Asia-Pacific markets displayed a mixed performance on Tuesday as investors took cues from Wall Street’s overnight results and awaited the US Federal Reserve’s decision scheduled for December 18.

Regional market performance

Australia’s S&P/ASX 200 led regional gains, rising 0.73% as strength in resource and financial stocks drove the index higher.

Japan’s Nikkei 225 and Topix edged up 0.12% and 0.11%, respectively, reflecting cautious optimism.

In contrast, South Korea’s Kospi fell by 1%, and the tech-heavy Kosdaq slipped 0.92%, dragged down by profit-taking in semiconductor and biotech stocks.

Hong Kong’s Hang Seng Index declined 0.4%, with losses concentrated in technology and real estate.

Meanwhile, mainland China’s CSI 300 managed a modest 0.34% gain, buoyed by strength in consumer staples and industrials.

Wall Street sets the tone

In the US, the Nasdaq Composite hit a new record, climbing 1.24% to close at 20,173.89, powered by a rally in tech stocks.

The S&P 500 also edged up 0.38%, ending the session at 6,074.08. However, the Dow Jones Industrial Average fell for the eighth consecutive session, losing 0.25% to close at 43,717.48.

Nvidia, a key player in artificial intelligence chips, saw its shares decline by 1.7%, marking a 10% fall from its November peak and entering correction territory.

Investors remain cautious ahead of the Fed’s decision, with the CME FedWatch tool indicating a 98.2% probability of a 25-basis-point interest rate cut.

Key corporate updates

Alibaba’s $1.3 billion loss from Intime sale

Alibaba announced the sale of its department store business, Intime, for 7.4 billion yuan ($1 billion) to a consortium led by Youngor Group and Intime’s management team.

The transaction will result in a one-time loss of approximately 9.3 billion yuan ($1.3 billion).

Alibaba acquired Intime in 2017 for $2.6 billion, marking a significant markdown in its investment.

SoftBank’s US investment plans boost shares

SoftBank Group shares rose 3.15% after CEO Masayoshi Son disclosed plans to invest $100 billion in the US, focusing on artificial intelligence and infrastructure projects.

This initiative, announced during Son’s visit to President-elect Donald Trump, aims to create 100,000 jobs and deploy the funds before the end of Trump’s term.

Singapore exports rebound

Singapore’s non-oil domestic exports surprised on the upside, growing 3.4% year-on-year in November, reversing a 4.7% decline in October.

The figure exceeded analysts’ expectations of a 0.7% drop. Electronics exports led the charge, while non-electronics declined.

On a month-on-month basis, exports surged 14.7%, far outpacing the anticipated 8% rise.

Investors across the Asia-Pacific region remain focused on the Fed’s upcoming interest rate decision and key corporate announcements.

Mixed market performances underscore lingering uncertainties, while stronger-than-expected data from Singapore and corporate activity in China and Japan provide pockets of optimism.

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India’s benchmark indices Nifty 50 and Sensex started the day in the red on Tuesday.

Nifty 50 sank below the 24,500 mark, going down around 0.77% to trade at 24,487.70 points while the Sensex was down 0.71% to trade at 81,165.23 in early trade. 

The fall today comes as investors remain jittery ahead of the US Fed meeting.

The two-day meeting is expected to conclude with Jerome Powell announcing a 25 basis point interest rate cut on Wednesday.

The sentiment also dampened as foreign institutional investors turned net sellers of Indian equities on Monday.

FIIs sold Indian stocks worth around ₹270 crore (around £25.07 million) on Monday. The India VIX, or volatility index, jumped close to 6% to 14.8, indicating increasing market uncertainty.

Meanwhile, the Indian rupee fell to a new record low of 84.93 against the US dollar in early trade on Tuesday.

At the interbank foreign exchange, it opened at 84.89 before slipping further to 84.92, slightly down from its previous close of 84.91.

Indian stocks in focus today

A total of 48 stocks in the 50-stock Nifty index were in the red on Tuesday morning.

Heavyweights like HDFC Bank, TCS, Airtel, and Reliance Industries were all down over 1%. 

Shares of India’s biggest private lender HDFC Bank were down after receiving a warning letter from SEBI, alleging non-compliance with disclosure regulations regarding the resignation of a senior employee.

The fall also dragged the Nifty Bank index which traded around 0.89% lower at 53,104.20 points.

Gains were seen in the pharma giant Cipla and Jaguar Land Rover parent Tata Motors.

The Mumbai-based pharma major saw shares rise around 2.4% to hit an intraday high at ₹1,483 as domestic brokerage firm Kotak Institutional Equities upgraded the stock to “buy” from “add,” with a target price of ₹1,725.

Adani Group stocks in the index, Adani Ports, and Adani Enterprises were also in the green in early trade on Tuesday.

Sectors such as Oil and Gas, Telecom, Metals, Financials, and Auto were all struggling at the bourses.

However, sectors such as Agriculture, Real Estate, and Media were in the green.

