US stock futures rose early on Wednesday after suffering a big drop yesterday. President-elect Donald Trump and signs of stronger inflation are making traders nervous going into early 2025.
The biggest concern right now is what the Federal Reserve will do next. After cutting interest rates by one percentage point late last year, traders are reducing expectations for further cuts in 2025, which is bad news for stocks. On Tuesday, economic data on the labor market and the service industry suggested that economic growth is still strong, companies are still looking to hire and have room to raise prices.
On top of that, Trump renewed the tariff talk on Tuesday by saying he would penalize Denmark if it doesn’t hand over sovereignty over Greenland. Both import taxes (which would fuel inflation) and geopolitical uncertainty could increase volatility this year. For now, however, the strength of the economy is probably good for corporate profits.