Key events to watch in the week ahead: 13 – 19 January 2025

This week’s overview

An initial bounce in Wall Street failed to sustain this week, as a hawkish Federal Reserve (Fed) jitters were reignited by a run of stronger economic data. Particularly, the ramp-up in services activities’ prices from the Institute for Supply Management (ISM) services Purchasing Managers' Index (PMI) may be the largest shocker, with the reacceleration in the prices sub-index to a near two-year high likely to force the Fed on a no-move in rates ahead until further disinflation conviction is seen.

Heading into the new week, here are four key events to watch.

US 4Q earnings season: US banks

The 4Q earnings season will kick off next week, with result releases from the major US banks such as JPMorgan, Goldman Sachs, Wells Fargo, Citigroup, Morgan Stanley and Bank of America.

Based on FactSet, for 4Q 2024, the earnings growth rate for the S&P 500 is expected to be at 11.9%, which will mark its highest growth since 4Q 2021. Among the eleven S&P 500 sectors, the financial sector is expected to lead in year-over-year earnings growth. Market participants will be closely monitoring how the high-for-longer rate prospects may support the sector's outlook, alongside the banks’ assessments of economic risks.

15 January 2025 (Wednesday, 9.30pm SGT): US consumer price index (CPI)

In the Fed’s December economic projections, inflation forecasts for 2025 have been revised significantly higher from 2.2% to 2.5%, which may form the basis for rate cuts been guided down to two from the originally four cuts. Since then, positive economic surprises in the US have further validated the hawkish outlook, prompting market participants to recalibrate their expectations towards only a single rate cut this year.

With concerns of inflation risks resurfacing with US reflation and Trump 2.0, any higher-than-expected read may give rise to hawkish Fed jitters. Any signs of inflation persistence may continue to keep the US dollar well-supported and US Treasury yields elevated, which may come at the expense of equities’ performance.

Headline inflation is expected to rise by 0.3% month-on-month (MoM), consistent with November's pace, while core inflation is projected to decline by 0.1% MoM, down from the 0.3% increase recorded previously.

16 January 2025 (Thursday, 9.30pm SGT): US retail sales

Positive US economic surprises this week have not translated to increased appetite for risk-taking, as the hawkish Fed’s rate outlook dominates market sentiments, reviving the “good news is bad news” narrative. The upcoming US retail sales data is expected to reflect resilient consumer activities, with a 0.5% month-on-month increase, slightly below the 0.7% growth recorded previously.

While a strong retail sales read may further push back against recession concerns, market reaction could be more complex. Economic resilience could be viewed through the lens of a hawkish Fed, reinforcing tighter monetary policy expectations which may come as some trade-off for equities’ performance.

17 January 2025 (Friday, 10am SGT): China’s 4Q gross domestic product (GDP)

Just last month, President Xi gave markets the reassurances that China’s full-year 2024 GDP is on track to expand around 5%, which aligns with its official target. His commitment to further policy support into 2025 was also well-received, but the devil will be in the details, given that previous stimulus efforts have struggled to convince markets of their effectiveness in driving a meaningful economic turnaround.

For China’s 4Q GDP, market expectations are looking for a 5.1% year-on-year growth, up from 4.6% in the third quarter, which may still suggest some falling short of the 5% target. Nonetheless, focus has been concentrated around any upcoming policy stimulus measures lately, which could help limit downside risks for Chinese equities in the near term.

Other key economic indicators will be released alongside the GDP data. Industrial production is expected to tick up to 5.5% from 5.4%, retail sales are anticipated to rebound to 3.5% from 3.0%, and fixed asset investment is forecasted to remain steady at 3.3%.