Asian peers show mixed trends

Japan’s Nikkei 225 was trading flat while South Korea’s Kospi continued its drop due to the ongoing political crisis.

Hong Kong’s Hang Seng index also opened in the red trading 0.39% lower at the time of writing.

Australia’s S&P/ASX 200 rose close to 0.8, while Taiwan’s Taiex gained 0.12%. 

The US stock market ended mixed on Monday even as the Nasdaq closed at a record high driven by gains in tech shares.

On the other hand, the Dow Jones Industrial Average slipped 0.25% to 43,717.85, while the S&P 500 rose 23.03 points, or 0.38%, to 6,074.12.

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As we head ever closer to year-end, it’s time to take an early squint at how markets have behaved in 2024.

US equities have been on an absolute tear. In fairness, the starting point for the latest, and possibly last, leg of the rally was October 2023.

This was when equity prices steadied, and ultimately bottomed, following a difficult summer.

The issue had been interest rates, and more specifically, when they would start to come down.

As is well known, but still worth repeating, the US Federal Reserve had been very slow off the mark to respond to inflationary pressures that built up during the pandemic in 2020 and 2021.

These were obvious to everyone, apart from the Fed, who remained convinced that the jump in inflation was transitory.

Then, Russia invaded Ukraine early in 2022.

The US central bank rushed to catch up with reality, and hiked rates in March – their first rate increase since 2018.

It then carried on a relentless programme of rate hikes, taking the Fed Funds from an upper limit of 0.25% in March 2022 to 5.50% in July 2023. 

Now, the S&P 500 peaked at the beginning of 2022 at around 4,800, while the tech-heavy NASDAQ had topped out a month or so earlier.

Over the next ten months, US equities dropped steadily.

In October 2022 the S&P finally found a floor just below 3,500 for a total decline of 28%.

The tech-heavy NASDAQ  lost 38% over a similar, but slightly longer, period.

From there, US equities experienced a modest recovery, despite the fact that the Fed was still tightening monetary policy.

The Fed made what proved to be its final rate hike in July 2023.

This was when the nascent stock market rally came to a shuddering halt.

Traders now believed that the Fed was compounding its original mistake of not taking inflation seriously by overcompensating and raising rates too high. 

Equities sold off sharply over the next three months.

Once again, they bottomed in October.

This time, the selling stopped as investors began to second-guess the Federal Reserve in forecasting that interest rates had peaked.

Now traders began to speculate when the Fed would start cutting rates.

US stock indices turned sharply higher, and as we got into 2024, markets were pricing in as many as 150 basis points worth of rate cuts in 2024, with the first being in March.

It seems quite bizarre looking back, yet it wasn’t until September, just two months ago, that the Fed finally cut rates.

And, in what looked like a bout of mild panic, or a desperate attempt to overcompensate for any delay, it was a bumper cut of 50 basis points, rather than the 25 basis points widely expected.

Anyway, it helped markets overcome the sell-off that greeted the unruly unwinding over the summer of the yen carry trade.

It also helped lift equities, as did the 25 basis point cut in November. 

From the low last October, to the recent high in early December, the S&P 500 has added 48%.

The NASDAQ has gained 52% over the same period.

Thanks to some CPI numbers in December, which, while indicating that the drop in inflation has stalled, were nevertheless in line with expectations, the probability of another 25 basis point cut before the year-end has shot up to 98%.

Will that, along with the likelihood of a couple of cuts next year as well, help to keep the rally going? We’ll find out soon enough.

(David Morrison is a Senior Market Analyst at Trade Nation. Views are his own.)

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The JPMorgan Equity Premium Income ETF (JEPI) stock has had a strong performance this year as it jumped to a record high of $60.52. Its total return this year stood at 15%, underperforming the S&P 500 index, which has risen by about 27.3% this year. 

JEPI has risen by 15.9% in the last twelve months, while the S&P 500 has jumped by almost 30% this year.

Why the JEPI ETF has risen

The JPMorgan Equity Premium Income ETF has risen by over 15% this year as American stocks have rebounded. The S&P 500 index has roared to a record high, continuing a trend that has been going on for years.

The fund has jumped because of how it is structured. This fund uses a covered call strategy, where the fund has invested in popular companies in the S&P 500 index. In this, it has invested in 132 companies like Amazon, ServiceNow, Meta Platforms, Mastercard, Microsoft, Visa, and NVIDIA. 

On top of this, the fund has used the options market to generate returns. It does this by by selling call options tied to the S&P 500 index. A call option gives users the right, but not the obligation to sell an asset at a certain strike price. 

JEPI receives a call option premium, which it uses to pay its investors in the form of dividends every month. This explains why the fund has a dividend yield of about 7%.

Therefore, JEPI benefits when American stocks are in an uptrend because of the 132 blue-chip companies it has invested in. 

The options trade on the S&P 500 works like this: if the index falls, the trade becomes worthless since the fund can buy it at a cheaper price. If the index rises, the fund benefits by having the option to buy it at a cheaper price. 

