As the year draws to a close, financial markets may experience heightened volatility as money managers seek to recalibrate their portfolios. The last week of the year often sees significant movements driven by year-end adjustments. For 2024, assets like Stocks, gold , and the US Dollar have seen mixed performance, prompting fund managers to make late adjustments in their holdings to align with changing valuations. This flurry of trading activity is likely to coincide with reduced market participation, which can amplify price swings, particularly on December 31. Subsequently, corrections may occur when trading resumed on January 2, with more market players back on board the following week.
On January 2, market participants will be eager to assess the weekly jobless claims data, which serves as an early barometer for the labor market in 2025. Traditionally, weekly claims are an important indicator of employment health, and recent figures have suggested a resilient job market. The anticipated results will reflect claims for the week ending December 27 and are expected to mirror the previous week’s count of 219,000. A lower number around 200,000 could uplift both the US Dollar and stock prices, while a higher figure exceeding 230,000 might exert downward pressure on these assets. Given the thin liquidity during this holiday week, even small trades could lead to notable market movements.
Additionally, traders will have a chance to preview the upcoming Nonfarm Payrolls release through the ISM Manufacturing PMI, scheduled for January 5. This index provides insight into the prevailing sentiment within the manufacturing sector, where recent readings have indicated contraction, remaining below the pivotal 50-point level. With expectations for December at around 48.3, any positive deviation could bode well for stocks and the dollar, while disappointing figures might have the opposite effect. This early signal could invigorate returning traders and influence market dynamics as the new year begins.
In conclusion, traders should approach the market with caution during this period of low liquidity, as movements — especially those on December 31 — may be unpredictable. For those taking a break, the holiday offers a welcome reprieve before the market’s traditional rhythms resume.
