January 2025 - Research Financial Strategies

Weekly Market Insights | Goldilocks Returns; Market Ends Week “Just Right.”

by Jim Streight | Jan 20, 2025 | Weekly Stock Market Commentary

Stocks roared back last week, fueled by upbeat Q4 corporate reports and economic news that stalled inflationary fears.

The Standard & Poor’s 500 Index rose 2.91 percent, while the Nasdaq Composite Index advanced 2.45 percent. The Dow Jones Industrial Average led, picking up 3.69 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, added 2.00 percent.^1,2

Goldilocks is Back

The “Goldilocks” narrative—an economy that’s neither too hot nor too cold—made a comeback last week.

Tuesday’s Producer Price Index report showed that wholesale prices rose less than expected in December—one piece of evidence suggesting a cooling economy.³

Stocks jumped out of the gate Wednesday after the December Consumer Price Index (CPI) report showed core inflation (minus volatile energy and food prices) rose less than expected. Investors also cheered Q4 reports from a handful of money center banks and positive news out of the Middle East.⁴

Stocks took a breather Thursday before pushing higher again on Friday.⁵

The S&P and Dow Industrials had their best week since early November, and the Nasdaq saw its best weekly performance since early December. The yield on the 10-year Treasury note fell roughly 20 basis points over the week.^6,7

Slowing Inflation

Investors welcomed the inflation reports, believing wholesale and consumer prices might trend lower in 2025.

First, producer prices came in at 0.2 percent, which was less than the 0.4 percent increase anticipated. Then consumer prices came in at 2.9 percent, slightly elevated, but the real story was core inflation. When you subtract out food and gas prices, CPI saw its smallest monthly increase since July.⁸

This Week: Key Economic Data

Monday: Markets closed – MLK Jr holiday

Wednesday: Treasury Buyback Announcement. 20-Year Treasury Bond Auction.

Thursday: EIA Petroleum Status Report. Weekly Jobless Claims. Fed Balance Sheet.

Friday: Existing Home Sales. Consumer Sentiment.

^{Source: Investors Business Daily – Econoday economic calendar; January 17, 2025}^{The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday: Netflix, Inc. (NFLX), The Charles Schwab Corporation (SCHW), Prologis, Inc. (PLD), Interactive Brokers Group, Inc. (IBKR), 3M Company (MMM), Capital One Financial Corporation (COF)

Wednesday: The Proctor & Gamble Company (PG), Johnson & Johnson (JNJ), Abbott Laboratories (ABT), The Progressive Corporation (PGR), GE Vernova Inc. (GEV)

Thursday: Intuitive Surgical, Inc. (ISRG), GE Aerospace (GE), Texas Instruments Incorporated (TXN), Union Pacific Corporation (UNP), Elevance Health, Inc. (ELV)

Friday: American Express Company (AXP), Verizon Communications Inc. (VZ), NextEra Energy, Inc. (NEE), HCA Healthcare, Inc. (HCA)

^{Source: Zacks, January 17, 2025.}^{Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“Silence is like starvation.”

– Cherrie L. Moraga

Beware of Phishing Scams

A phishing scam occurs when someone pretends to be a trusted source, such as a bank, tax preparer, or credit card company, to access your personal information.

If you believe you may be part of a phishing scam, here are some recommendations from the IRS:

Never open an email from a sender that you don’t recognize.
Never disclose personal information to anyone online, including your passwords, bank account numbers, credit card numbers, or Social Security number. The IRS will never ask for this information via email.
When possible, use two-factor authentication to protect your accounts. Two-factor authentication requires a secondary form of identification (such as a phone number) to access your account.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁹

What’s the Deal With Downward Dog?

Even if you’ve never set foot on a yoga mat, you’ve probably heard of one of the most popular poses called Downward Dog.

