Wall Street's festive season

By Carmel Crimmins, Reuters Econ World podcast host

Hello there,

I'm back in my favourite city for this year's Reuters NEXT summit and the holiday vibe on Wall Street is, well, festive. Markets are buzzing with the S&P 500 returning nearly 30% so far this year and the Nasdaq hitting 20,000 this week, as bets on another Fed rate cut, AI hopes and expectations for President-elect Donald Trump's next term turbo-charge animal spirits.

High U.S. equity valuations have some investors worried about a correction but European investors betting this will encourage a move into cheaper markets across the pond shouldn't hold their breath. Joachim Klement, an investment strategist at Panmure Liberum, writes that when U.S. equities experience a major drawdown, American investors typically reduce their exposure to foreign equities as well.

U.S.manufacturers aren't taking any chances. They're getting stock in from overseas ahead of Trump's inauguration. The National Retail Federation said this week that inbound cargo traffic would notch records in November and December, due to the prospect of a dockworker strike on U.S. East Coast ports in January and the trade risk.

In Beijing, China's top leaders and policymakers are considering allowing the yuan to weaken next year as they brace for higher U.S. tariffs, Reuters exclusively reported this week.

And what about Europe?  The risk of a trade war couldn't come at a worse time for the region. Growth is anaemic, productivity low and its two major players – France and Germany – are preoccupied with their own political crises.

No wonder the European Central Bank cut rates for the fourth time this year and kept the door open to further easing. The Swiss National Bank went one step further, cutting its interest rates by 50 basis points on Thursday, its biggest reduction in almost 10 years.

In contrast to the widespread fears about tariffs in the European Union, the UK is expected to mostly avoid such trouble, according to a recent Reuters poll. A strong majority of economists expect Trump to impose a tariff of less than 10% on UK imports next year, or none at all, which will have an insignificant effect on the British economy.

As always, I'd love to hear from you by hitting reply on this email or finding me on LinkedIn.  

The tech-heavy Nasdaq hit the 20,000 milestone this week but, valuation-wise, it is still far from levels it reached during the dotcom bubble.

The index trades at roughly 36 times earnings, a three-year high and well above its long-term average of 27, according to LSEG Datastream. That is still well below the roughly 70 times the index's P/E ratio reached in March 2000.

"It may be the end of the era for West African cocoa dominance." - Joe Bavier, Africa business correspondent on this week's Reuters Econ World pod.

On this week's show, we go deep on "Cocoa markets", looking at the factors behind the surging price of cocoa and what it means for the West African nations that produce it. Listen here.

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