In an Unpredictable Market Here Are Some Potential Winners and Losers for the First Quarter

Every year, analysts discuss the stocks and sectors they favor for the coming year, often providing price targets for where major indexes might land by year-end. I believe both of these practices are futile. The market is dynamic and ever-changing; the environment can shift on a dime, so don’t get attached to a one-year playbook. Focusing on quarterly trends is a better approach.

I have a few items I’m monitoring for Q1, listed in no particular order. These are not recommendations, just observations.

Economic Landscape

As of the end of December, the FOMC updated its Summary of Economic Projections (SEP), making key adjustments:

• Core PCE projections for 2025 were revised upward from 2.2% to 2.5%.
• Real GDP growth was adjusted from 2.0% to 2.1%.
• The number of anticipated rate cuts for 2025 was reduced by one 25-basis-point cut, down from four cuts projected in September to 2 cuts for the year.

The 10-year Treasury yield has moved higher since the first rate cut, alongside the U.S. Dollar Index ($DXY)—and rightly so. Economic data remains robust, with Real GDP continuing to exceed 2.5%, the Unemployment Rate holding steady at around 4.2%, and the Labor Participation Rate stabilizing at approximately 62.5% throughout the year.

Labor Market

For Q1, continued stability in initial claims is expected due to the high frequency of the data. In contrast, monthly BLS data—and even more delayed revisions—will likely have less market influence. Instead, the market will focus on high-frequency data and dismiss monthly payroll data, especially prior-month revisions, given the optimistic business landscape following Donald Trump’s election.

The Philly Fed provides a valuable report that models preliminary non-farm employment change data (reflected in monthly Non-Farm Payrolls) and uses comprehensive datasets from the BLS Quarterly Census of Employment and Wages (QCEW) to produce an Early Benchmark indicator. This indicator reflects potential overestimation or underestimation of non-farm payrolls for each state. Unfortunately, the Early Benchmark indicator shows that total Non-Farm Payrolls have been overestimated. This aligns with the aggressive downward revision reported this year of 818,000 jobs from April 2023 through March 2024. The final revision will be released in February, alongside the January Labor Report.

The market may not feel significant labor pressure until the Unemployment Rate reaches 4.5–4.6%. While this may be a tall order for Q1 based on current trends preliminary data, it becomes more plausible by Q2 of 2025 after revisions and census data updates.

 

Source: The Federal Reserve Bank of Philadelphia

Liquefied Natural Gas

Just like in 2024, I am optimistic about the longer-term vision on liquefied natural gas. For those who may not know, liquified natural gas is natural gas that is cooled at -260 degrees Fahrenheit, which requires special equipment to complete the process and to also transport liquified natural gas in the form of exports to other countries. The reason LNG has gained enthusiasm over the last several years is the result of diminishing natural gas flows from Russia to Europe due to the Russia/Ukraine war, and also its ability to scale to make it more efficient to transport natural gas, in which the United States has an abundance of and in some cases we flare off excess (burn off) supplies of natural gas because it does not make it economical to capture and transport through pipelines.

With the change in Presidential administrations, the expectation is for expedited permitting and favorable regulations for the energy market as a whole, but for LNG, there might be a special focus around this industry because of its geopolitical implications. It is one of the bigger economic levers the U.S. may use over the coming months and years. Right now, LNG is still relatively expensive, and that is the result of a lack of infrastructure and tanker availability as LNG requires special tankers to transport the commodity. Infrastructure plays around LNG may be in the spotlight for Q1.

 

Source: EIA

 

Source: EIA

Several companies with LNG exposure (Not a recommendation):

• Cheniere Energy LNG: Cheniere Energy is the leading U.S. producer and exporter of LNG, operating major liquefaction facilities at Sabine Pass and Corpus Christi. Its robust infrastructure and long-term contracts position it as a critical player in the global LNG supply chain.
• TotalEnergies SE TTE: TotalEnergies is a global energy giant with significant investments in LNG production, trading, and infrastructure, including projects like the Arctic LNG venture. Its diversified portfolio highlights its commitment to LNG as a cleaner energy alternative.
• Golar LNG Limited GLNG: Golar LNG is a pioneer in Floating LNG (FLNG) technology and operates LNG carriers, enabling efficient liquefaction, storage, and transportation. The company's innovative solutions offer flexibility and cost savings in the LNG value chain.
• Chevron CVX: Chevron has extensive LNG operations, particularly in Australia with the Gorgon and Wheatstone projects, which supply LNG to global markets. Its LNG ventures align with its strategy to meet rising global energy demands with lower carbon solutions.
• Exxon Mobil XOM: ExxonMobil is a major player in LNG with projects in Qatar, Papua New Guinea, and Mozambique, contributing to its role as a key supplier of cleaner-burning fuel. The company’s LNG operations are integral to its global energy portfolio and sustainability efforts.
• Baker Hughes BKR: Baker Hughes provides critical equipment and services for LNG projects, including turbo-machinery and gas technology for liquefaction and transportation. Its expertise supports the development and operation of LNG facilities worldwide.
• Honeywell International Inc. HON Honeywell provides advanced technologies and equipment essential for LNG facilities, including control systems and automation solutions. In 2024, Honeywell announced its acquisition of Air Products' LNG technology and equipment division for $1.81 billion, enhancing its LNG pretreatment portfolio.
• KBR, Inc. KBR KBR offers engineering, procurement, and construction services, with significant experience in LNG projects, including liquefaction and regasification facilities. KBR is recognized as a leading company in the LNG infrastructure market.

