Weekly Market Update – January 24, 2025

Quick Takes

• The major indexes finished in positive territory for a second consecutive week. The S&P 500 Index finished the week up +1.7%, the best start to a presidential term since the Reagan administration in 1985. It’s gained +4.7% over the last two-week stretch.
• The U.S. dollar had its worst week since November 2023, falling -1.7%. That, along with the lack of draconian tariff announcements helped stocks overseas rally. The MSCI EAFE Index was up +3.2%, and the MSCI Emerging Markets Index was up +1.9%.
• U.S. Treasury yields were down marginally, with 10-year U.S. Treasury yield down just -1 basis point to finish the week at 4.62%. The Bloomberg U.S. Aggregate Bond Index saw a mild +0.1% gain, while the Bloomberg Global Aggregate ex U.S. Bond Index was +1.5%.

Source: Bloomberg. Data as of January 24, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks and Bonds Rally as Dollar Falls

The major indexes finished in positive territory for a second consecutive week. The S&P 500 Index finished the week up +1.7%, the best start to a presidential term since the Reagan administration in 1985. It also notched its first record closing high of the new year after setting 57 new highs in 2023. It’s gained +4.7% over the last two-week stretch. The Nasdaq Composite Index also gained +1.7%, while the small-cap Russell 2000 Index was up +1.4%. Solid fourth quarter earnings reports and the lack of new oppressive tariffs by the Trump administration (although Trump did say that Canada and Mexico could be targeted as soon as February), helped buoy investors’ spirits. In an interview at the Oval Office, Trump said he’d “rather not” put tariffs on China. Trump also announced the Stargate Project, a $500B, four-year initiative to build out artificial intelligence (AI) infrastructure, which added to the bullishness. However, that is now in question following the weekend release of a new, competing Chinese AI alternative, DeepSeek, developed with substantially less infrastructure and investment, yet it has compelling performance specifications.

The U.S. dollar had its worst week since November 2023, falling -1.7%. That, along with the lack of draconian tariff announcements, helped stocks overseas rally too. Developed market international stocks (as measured by the MSCI EAFE Index) were up +3.2%. Emerging market stocks (the MSCI Emerging Markets Index) were up +1.9%. Most major European markets saw decent gains for the week, with the STOXX Europe 600 Index up +1.2% for the week. France’s CAC 40 Index climbed +2.8%, Germany’s DAX gained +2.4%, but the U.K.’s FTSE 100 Index was little changed, and Italy’s FTSE MIB dipped -0.2%. In Asia, Japan’s Nikkei 225 Index rose +3.9%, even after the Bank of Japan increased the policy rate to +0.5%, the highest level since the 2008 Global Financial Crisis. Chinese stocks saw a modest +0.3% rise for the Shanghai Composite Index. 

U.S. Treasury yields were down marginally, with 10-year U.S. Treasury yield down just -1 basis point to finish the week at 4.62%. The Bloomberg U.S. Aggregate Bond Index saw a mild +0.1% gain, while non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were up +1.5% for the week.

The Week Ahead

After several shortened weeks and light economic calendars, activity picks up substantially this week. A heavy dose of housing data kicks off Monday with New Home Sales, then the competing S&P CoreLogic and FHFA House Price Indexes on Tuesday, weekly MBA mortgage applications Wednesday, and Pending Home Sales on Thursday. Beyond housing, data releases to watch include the Census Bureau‘s Durable Goods Report for December on Tuesday, the Bureau of Economic Analysis‘ advance estimate of fourth-quarter Gross Domestic-Product (GDP) on Thursday, and the BEA’s Personal Consumption Expenditures Price Index for December on Friday. It is also a busy week for central banks. We get interest-rate decisions from the Federal Reserve (Fed) and Bank of Canada (BoC) on Wednesday and the European Central Bank (ECB) on Thursday will keep investors busy. Markets are overwhelmingly pricing in no change in interest rates from the Fed, while the BoC and ECB are expected to cut their benchmark interest rates.

