The Federal Reserve Chair candidate announced, US bond costs face renewed pressure, multi-asset decline under pressure

The Federal Reserve Leadership Change Imminent, Yield Curve Tells All

Trump latest statement confirms that former Fed Governor Waller will be the preferred candidate to succeed Powell. This decision has sparked cautious optimism on Wall Street—markets are pleased that Waller is more independent compared to the other candidate, Haskett, but also remain wary that Trump still insists on consulting him on rate cuts. Trump publicly expressed hope to push rates down to 1% or even lower within a year, directly addressing the enormous $30 trillion US government debt financing costs.

Powell’s term will end in May next year. He has long resisted Trump’s aggressive rate cut demands, which has been a focal point of multiple public clashes between the two. The confirmation of the new chair signals potential significant adjustments to the Federal Reserve’s policy framework.

US Bond Market Volatility, Long-term Yields Hit Highs

Market concerns over Fed independence and inflation outlook are directly reflected in Treasury yields. After this week’s Fed rate cut announcement, bond markets experienced notable adjustments:

• 2-year Treasury yield fell to 3.52%, indicating lingering expectations of short-term rate cuts
• 10-year Treasury yield rose to 4.18%, up 3 basis points
• 30-year Treasury yield increased to 4.84%, reaching a new high since early September, with a weekly increase of about 5 basis points

The continued rise in the 30-year yield is particularly noteworthy, reflecting market fears of long-term inflation outweighing rate cut expectations. Chicago Fed President Goolsbee and Kansas Fed President Smith both stated on Friday that inflation concerns are central to their opposition to further rate cuts.

Risk Assets Under Pressure, Gold and Silver Rise and Fall

Rising bond yields and market concerns over AI companies’ hefty spending and uncertain profit outlooks have driven risk assets lower. Global stock markets broadly declined:

US Market Performance

• Dow Jones: down 0.51%
• S&P 500: down 1.07%
• Nasdaq: down 1.69%, with Broadcom shares dropping over 11%

European Market Performance

• Germany DAX 30: down 0.45%
• France CAC 40: down 0.21%
• UK FTSE 100: down 0.56%

In precious metals, gold rose 0.47% to $4,299.2 per ounce but shows signs of retreating from highs. WTI crude oil fell 0.67%, trading at $57.5 per barrel.

Crypto Market Slightly Adjusts, BTC and ETH Under Pressure

Amid cooling risk sentiment, cryptocurrencies also retraced:

• Bitcoin: latest price $87.84K, up 0.62% in 24 hours
• Ethereum: latest price $2.95K, down 0.11% in 24 hours

Compared to the macro environment’s rising bond yields and stock volatility, the direct impact on crypto markets remains relatively mild.

Forex and Hong Kong Stocks

• US Dollar Index: up 0.06%, at 98.39
• USD/JPY: up 0.17%
• Hang Seng Index futures close at 25,735 points, 242 points below yesterday’s close

Goldman Sachs Maintains Optimistic Outlook, AI Spending a Hidden Risk

Despite short-term market sentiment weakening, institutional confidence in US stocks’ mid-term prospects remains firm. Goldman Sachs reaffirmed its S&P 500 target of 7,600 points for next year, implying about 10% upside from current levels.

The firm expects constituent companies’ EPS to grow 12% next year, with another 10% increase in 2027. Notably, AI productivity gains are projected to contribute 0.4 percentage points and 1.5 percentage points respectively. However, the massive capital expenditure by AI firms and uncertainties in profit realization cycles pose the biggest current market risks.

Tech Giants’ Movements: Broadcom Surprises, Oracle Bonds Under Pressure

Broadcom Quarterly Results Beat Expectations

Broadcom announced Q4 results exceeding expectations, with net profit up 97% year-over-year to $8.5 billion, adjusted EPS of $1.95, surpassing the expected $1.86; revenue increased 28% YoY to $18 billion. AI chip sales reached $11.07 billion, up 22% YoY. The company expects AI chip sales in Q1 to double to $8.2 billion.

However, the stock surged over 3% during the session but later came under pressure due to Nasdaq’s overall decline, closing down over 11% on Friday.

Oracle Bonds Signal Risks

Oracle’s bond prices continued to decline this week, with $18 billion of high-grade bonds purchased in September showing an unrealized loss of about $1.35 billion. Its 2035 maturity bonds with a 5.2% coupon saw the 5-year credit default swap spread widen by 0.17 basis points to 1.71 basis points on Friday, with a yield of 5.9%, exceeding the average for junk bonds with the highest ratings.

Elon Musk’s Next Move: SpaceX IPO Expected

Musk hinted in interactions with tech media that SpaceX is preparing for an IPO in mid to late next year, with an estimated valuation of around $1.5 trillion, comparable to Saudi Aramco’s $1.7 trillion valuation in 2019. Considering Musk owns about 42% of SpaceX, this IPO could make him the world’s first billionaire with a trillion-dollar net worth.

Geopolitical Edge Changes: US-White Relationship Shows Signs of Thaw

Relations between the US and Belarus appear to be easing. The US announced the lifting of sanctions on Belarusian potash fertilizers, while Belarusian President Lukashenko pardoned 123 prisoners, including Nobel Peace laureate Bialiatski in 2022.

Meanwhile, the US Treasury announced sanctions on six Venezuelan oil tankers, including a Hong Kong-flagged vessel, accusing it of financing Maduro’s regime. This reflects ongoing US efforts to maintain order in the global oil market.

Outlook: US Debt Costs and Market Balance

Rising US debt financing costs will be a key macroeconomic variable in 2025. The confirmation of Fed leadership, yield curve adjustments, and revised AI spending expectations will jointly determine future market directions. In the short term, risk assets may still need to digest these adverse factors, but institutions like Goldman Sachs remain optimistic about medium-term economic resilience and corporate earnings growth.