The infrastructure plays, the bottom-up players may see tailwinds in Q1, like Baker Hughes, KBR, and Honeywell (even though LNG exposure may only be 5% of total revenue mix).

Copper

Pressure on key industrial metals like copper and silver persists as we begin the year, driven by the lackluster performance of China's expansion story throughout 2024. However, rhetoric from China continues to intensify, and if actions align with these statements, the "China trade" could gain traction by Q2 this year.

Copper was a notable trade last year, but prices have since pulled back as China has shifted to becoming a temporary net exporter of finished copper. This transition is driven by the ongoing expansion of smelting operations, even though copper ore remains in a structural supply deficit. The market anticipates the reopening of key mining operations in the second half of the year. While this potential supply increase may already be priced in, a price ceiling could persist if China does not significantly ramp up domestic consumption.

China accounts for approximately 55% of global refined copper consumption, so any bullish narrative around copper must be supported by increased domestic demand. Copper price action and global inventory levels should be closely monitored, as they are likely to serve as early indicators of progress in the China stimulus narrative.

It is important to note that while refined copper supply is currently in surplus, copper ore remains in a structural supply deficit. The physical market will need to work through the oversupply of refined copper before structural price support can emerge.

 

Source: ING Research

I expect the China narrative to gain traction by the end of Q1, with stronger momentum building into Q2. While price advances may be short-lived, a risk/reward trade could materialize for those patient enough to await the move, with resistance near the 2024 highs around $4.70. The 200-week SMA and 100-week SMA have converged, forming a potential support area. In the event of a structural break lower, $3.70 may act as a key support level.

The MACD is currently bearish but may begin to flatten if the $4.00 level holds. A bullish crossover of the 12 EMA above the 26 EMA on the weekly chart could serve as a bullish signal for the market.

Remember, there are other China-exposed equity trades that may relate to this early economic signal. Companies typically do not preannounce a ramp-up in commodity orders—they simply act when the timing is appropriate.

 

Silver

The silver market saw impressive activity in 2024 as it was leveraged to complement the strong move in gold and to gain exposure to the A.I. trade. Silver is used in approximately 90% of all electronics in one form or another, so the increasing demand for high-powered A.I. infrastructure products, such as GPUs and server technology, could serve as a significant tailwind for the metal. However, consumer electronics demand has been lagging since the post-COVID era, creating some slack in demand for this precious and industrial metal.

Many analysts are optimistic about a refresh cycle for consumer electronics, including cellphones and laptops. If this refresh narrative materializes in the second half of the year, silver could be a major beneficiary. That said, silver is also considered an inflationary hedge. The China growth narrative will play a critical role in silver’s ability to sustain a bullish trend. However, if slack persists in Asia-Pacific markets and there is a marginal slowdown in the U.S., silver could face downward pricing pressure.

Fundamentally, the market remains in a physical deficit when considering ETF holdings. Modest silver production growth is expected in 2025, alongside industrial demand growth projected in the high single digits. A potential price decline would likely result from a global economic slowdown. Given these dynamics, coupled with pent-up optimism around China’s expansion and expectations for sticky Q1 U.S. inflation data—especially in energy commodities like natural gas—silver may still have room to run.

 

Traders should continue to rely on technical analysis, with the weekly MACD serving as a primary guide. Key bullish and bearish signals can be identified through MACD crosses: a 12 EMA crossing above the 26 EMA indicates a bullish trend, while a 12 EMA crossing below the 26 EMA signals a bearish trend.

Support for silver futures (/SI) currently lies at $24.50-$25, with resistance at $32. Any break above $32, accompanied by volume exceeding the 10-week average by 20%, should be taken seriously as a potential breakout signal. A weakening U.S. Dollar, driven by weaker domestic economic data alongside sticky inflation, may also act as a tailwind for silver in Q1. However, at present, the U.S. Dollar Index ($DXY) does not appear to be weakening anytime soon.

Crude Oil

It should come as no surprise that petroleum markets experienced lackluster performance during the last quarter of 2024. Global demand has softened, with slack evident in the Asian markets, particularly in India and China, as well as a lack of industrial activity in Germany. This has prompted leading industry agencies, including OPEC and the IEA, to revise their petroleum demand outlooks for 2024 and 2025.

OPEC+ continues to delay adding production to the market due to concerns over weak pricing support. In 2025, it should be expected that any sustainable price advances in oil will be met with increased supply, limiting the potential for sustained bullish trends unless there are logistical disruptions caused by geopolitical risks.

That being said, Q1—particularly January—may present the best window of opportunity for bulls. The first three weeks of the year are likely to see a meaningful drop in refiner utilization rates due to scheduled maintenance. Additionally, harsh winter weather, such as "Arctic blasts," could disrupt production in regions like the Bakken, affecting both extraction and pipeline operations.

The China stimulus narrative could also act as a bullish catalyst for energy markets in the first quarter. Furthermore, the early months of the Trump administration may bring headlines about favorable policies aimed at incentivizing exploration and infrastructure spending. However, it is important to note that a "drill, baby, drill" approach is not inherently bullish for prices. Instead, it could constrain additional investment as energy companies prioritize profitability over production.

It is also expected that China will continue to expand its oil and natural gas import relationship with Russia, potentially reducing its demand for global supplies.

 

Given the current fundamental backdrop, WTI crude oil is likely to trade within a range of $67-$75. Any geopolitical risk involving Iran, including greater enforcement of economic sanctions, could add a $2-$4 premium to prices. For the year, any break below $63 may result in crude oil hitting the mid $50 level. The 200-week SMA continues to be a key area of resistance at $80.

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This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.