Fourth-quarter earnings season shifts into high gear this week. On Monday, AT&T and Nucor report, followed by Boeing, General Motors, Lockheed Martin, and Starbucks on Tuesday. Wednesday is particularly busy with ASML Holdings, Danaher, General Dynamics, IBM, Lam Research, Meta Platforms, Microsoft, Tesla, T-Mobile US, Waste Management, and Western Digital all reporting. Apple, Caterpillar, Comcast, Intel, Mastercard, Southwest Airlines, United Parcel Service, and Visa publish quarterly results on Thursday, then Charter Communications, Chevron, and Exxon Mobil close the week on Friday.

Chart of the Week

The National Association of Realtors (NAR) reported that Existing Home Sales rose +2.2% in December to a seasonally adjusted annual rate of 4.24 million units, above expectations for 4.20 million units and up from the 4.15 million units reported the prior month. It was the third month in a row of increases, and December is typically a slow month in the real estate market, so the increase in activity is noteworthy. Year-over-year existing sales were up +9.3%, the biggest annual gain since June 2021, up from the +6.1% annual rate the prior month. But 2024 was the lowest calendar year of existing home sales since 1995. As shown in the chart below, home sales fell in 2024 to a rate of 4.06 million. Higher mortgage rates and record home prices kept sales subdued for the second straight year. The Median Existing Home Price was steady at $404,400 from the prior month. Year-over-year, home prices were up +6.0%. For calendar year 2024, the median price of homes sold hit a new high of $407,500. The Inventory of Homes for Sale was up +0.7% from the prior month and +19% from last year, to 1.37 million units, which is the highest level since October 2021. Unsold Inventory is at a 3.8-month supply, down from 4.2 months the prior month. Homes Listed for Sale remained on the market for 35 days on average, up from 32 days the previous month. First-Time Buyers were 31% of sales in the month, up from 30% the month before. Historically, these buyers make up closer to 40% of home sales, but affordability has been hit hard in the last two years due to fast-rising home prices and higher mortgage rates. All-Cash Sales rose to 28% of transactions from 25% the prior month. Homes sold above list price were 16%, down slightly from 18% a month ago. For the month, sales rose in three of the four regions: the Northeast was up +3.9%, the South was up +3.2%, the West was up +2.6%, and the Midwest was down -1.0%. “This is happening at a time when mortgage rates are not behaving,” said Lawrence Yun, chief economist at the NAR. 

U.S. Homes Sales in 2024 Fell to Lowest Level in Nearly 30 Years

Annual U.S. Existing Home Sales

Source: National Association of Realtors, The Wall Street Journal.

Did You Know?

MONEY OFF THE SIDELINES – Global Exchange Traded Funds (ETFs) experienced record net inflows in 2024 and were positive for every month, taking the current streak to 67 months. 2024’s record net ETF inflow of $1.88 trillion was +46% above the prior record annual inflow of $1.29 trillion in 2021. (Source: ETFGI)

GHOST JOBS – “Ghost job” is a term used to describe an advertised position that an employer has no intent to fill. According to hiring platform Greenhouse, between 18% and 22% of jobs advertised in 2024 never got filled, and 70% of the companies using its platform in Q2 2024 posted at least one ghost job. (Source: Greenhouse, The Wall Street Journal)

FROM BROKER TO ADVISOR – While U.S. search interest for the terms “stock broker” and “financial advisor” on Google was about the same 20 years ago, searches for “financial advisor” have more than doubled since then, while searches for “stock broker” have fallen by two-thirds. (Source: Google Trends)

This Week in History

DEEP CUT – On January 22, 2008, as the subprime crisis gathered steam, the Federal Reserve chairman, who normally tried to avoid reacting directly to financial markets, saw global markets in free fall and abruptly orchestrated the single deepest rate cut, -0.75%, in the Fed’s main interest-rate target in more than 20 years. (Source: The Wall Street Journal)

