How Jobs and Volatility Reveal the 2 Faces of 2025
Taking a cue from the Roman god Janus, investors see inflation concerns ahead and solid market gains in the rearview.
The hoped-for Santa rally never came, and instead, investors are being greeted by Krampus: declines in broad stock markets, inflation fears, and market guru Jeremy Grantham preaching oncoming cataclysm.
Volatility, as measured by the ProShares VIX Short-Term Futures ETF (VIXY), was jumping by 7% on Jan. 10 midday and has risen 7% since the year began. Santa, it appears, has dumped a bag of coal before retreating to the North Pole.
Still, this is the month named for Janus, the Roman god who faces forward and back, reflecting duality—beginnings and ends. If Janus were an investor, he’d probably note that 245 or so trading sessions remain this year, and anything can happen.
The stock declines of the past few weeks come in the context of back-to-back 26%+ annual stock market gains. Perhaps some cooling off is healthy for the market—the S&P 500’s price-to-earnings ratio at above 26% currently is historically high.
To etf.com Research Lead Kent Thune, volatility means opportunity. He said that gyrating markets are good for making money—prices undulate and smart, long-term investors dollar-cost average to take advantage of cheaper buying prices and long-term gains in stock markets.
Fear fuels volatility, Thune noted, meaning contrarian investors may want to look at rate-sensitive bond ETF like TLT, the iShares 20+ Year Treasury Bond ETF.
“Volatility is an opportunity for investors willing to stick their necks out when most other investors are running the other way,” he said. “Yields are near multi-year highs, meaning prices are at multi-year lows for rate-sensitive bond ETFs.”
Jobs Surging
More people are working, according to the latest jobs report that shows the economy added 100,000 more workers than expected in December. More workers, in turn, translates into more consumers. Still, stocks continued their decline due to signs the Federal Reserve is becoming increasingly dovish, reluctant to cut interest rates and add cheap cash to the economy that would otherwise fuel hiring and capital investment.
Then, there’s Jeremy Grantham. The British investing strategist—whose company GMO issued the GMO U.S. Quality ETF (QLTY) 14 months ago—said in a webinar this week that declining birth rates, climate change, and overpriced equities are combining to eventually wreak havoc on markets, according to Business Insider. While Grantham correctly predicted the dot-com bubble and the 2008 financial crisis, his soothsaying since then hasn’t been right, the news outlet said.