Weekend Update, January 20th, 2025
Index, Sector & Asset Performance
US stock markets rallied last week on 1- weaker than expected inflation data and 2- good to stable other economic data. The makings of a “soft landing” for the economy stocks continue. Against the ongoing doomer calls for crashes for the last 2 years plus, the S&p500 has been experiencing a soft-landing playbook for the better part of 15 (October 2023) to 27 months (October 2022) depending on your point of view.
The S&P 500 rallied +2.9% last week, led by large cap bank stocks, as well as cyclical energy, materials, and industrial stocks. Defensive groups such as staples and consumer defensives lagged. The S&P 500 is still about 1.5% off its December 6th all-time high, but is now up about +2% YTD, 2025. The lagging indexes of 2024 are leading YTD with the Dow Jones Industrial Average up +2.3%, the Russell 100 Value index up +3.5% and the tech heavy NASDAQ lagging, up +1.7% so far.
Year to date, the best sectors in the S&P 500 are energy +9.2%, materials +5%, and industrials +4.5%. Lagging sectors are staples -1%, technology -.2%, and real estate +1.0.
The U.S. markets are closed today for the MLK holiday
President Trump will be inaugurated later today.
Houston and its surrounding areas will likely be “shut down” Tuesday and Wednesday for our first major snow event (2-6 inches in the metro area) in decades. The OHFG investment team is use to working remotely, and we will continue monitoring portfolios, economic events, and earnings calls even if the office is closed for a day or two mid-week.
The out-going President and his administration continue to throw up last minute regulatory and business roadblocks on the way out the door. Last week, the Biden administration made constitutional history by declaring the long un-passed ERA, 28th Amendment, ratified and law of the land. I must have missed this week of 5th grade civics class, as I recall Congress having constitutional authority, not the President.
Interest rates moved lower across most maturities with the 10-year Treasury (linked to most mortgage rates) falling -14 basis points. The moved down in rates was triggered by bearish trader positioning into a low-enough U>S core CPI data release. Core inflation held at 3.2% y/y with month-to-month pricing decelerating. Prices ex food and energy rose +2.7%, breaking a streak of 4 months with readings over 3%.
Economic Indicators and Earnings Commentary
See above interest rate commentary. U.S. inflation remains above the Fed’s long term, stated goal of 2%, with the 3-, 6-, and annual trends of CPI still near 3%.
Inflation is proving sticky at the same time that the true labor markets (the BLS data will almost certainly be revised lower throughout 2025, as it has been revised materially lower for 2 years) are slowly weakening.
Initial jobless claims are released Thursday, January 23rd. A host of data is released Friday January 24th including, Manufacturing PMI’s, Michigan Consumer sentiment, and existing home sales.
4Q2024 earnings season started strong last week with most large banks/brokers/financials beating expectations (MS, GS, JPM, WFC, C). On the technology front, Taiwan Semi (TSM) reported sizzling demand for its leading edge 2-5 nanometer chip processes needed for making “AI” related (NVDA, AVGO, MRVL, AMD) chips. This week large cap names like Netflix (NFLX), Procter and Gamble (PG), American Express (AXP), and Johnson and Johnson (JNJ) report. Other names of interest this week include 3M (MMM), Capital One (COF), General Electric (GE), Untied Airlines (UAL), Abbott Labs (ABT), Halliburton (HAL), Union Pacific Rail (UNP), Freeport-Copper mining (FCX), and Verizon (VZ).
Global Market Trends/Commodities/Currencies
Most Central banks throughout the world are dovish and easing. The outliers are the U.S. Fed, dovish tilt and on hold, and Japan who is looking to raise rates later this week.
The price of a barrel of oil sits near $80/bbl.
Commodities rallied at the end of last week on stable US data as well as questionably stronger China data. Soft commodities such as grains are rallying on US and Brazilian weather, continued Russian/Ukraine fighting and stable to higher demand.
Bitcoin rallied to over $107k this morning.
The US Dollar fell last week on stable US data and the talk that Japan will raise rates this week.
Oak Harvest Weekly Stock Talk
Top Reasons for the “Weak” Start to 2025 in Stocks
Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.