The pose is popular because it has many benefits, such as increased flexibility and spinal strength. In yoga, it’s a resting posture to let your muscles lengthen and straighten. It can help stretch your back, neck, hamstrings, and calves. You can sit in the pose without moving (a static hold) or “walk the dog,” which includes pushing your heels toward the ground to stretch out your calves.

If you’re new to downward dog, practice proper form by bending your knees and focusing on lengthening your back and arms. Ideally, your body should be in an inverted “V” shape. Eventually, you may straighten your legs and have your heels touch the floor!

Tip adapted from Ekhart Yoga¹⁰

You can make it and read about it today; many classes are taught in it, but it is not part of the future. What is it?

Dave is at the hardware store to buy something for his house. Yesterday, he bought 1 for $1. The week before, he purchased 10 for $2, and his friend bought 100 for $3. Today, he bought 907 for $3. If the prices haven’t changed, how is this possible? Answer: Dave and his friend have been buying house numbers. 907 is $3 because it costs $1 per numeral.

Dolomite Mountains at Sunset

Dolomitic Alps, northeastern Italy

Footnotes and Sources

^{1. The Wall Street Journal, January 17, 2025}

^{2. Investing.com, January 17, 2025}

^{3. CNBC.com, January 14, 2025}

^{4. The Wall Street Journal, January 15, 2025}

^{5. CNBC.com, January 17, 2025}

^{6. MarketWatch.com, January 17, 2025}

^{7. CNBC.com, January 17, 2025}

^{8. The Wall Street Journal, January 15, 2025}

^{9. IRS.gov, July 29, 2024}

^{10. Ekhart Yoga, October 3, 2024}

Weekly Market Commentary

by Jim Streight | Jan 16, 2025 | Carson

The Markets

Bond yields are rising—and they have investors’ attention.

Last year, the United States Federal Reserve (Fed) lowered the federal funds rate by one percent. (The federal funds rate is the interest rate the Fed charges banks. It influences other interest rates.) This shift in Fed policy made a lot of people happy.

Companies, business owners, and consumers cheered because Fed rate cuts typically lower borrowing costs. As a result, rates on business loans, home equity loans, auto loans and credit cards tend to move lower.

Stock investors were enthusiastic because lower borrowing costs can reduce companies’ expenses and increase profits, and that can lift stock prices higher. Since the stock market moves in anticipation of future events, rate cut expectations are already reflected in many companies’ stock prices.

Prospective homebuyers were optimistic. Fixed mortgage rates are linked to the yield of the 10-year U.S. Treasury note, and they hoped it might also move lower.

Bondholders were more skeptical. Even as the Fed was cutting the federal funds rate, yields on longer maturities of U.S. government bonds were moving higher—not lower. One reason is that economic data—including last week’s strong jobs report—continue to confirm that economic growth and inflation are exceeding expectations. As a result, the Fed may be inclined toward fewer rate cuts in 2025.

“For stocks, higher bond yields imply no increase in price/earnings ratios and possibly some contraction from current levels,” reported Randall W. Forsyth of Barron’s. Changing expectations for Fed actions and company performance is likely to shift analysts’ outlook for stock market performance.

There is a second reason for the divergence in Fed actions and government bond yields, according to economist Mohamed El-Erian, a columnist for Bloomberg. He explained that key government bond yields in advanced economies “are widely regarded as the most accurate gauge of the economic outlook, including growth, inflation and central bank policies.” In his opinion, “Yield increases show that investors are closely watching whether advanced economies have the ability to deal with high debt and rising borrowing costs.”

Last week, major U.S. stock indices moved lower, and yields on longer maturities of U.S. Treasuries continued to rise.

HOW MUCH DO YOU KNOW? Last year, Pew Research asked adults across the United States how much they knew about personal finance, a topic that includes “managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, and retirement, tax, and estate planning,” reported Will Kenton of Investopedia.

