time and Patience.”

– Leo Tolstoy

Do You Have to Pay Taxes on Your Hobby?

Whether you picked up embroidering, dog grooming, or making jewelry, a side hobby may or may not require paying taxes.

Does your kids' lemonade stand need to pay taxes? Probably not but if you're doing something like selling cookies out of your kitchen, you might need to check out the rules.

Here are some things to consider when determining whether your activity is a hobby or business:

• Is your hobby carried out in a businesslike manner?
• Do you maintain complete and accurate books and records for your hobby?
• Is the effort you put into your hobby intended to make a profit?
• Do you depend on the income from your hobby for your livelihood?
• Do you know how to carry out your hobby as a successful business?
• Have you made a profit from your hobby?

If you receive income from your hobby with no intention of making a profit, you may have to report the income to the IRS.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁷

How Well Do You Know Your Sunburn Protection Factor?

We all know that protecting your skin from the sun is important, but did you know that not all sunscreens are made equal? Dermatologists have some specific recommendations when it comes to your Sunburn Protection Factor (SPF). Here are some tips:

• Choose a broad-spectrum sunscreen that protects you from both UVB and UVA rays.
• Always use at least SPF 30
• Choose a water-resistant sunscreen.
• Don’t forget your lips! Apply sunscreen to your lips or use a chapstick with SPF 30 or higher.
• Reapply your sunscreen every 2 hours if you’re sweating a lot in the water.
• Apply enough sunscreen to cover all skin that clothing will not cover. Most adults need about 1 ounce—or enough to fill a shot glass—to cover their bodies completely.
• Apply your sunscreen 15 minutes before going outdoors.

These tips will help you choose the best sunscreen to protect your skin for years.

Tip adapted from American Academy of Dermatology⁸

Throughout Friday, Hanna asks her mother the same four-word question. On each occasion, her mother gives her a different answer. What is the question?

Last week’s riddle: It softly goes up and down the stairs in many homes and office buildings, yet it never moves. What could it be?
Answer: Carpet.

Delicate Arch 

Arches National Park, Utah, USA

Footnotes and Sources

^{1. The Wall Street Journal, December 27, 2024}

^{2. Investing.com, December 27, 2024}

^{3. MarketWatch.com, December 23, 2024}

^{4. CNBC.com, December 26, 2024}

^{5. The Wall Street Journal, December 27, 2024}

^{6. MarketWatch.com, December 26, 2024}

^{7. IRS.gov, March 18, 2024}

^{8. American Academy of Dermatology, August 1, 2024}