January 12, 2025
Volume 12, Issue 02
Weekly Recap
U.S. equities declined last week. Small-cap stocks underperformed their large-cap peers for the fifth of the past six weeks, as the Russell 2000 dipped into correction territory on Friday morning. As measured by Russell 1000 indexes, value stocks held up better than their growth counterparts. The Nasdaq Composite fell 2.34 percent, its biggest weekly drop since mid-November.
Last week started on a positive note following a report that the incoming Trump administration’s proposed stance on tariffs was likely to be softer than previously indicated, which led to most indexes finishing higher on Monday. However, optimism faded throughout the week after President-elect Donald Trump refuted these reports and several pieces of economic data fueled concerns about stubborn inflation.
On Tuesday, the Institute for Supply Management reported its Services Purchasing Managers’ Index, a measure of economic activity in the services sector. The index came in at 54.1 for the month of December, two percentage points higher than November’s reading (readings above 50 indicate expansion). Notably, the component of the index that measures prices paid by services organizations for materials and services increased by 6.2 percentage points to 64.4, stoking fears that progress on bringing down inflation has stalled and that interest rates could remain “higher for longer.”
Adding to these fears, Federal Reserve Governor Michelle Bowman noted in a speech on Thursday that inflation has held “uncomfortably above” the Fed’s 2 percent long-term target and that while the Fed made significant progress in 2023, there are still upside risks to inflation. Minutes from the Fed’s December policy meeting, released Wednesday, echoed this sentiment, and indicated that most officials were comfortable holding rates steady at their upcoming meeting in January, as “almost all participants judged that upside risks to the inflation outlook had increased.”
The economic calendar wrapped up Friday morning with the Labor Department’s closely watched monthly nonfarm payrolls report for December. The report indicated that the U.S. economy added 256,000 jobs during the month, well ahead of consensus expectations for 155,000. The unemployment rate was down a smidgen at 4.1 percent, and wages grew 3.9 percent year-over-year. The December data cap off a resilient year for U.S. labor markets despite facing several headwinds and seemingly provide Fed officials with another data point in favor of moderating the pace of rate cuts. Stocks turned sharply lower on Friday following the jobs data release, solidifying the major indexes’ losses for the week. U.S. Treasury yields were higher heading into Friday and jumped further following the blowout jobs report, with the benchmark 10-year U.S. Treasury note touching its highest intraday yield level since November 2023 on Friday morning.T-bills mostly held up; the belly of the yield curve was hardest hit.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
The U.S. labor market has found its footing, a relief to households and businesses but a growing cause for concern in financial markets. The U.S. economy added 256,000 jobs in December and the unemployment rate edged down to 4.1 percent, the Labor Department announced Friday. Last month’s gain in nonfarm payrolls was the biggest since March and well above the 155,000 jobs that economists had expected. The unemployment rate was also better than the expected 4.2 percent. However, October and November payrolls were revised down by 8,000 combined, the participation rate was unchanged, and the employment population ratio increased.
According to ADP, private employment increased by 122,000 in December.
In the week ending January 4, the advance figure for seasonally adjusted initial jobless claims was 201,000, a decrease of 10,000 from the previous week’s unrevised level of 211,000. The 4-week moving average was 213,000, a decrease of 10,250 from the previous week’s unrevised average of 223,250.
FOMC Minutes: “The process [of reaching inflation target] could take longer than previously anticipated.”
The average new 30-year fixed-rate mortgage cost 6.93 percent last week, Freddie Mac announced Thursday. That is the most expensive rate since July. Mortgage rates have been stuck firmly above 6 percent since late 2022, following a decade when rates in the 3-to-4 percent range were the norm.
President Joe Biden signed the Social Security Fairness Act last Sunday afternoon at an event at the White House. The Social Security Fairness Act repeals the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) provisions of Social Security. Here is what financial advisors should do now. In 2023, according to time use data from the Bureau of Labor Statistics, just 4.1 percent of Americans attended or hosted a social event over an average weekend or holiday, which is down by 35 percent since 2004, when 5.6 percent indulged.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- Why people over the age of 55 are the new problem generation (The Economist)
- 2035: An Asset Allocator Looks Back Over the Last Ten Years (Cliff Assness)
- The State of Retirement Income: 2024 (Morningstar)
This is the best thing I’ve read recently. The scariest. The sickest. The saddest. The funniest (unless it’s this). The most thoughtful. The most insightful. The best shade. Moo Deng. The “everything” chart.
On August 13, 1966, radio station KLUE in Longview, Texas, scheduled the nation’s first “Beatles Bonfire.” Teens were urged to bring their Beatles records, posters, and the like, to the station, where they were piled high and set on fire. The very next day, the radio station was struck by lightning.
“A year from now you may wish you had started today.” ~ Karen Lamb
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor. This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets. Madison Avenue Securities, LLC | 13500 Evening Creek Drive N, Suite 555 | San Diego, CA 92128 US