Economic Review

• The preliminary “flash” S&P Global U.S. Composite Purchasing Managers Index (PMI) showed economic growth slipped to start the year, falling to 52.4 from a 9-month high of 55.4 the prior month. Wall Street was expecting an improvement to 55.6. Levels above 50 indicate economic expansion, while levels below 50 indicate contraction. The Manufacturing PMI did improve, rising to 50.1 from 49.4 the prior month, exceeding expectations for 49.8. It was the first time manufacturing topped 50 in seven months. However, the Services PMI fell to 52.8 from a 38-month high of 56.8 the prior month and was well short of expectations for a 56.5 reading. The service side of the economy — such as retailers, banks, and hospitals — employs most Americans and has driven the expansion since the pandemic. The S&P Global “flash” PMI surveys are among the first indicators of each month to give a sense of how well the U.S. economy is doing. Purchasing managers said they were mostly optimistic about the future, especially in the manufacturing sector. They expect orders to hit the highest level in three years, but output growth slowed, and price pressures rose. Employment jumped higher on sustained optimism as companies stepped up efforts to hire more workers. Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said, “Uncertainty in the lead up to the presidential election has been replaced with optimism about the future.” 
• The final reading of the January University of Michigan Consumer Sentiment Index slipped to 71.1 from the preliminary reading of 73.2 two weeks ago, where it was expected to remain. The final reading of December was 74.0. The Current Economic Conditions component fell sharply to 74.0 from the initial estimate of 77.9 and is down from the prior month’s 75.1 final reading. The Consumer Expectations component was down to 69.3 from the initial estimate of 70.2 and the prior month’s final reading of 73.3. One-year inflation expectations were unchanged from the preliminary reading of +3.3%, up from the prior month’s level of +2.8%. The five-year inflation expectations level was +3.2%, a tick down from the +3.3% initial estimate and up from prior month’s final reading of +3.0%. 
• The Conference Board’s Leading Economic Index (LEI) inched down by -0.1% in December to 101.6 from an upwardly revised +0.4% the prior month (originally reported at +0.3%). That was in line with Wall Street forecasts. Breadth of the index was fair, with 5 of the 10 indicators tracked positive for the month. The decline was attributed to lower consumer confidence, weak manufacturing orders, higher initial unemployment claims, and fewer building permits. On the positive side, six- and twelve-month growth rates were less negative, suggesting fewer headwinds to the U.S. economy ahead. The LEI Coincident Index improved by +0.4, after five straight months at +0.1%, while the LEI Lagging Index rose by +0.1% after rising +0.3% the prior month.
• The Kansas City Fed Manufacturing Survey was unchanged at -5 in January after the prior month was revised down from -4. That was worse than expectations for flat (0.0) reading. The component indexes that comprise the headline were mixed. The Production index fell to -9 from -6, New Orders improved to -6 from -16, Number of Employees was steady at +1, and the Average Employee Workweek rose to +1 from -10. The Prices Paid for raw materials index was unchanged at 18 after December’s reading was revised slightly higher. The Kansas City Fed Service Sector Outlook Survey fell to -4 from +4 the prior month (revised up from +2).
• Weekly MBA Mortgage Applications were essentially flat at +0.1% for the week ending January 17, following a +33.3% surge the prior week. The Purchase Index inched up +0.6% after soaring +26.9% the prior week. The Refinance Index dipped -2.9% following the prior week’s +43.5% jump. The average 30-Year Mortgage Rate slipped to 7.02% from 7.09% the prior week, breaking five straight weeks of increases.
• Weekly Initial Jobless Claims rose +6,000 to 223,000 for the week ending January 18, worse than expectations for claims of 220,000. The prior week was unrevised. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose +46,000 to 1,899,000 in the week ending Jan 11, worse than expectations of 1,853,000 claims. Last week’s reading of 1,859,000 was revised lower to 1,853,000.

Asset Class Performance

Source: Bloomberg.

Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 30% US Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.