Wall Street's sights are set on 2025! Trump's inauguration "debut" and January employment data will test the market.

Notice that, after the end of a brilliant year for the US stock market, investors are expecting a seasonal trend in mid-January, when a series of economic data and the transfer of power in Washington may lead to market volatility. As of December 27th, the S&P 500 index has risen by about 25% in 2024, while the tech-heavy Nasdaq Composite index broke through 20,000 points for the first time last December, with an increase of over 31%. However, analysts and traders say that due to some profit-taking and doubts about the market performance in January, the stock market saw selling on Friday. Robert Pavlik, senior portfolio manager at Dakota Wealth, said, "Some are concerned that there may be some reallocation and redistribution of funds in the first half of next year, and investors trading today and next week may just want to be proactive." Stock Market's Almanac data shows that the stock market usually performs well in the last five trading days of December and the first two days of January, a phenomenon known as the "Santa Claus rally." Since 1969, this rally has pushed the S&P 500 index up by an average of 1.3%. Despite the selling seen last Friday, in the past five trading days, the S&P 500 index rose by 1.77% and the Nasdaq index rose by 1.8%. The duration of the upward trend will depend on several forces that may affect the market in 2025. The US monthly employment data to be released on January 10 should give investors a new view on the health and strength of the US economy. After setbacks caused by hurricanes and strikes earlier this year, there was a rebound in job growth in November. Shortly after, when US companies begin to report fourth quarter earnings, the market's strength will be tested again. According to LSEG data, investors expect earnings per share to grow by 10.33% in 2025, compared to an expected growth of 12.47% in 2024, despite the excitement over the policies of President-elect Trump expected to boost prospects in industries such as banking, energy, and cryptocurrencies. Michael Rosen, Chief Investment Officer at Angeles Investments, said, "People are hoping that next year's tax and regulatory environment will be reduced or decreased, which will help support corporate profits, which are the fundamental factor driving market development." Trump's inauguration on January 20th may also bring some surprises to the market. It is expected that he will issue at least 25 executive orders on his first day in office, covering a range of issues from immigration to energy and cryptocurrency policies. Trump has also threatened to impose tariffs on Mexico, Canada, and China, and crack down on immigration, ultimately passing on the costs to consumers. Helen Given, Deputy Director of Trading at Monex USA, said that a new government always brings a lot of uncertainty. She also added that the impact of Trump's anticipated trade policy is likely far from fully reflected in the global currency markets. Given said, "We are looking ahead, seeing which policies in these proposals will actually be implemented, and which policies may need further brewing." She expects this to have a significant impact on the euro, the Mexican peso, the Canadian dollar, and the Chinese yuan. The Fed's first monetary policy meeting of the year, ending in late January, may also pose a challenge to the rise in the US stock market. On December 18th, the Fed implemented its third rate cut of the year, and hinted at fewer rate cuts in 2025 due to uncertain inflation prospects, leading to a sharp drop in the stock market, disappointing investors who had expected rate cuts to boost corporate profits and valuations. However, this may be a good thing for alternative assets like cryptocurrencies. Damon Polistina, Research Director at investment platform Eaglebrook Advisors, said that the incoming Trump administration, which is expected to be friendly towards cryptocurrencies, is adding some catalysts to enhance the confidence of cryptocurrency investors. Expectations of a Trump-friendly policy have caused Bitcoin to soar to over $107,000 this month.