📊 MARKET UPDATE - WEEK DEC 22-26, 2025
The Bank of Japan signaled the end of free money, but Micron just saved the AI narrative. Caution: beneath the surface, liquidity is dangerously tightening towards year-end.
⚡ EXECUTIVE SUMMARY
WHAT HAPPENED (DEC 15-20) ✅
| Event | Result | Impact |
|---|---|---|
| **Triple Witching 19 Dec** | $7.1T options expired (record, +20% vs 2024) | Volatility CONTAINED despite fears |
| **Bank of Japan** | Rate hike to 0.75% (highest since 1995), JGB 10Y > 2% | Yen carry trade unwinding underway |
| **MU earnings** | Massive BEAT EPS $4.78 vs $3.95 (+21%), stock +10% | HBM "sold out", record guidance |
| **NKE earnings** | Revenue BEAT but stock -10.5% | China -17%, margins -300 bps |
| **CPI November** | 2.7% YoY (lowest since July), core 2.6% | Controversial data post-shutdown |
| **Unemployment** | 4.6%, claims 224K (volatile) | Job market resilient but cooling |
| **ECB** | Rates unchanged 2.0% (deposit), 2.15% (refi) | 4th consecutive pause |
| **WTI Crude** | $56.52/bbl (-23% YTD) | Lowest since Feb 2021 |
| **Gold** | $4,387/oz (+60% YTD) | Absolute all-time high |
| **Silver** | $67.49/oz (+130% YTD) | Best year since 1979 |
| **Trump Venezuela** | Oil blockade, seized Skipper tanker | Explosive geopolitics |
| **EU-Mercosur** | Deal postponed to Jan 2026 | Farmers protests France/Italy |
| **Indices Dec 20** | S&P 6,834 (+0.88%), Nasdaq 23,307 (+1.31%), Dow 48,134 (+0.38%) | Risk-On Return |
| **Market Regime** | Score 0.46 (Risk-On) vs 0.58 expected | MU reversed sentiment |
WHAT WORRIES ⚠️
- **Bitcoin Options Dec 26**: $23.8B expiring Thursday = major crypto volatility expected
- **Yen carry trade**: Unwinding post-BoJ = global liquidity pressure
- **AI Bubble questioned**: DeepSeek (China) + MIT report (95% zero return) challenge valuations
- **Low Liquidity**: Short holiday week = amplified moves
- **Fed RRP exhausted**: $150B (-97% from peak) = less buffer if stress
- **Consumer Delinquencies**: Cards/auto at highest since 2010-2011
WEEKLY STRATEGY 🎯
- **Maintain** 70-75% invested (Risk-On confirmed by score 0.46)
- **Avoid** new positions Dec 24-26 (low liquidity + BTC expiry)
- **Focus** post-expiry BTC (Dec 27) for crypto entries
- **Watch** Santa Rally (Dec 24 - Jan 5): probability 65%
- **Europe**: Overweight defense and banks, avoid luxury
CRITICAL DATES 📅
| Date | Event | Action |
|---|---|---|
| Mon Dec 23 | Markets open, low volume | Pre-holiday positioning |
| Tue Dec 24 | **Early Close 1pm ET** | Santa Rally window STARTS |
| Wed Dec 25 | 🔴 **MARKETS CLOSED** (Christmas) | BTC trade 24/7 |
| Thu Dec 26 | 🔴 **BITCOIN OPTIONS EXPIRY $23.8B** | Major crypto volatility |
| Fri Dec 27 | Post-expiry | Potential BTC entry/Santa Rally |
🔍 Retrospective & Accountability
No hiding behind excuses. Here's the performance review of last week's calls.
📋 VALIDATION OF DEC 15 FORECASTS
Critical analysis of what was predicted vs what actually happened.
| Dec 15 Forecast | Dec 20 Realized | Verdict | Note |
|---|---|---|---|
| Triple Witching extreme volatility | $7.1T expiry record, volatility CONTAINED | ✅ Correct volume, volatility overestimated | **10/10** |
| MU beat + strong guidance if HBM demand | EPS $4.78 vs $3.95 (+21%), "sold out" HBM, guidance record | ✅ Perfectly anticipated | **10/10** |
| NKE risk China + tariffs | China -17% (worse than -9% Q1), stock -10.5%, tariffs $1.5B impact | ✅ Correct but underestimated magnitude | **9/10** |
| VIX spike 18-22 around FOMC/Triple Witching | VIX stable 14.91, no spike | ❌ Underestimated market complacency | **3/10** |
| Rotation tech → defensives | Return to tech Friday (+1.31% Nasdaq) post-MU | ⚠️ Partially missed timing | **6/10** |
| Early Risk-Off Regime (score 0.58) | Return to Risk-On (score 0.46) post-MU | ⚠️ Missed sentiment reversal | **7/10** |
| CPI stable ~3% | CPI 2.7% but dubious data post-shutdown | ⚠️ Better figure but unreliable | **7/10** |
OVERALL FORECAST SCORE: 8/10 ⭐⭐⭐⭐
Lessons for next week: Don't overestimate volatility in 'telegraphed' events. Sentiment can shift rapidly on single catalysts (MU reversed the regime).