More than half (54 percent) of those who participated in the survey said they knew a great deal or a fair amount about personal finance. However, the results varied widely depending on the demographic attributes considered. For example, knowledge about money appears to increase with age, reported Khadijah Edwards of Pew Research Center. For example:

Ages 18 to 29: 41 percent know at least a fair amount

Ages 30 to 49: 47 percent know at least a fair amount

Ages 50 to 64: 60 percent know at least a fair amount

Ages 65 and older: 67 percent know at least a fair amount

Extrapolating that result suggests that about two-thirds of Americans may know a fair amount about personal finance as they approach retirement. Many survey participants learned what they knew about money from family and friends. Others said they relied on:

The internet,
A college or university course,
Media (news, documentaries, and books), and
Elementary or high school classes.

When asked about various issues related to finances, respondents were more confident in their ability to accomplish some tasks than others. For example, participants were confident they could:

Find their credit report 75 percent
Make a monthly budget 59 percent
Develop a plan to pay off debt 57 percent
Create a plan to save money 56 percent
Build an investment plan to grow wealth 27 percent

If you have friends or family members who would benefit from knowing more about how to manage, save, and invest money, gifting a subscription to a personal finance publication could make a difference. You’re also welcome to share our contact information. We help people pursue their financial goals.

Weekly Focus – Think About It
“Real knowledge is to know the extent of one’s ignorance.”
—Confucius, philosopher

https://www.newyorkfed.org/markets/reference-rates/effr

https://www.investopedia.com/terms/f/federalfundsrate.asp

https://www.bankrate.com/mortgages/federal-reserve-and-mortgage-rates/

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202501

https://www.bls.gov/news.release/empsit.nr0.htm

https://www.barrons.com/articles/bond-yields-stocks-markets-c547ed93?mod=hp_LEDE_C_1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/01-13-25_Barrons_Bond%20Yields%20Rising%20A%20Problem%20For%20Stocks_6.pdf)

https://www.bloomberg.com/opinion/articles/2024-12-30/bond-vigilantes-are-putting-governments-on-notice (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/01-13-25_Bloomberg_Bond%20Vigilantes%20Putting%20Govs%20on%20Notice_7.pdf)

https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/01-13-25_Barrons_Data_8.pdf)

https://www.investopedia.com/terms/p/personalfinance.asp

https://www.pewresearch.org/short-reads/2024/12/09/roughly-half-of-americans-are-knowledgeable-about-personal-finances/

https://www.goodreads.com/quotes/63437-real-knowledge-is-to-know-the-extent-of-one-s-ignorance

Weekly Market Insights | Investors Read Inflation Risk in Job Numbers

by Jim Streight | Jan 13, 2025 | Weekly Stock Market Commentary

Stocks fell for the second consecutive week as a round of fresh economic data stoked inflationary fears among investors.

The Standard & Poor’s 500 Index declined 1.94 percent, while the Nasdaq Composite Index dropped 2.34 percent. The Dow Jones Industrial Average lost 1.86 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slipped 0.49 percent.^1,2

Inflation Stymies Markets

Stocks rallied broadly to start the week, but two economic reports on Tuesday—job openings and the prices-paid index among service companies—raised fresh inflation concerns. Higher Treasury yields also put pressure on stocks.^3,4

Stocks flattened out on Wednesday. Investors reacted to news that most Federal Open Market Committee members agreed inflation risks had increased, per minutes from the Fed’s December meeting.^5,6

U.S. stock markets were closed Thursday in observance of President Jimmy Carter’s funeral.

On Friday, a warmer-than-expected December jobs report caused investors to question whether the Fed will adjust rates in 2025. News that consumer sentiment ticked down also pushed stocks lower.⁷

When Good Becomes Bad News

The economy added 256,000 jobs in December—100,000 more than economists expected. That’s the second-highest monthly job gain for 2024. Unemployment ticked down to 4.1 percent, which was also better than anticipated.

Job growth and lower unemployment signals good news for the economy but bad news for the markets. A stronger jobs market puts less pressure on the Fed to adjust rates, especially with inflation top-of-mind among investors.^8,9