The week felt unusually long with the Inauguration to start, and then a flurry of activity as promised by the new administration. But that did not translate into any real, identifiable market patterns worthy of passing along this week. We did see plenty of one-off impactful points, though, so in no particular order, we will highlight them below.

Future performance

With another week left in January, talk will inevitably start to focus on the fabled January Barometer. This is an age-old indicator that says that “as January goes, so goes the rest of the year.”  It’s good to keep in mind that, statistically speaking, this is true, but it is true for every other month in the year as well.  All this indicator really says is that markets trend; if the month in question is up (or down), it is likely part of a longer trend, suggesting that the months that follow will do the same.

Rents

The Cleveland Fed released its Rent metrics recently.

Federal Reserve Chairman Powell has acknowledged that the Cleveland Fed “New” rents generally lead the “All” rents. New rents just came in at -2.43%. 

As you can see from the chart below, New rents are approaching levels not seen since the GFC.

One of the major factors driving the above could simply be consumers’ views on buying a home. According to the University of Michigan Survey, of those seeing good conditions, less their survey of those seeing bad conditions. It’s no wonder the consumer is negotiating for lower rents.

DXY Update

Last week, we presented a chart of the GS Financial Conditions Index and how we thought the strength of the US$ might be impacting it.

Well, we found another chart this week that made us want to revisit the above

The updated version of the chart from last week just goes to show the sensitivity that both the SPX market multiple and the GS Financial Conditions Index have to the USD. The DXY Index moved less than .5% lower, and that results in a full multiple point higher of the Forward SPX multiple.

If the above pattern from President Trump’s first term holds true, it will certainly be interesting to see the impact on that forward multiple.

China’s Population Concerns

China’s population fell by ~1.39 million people in 2024, to a total of 1.41 billion, marking the 3rd straight yearly decline. 2024 marked the 2nd-lowest number of births since the founding of the People’s Republic of China in 1949. Bloomberg estimates that China’s population will shrink by ~50 million by 2035, to 1.36 billion, the lowest since 2012. All while the working-age population has been declining for over 5 years. China’s falling demographics are at the core of its economic issues.

We also thought this chart from CLSA gave further perspective on the issue.

According to ChatGPT:

“To maintain a positive GDP growth, a country typically needs to maintain or grow its working-age population, since this is the group that contributes to production and economic output. Several factors influence the relationship between birth rates and GDP growth, but here’s a basic breakdown:

Replacement-level fertility: For a population to replace itself in the long term, the fertility rate must generally be around 2.1 children per woman. This accounts for children who do not survive to adulthood and those who may not have children themselves. A fertility rate below 2.1 would eventually result in a shrinking population, which could pose challenges for maintaining GDP growth unless other factors, like immigration, offset the decline.”

The above makes us wonder if growth estimates related to Chinese exposure are taking this into account.

Have a great weekend!

Best,

Meraki Trading Team

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