Proflex Market Update - Wk 51

Dear Subscribers,

Welcome to another weekly review of markets as we head towards end of an exciting year for markets.

Markets Eye FOMC Update:

This week, markets are highly focused on the FOMC meeting. While a 25bps rate cut is almost certain according to interest rate futures, the real concern lies in the dot plot update, which will provide clarity on the Fed’s outlook for rate cuts in 2025.

Recent economic data and inflation numbers have shown little sign of cooling, leading to fears that the Fed may trim its forecast for the number of rate cuts in the coming years. A higher-than-expected terminal rate could reignite the “higher for longer” narrative, raising concerns for markets. While we are unlikely to revisit the elevated rates of last 18 months, a sustained rate of 3% or higher would increase risks for corporate debt and long-duration assets.

Bond Yields Rise, Small Caps Decline

Reflecting these fears, bond yields have risen over the past few days, putting pressure on small-cap stocks. If the Fed signals a higher terminal rate for this cycle, the sell-off in smaller companies could continue, as higher financing costs disproportionately impact businesses with tighter margins or significant leverage.

Bitcoin Surges Above $100k with Strategic Reserve Buzz

Bitcoin remains above the $100k mark, buoyed by weekend reports of various governments considering Bitcoin as a strategic reserve asset. Key developments include:

• The US federal government, under the incoming Trump administration, reportedly exploring Bitcoin reserve integration.

• Countries like Russia and Japan initiating discussions to add Bitcoin to their treasury assets.
• Texas state has proposed bitcoin reserve and 11 US states are expected to initiate similar proposals as per some reports.

Additionally, MicroStrategy (MSTR) received a significant boost as it was added to the Nasdaq 100 index, which will drive passive inflows into one of the largest corporate Bitcoin treasuries.

Sentiment was further lifted by Trump’s announcement that he plans to nominate pro-crypto attorney Paul Atkins to lead the Securities and Exchange Commission (SEC).

Broadcom Delivers - Boost to AI trade

In corporate news, Broadcom reported strong earnings, beating expectations and signaling further growth ahead in generative AI infrastructure. The company highlighted a multi-year revenue opportunity driven by hyperscaler spending, validating our long-term bullish view on the AI trade.

Proflex All-Access Performance Hits New Highs

Proflex Growth Gazette, the flagship portfolio in All-Access, has performed exceptionally well, achieving more than 2x of S&P500 returns in consecutive years. And Proflex Crypto Pulse is having second year with triple digit returns.

This success underscores the importance of our growth-focused strategies and proactive risk management during both bullish and uncertain market periods.

Best regards,

Raman Bindlish

Editor-in-Chief,

Blockstart Research

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