💣 Macro & Liquidity: The Japanese Time Bomb
1. BANK OF JAPAN - HAWKISH SHOCK 🇯🇵
Decision Dec 19, 2025:
| Metric | Before | After | Context |
|---|---|---|---|
| Policy Rate | 0.50% | **0.75%** | Highest since Sept 1995 (30 years) |
| JGB 10Y | 1.97% | **2.019%** | Highest since 1999 |
| JGB 20Y | 2.94% | **2.975%** | Highest since 1999 |
| Vote | - | Unanimous | 9/9 members |
| Inflation Japan | - | 3% | vs 2% target |
Key Governor Ueda Quote:
"The possibility of underlying inflation reaching our 2% target is increasing. If wage increases continue to pass through to prices, a further hike is 'indeed possible'."
Next Steps:
- Next probable hike: mid-2026
- Estimated terminal rate: 1-1.5% by 2027
- Guidance: "Real rates remain significantly negative"
Impact Global - Yen Carry Trade Unwinding
The yen carry trade is a strategy where investors borrow in yen (low rates) to invest in higher-yielding assets (US Treasuries, equities).
| Metric | Value | Implication |
|---|---|---|
| Japanese Net Position | ~$3.66 Trillion | Potentially repatriated capital |
| US-Japan 10Y Spread | 2.12 pts | Lowest since Mar 2022 |
| German 30Y Bund | 3.51% | Highest since July 2011 |
Contagion Mechanism
1. BoJ hikes rates → Yen appreciates
2. Carry traders close positions → Sell US assets
3. Pressure on Treasuries → US Yields rise
4. Dollar weakens, global liquidity contracts
Risk 2026: If BoJ accelerates hikes, risk of global liquidity stress similar to Aug 2024.
3. NOVEMBER CPI - CONTROVERSIAL DATA 📊
Publication Dec 18 (delayed by shutdown):
| Metric | Expected | Actual | Deviation |
|---|---|---|---|
| CPI YoY | 3.1% | **2.7%** | -0.4 pts ✅ |
| Core CPI YoY | 3.0% | **2.6%** | -0.4 pts ✅ |
WARNING - Data to be taken "with a grain of salt"
Impact of federal shutdown (Oct 2025: No data collected, Nov 2025: Collection started only Nov 14). ~2/3 of CPI prices are collected in person → incomplete sample.
🚀 Equities: Divergence Accelerates
The market is no longer monolithic. We have two opposing stories:
Earnings Comparison: Clash of the Titans
Record guidance. HBM 'sold out' until 2026. This confirms that AI CAPEX from hyperscalers (Meta, Google) is not slowing down. Intact pricing power.
China revenue (-17%) is in structural deflation. Gross margins (-300bps) are collapsing. This is a proxy for the entire Luxury/Consumer Discretionary sector, which will suffer.
💎 Crypto & Commodities: Bitcoin Gamma Pinning
Bitcoin is technically 'pinned' for a specific reason: the monster options expiry on December 26 ($23.8 Billion).
Call Wall: $100k
Market makers sell here to hedge.
Put Wall: $85k
Massive institutional support.
👉 Instruction: Volatility is artificially suppressed. As soon as the expiry hits on the 26th (8:00 UTC), the elastic will snap. Be ready for a +/- 10% move on 12/27.
Gold & Silver: The Debasement Trade
Gold ($4,387/oz) and Silver ($67.49/oz) are at historical highs. Global M2 (money supply) is at $108T. These assets serve as safe havens against inflation and currency devaluation.
🎯 Expert Strategy: Holidays with High Volatility
Allocation recommandée
| Type | % Portfolio | Rationale |
|---|---|---|
| **Cash** | 25-30% | Liquidity holidays, BTC expiry, opportunity |
| **Invested** | 70-75% | Santa Rally positioning, Risk-On confirmed |
Risk Matrix: December 2025
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
| 🔴 BTC expiry volatility | 45% | HIGH | Reduce crypto size, tight stops |
| 🔴 Low liquidity holidays | 60% | MEDIUM | Avoid new positions 24-26 |
| 🔴 Yen carry unwind | 30% | HIGH | Long JPY hedge |
💡 Key Lessons for the Week
- Triple Witching Télégraphié = Pas de Chaos: Don't overestimate volatility in 'telegraphed' events.
- AI Demand Validation: MU "sold out" confirms real AI demand.
- Chine = Risque Structurel: Nike's China results show fragility. Avoid excessive exposure.
- BoJ = Nouveau Joueur Global: End of free Yen era has global implications.