The challenge, however, comes up when the S&P 500 index is in a strong rally. When this happens, the fund misses an opportunity, especially when the index rises above the strike price.

JPMorgan Equity Premium Income ETF outlook for 2025

The JEPI ETF has done fairly well since its inception. Its total return in the last three years stood at over 23%, which coincided with the stock market rally.

2025 could be a challenging year for the market now that stocks and most assets have become highly overvalued. 

Also, the upcoming Donald Trump administration has pledged to impose tariffs and do mass deportations in the country. These actions are highly inflationary, which could see the Fed slam its brakes on the easing process.

The other potential risk for the JEPI ETF and other US stocks is that the market will start getting worried about the rising US debt. Data shows that the debt load has jumped to over $36.3 trillion, and will likely hit $40 trillion in 2025 or 2026. 

There is a risk that the US could go through a Lizz Truss crisis, especially if Trump attempts to pass unfunded tax cuts. At the time, UK stocks and bonds crashed, making her the shortest-serving UK prime minister.

Therefore, a combination of a major trade war, higher inflation, and unfunded tax cuts, could make 2025 a more difficult year for the market. Worse, as shown in the chart below, the JEPI ETF has formed a rising wedge pattern, a popular bearish sign in the market. 

Therefore, there is a risk that it may drop to $53.35, its lowest point in August, which is about 10% below the current level. Read more: JEPI ETF forecast: here’s why the stock could reverse soon

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The JPMorgan Nasdaq Equity Premium ETF (JEPQ) and Nasdaq 100 Covered Call ETF (QYLD) funds offer some of the biggest yields in the United States. JEPQ yields 9.30%, while the QYLD yields 11.46%, much higher than what the Nasdaq 100 index offers. So, how did these funds perform in 2024, and what is the outlook for 2025?

JEPQ ETF 2024 performance

JEPQ is a top exchange-traded fund that provides investors with exposure to the Nasdaq 100 index. Unlike other popular Nasdaq 100 funds like QQQ, the fund aims to provide monthly dividend payouts to investors using call options.

A call option is a financial trade that gives investors a right, but not the obligation, to buy an asset at a certain price and an expiry date. In its case, the fund has invested in the 100 companies that make the Nasdaq 100 index, including Apple, Microsoft, NVIDIA, and Amazon.

It has then sold or written a call option for the fund, receiving a premium. In this case, it benefits if the Nasdaq 100 index and the underlying stocks jumps. In theory, it can also benefit if the fund stays stagnant since it will pocket the call option premium. 

The JEPQ ETF has broadly underperformed the Nasdaq 100 because of its strong rally. In a covered call ETF, a strong rally in the underlying asset reduces returns since it hits the strike price, missing the upside. 

The JEPQ ETF’s total return this year was 27.5%, much lower than the Invesco QQQ’s (QQQ) 32%. However, in the long term, the JEPQ ETF has risen by 51% in the last three years compared to QQQ’s 42%.

Read more: JEPQ ETF stock sits at an all-time high: 3 catalysts to watch

QYLD ETF performance in 2024

The Global X Nasdaq 100 Covered Call ETF (QYLD) is another fund that aims to generate returns by investing in technology companies. 

Like JEPQ, its portfolio is made up of 100 companies that make up the Nasdaq 100 index. It then writes or sells corresponding call options of the same index. Altogether, it aims to generate returns that correspond to the Cboe Nasdaq 100 BuyWrite V2 Index. 

QYLD ETF has a higher dividend yield than JEPI since it pays about 11.46%. Its average four-year dividend yield has been 12.57%, which is much higher than other dividend-focused ETFs like SCHD and DGRO

The QYLD ETF has not done well over time, despite its strong dividend yield. Its three-year total return was just 19.7% compared to QQQ’s 41.90% and JEPQ’s 51.40%. 

Read more: QYLD vs JEPQ: which is a better Nasdaq covered call ETF?

Outlook for JEPQ and QYLD for 2025

The stock market has done well in the past few years, with the Nasdaq 100 and S&P 500 indices more than doubling.

2025 may be a more difficult year for the market because of the stretched valuations and the soaring US debt.

Donald Trump has made many pledges, some that may have a negative impact on the stock market.

As Mark Zandi noted recently, the next existential threat for the US stock market is the bond market now that public debt has jumped to over $36.2 trillion. Trump has pledged to deliver more tax cuts, which will be unfunded. 

He has also pledged to cut government spending and has appointed Elon Musk to lead these efforts. The challenge, however, is that DOGE’s responsibilities must be passed in Congress, which will be highly unlikely.

Therefore, there could be a major economic crisis in the United States in the coming months as we saw in 2022 during Lizz Truss’s era as the UK prime minister. 

On top of this, stocks may go through a valuation reset as also happened in 2022. Heightened volatility may have a slight benefit to the covered call ETFs like QYLD and JEPQ but the impact will be muted. The QYLD ETF had a negative return of 19% in 2022, while QQQ shed over 32%.

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