Market Update for January 21, 2025

And once again, we have a new President.  My clientele spans the gambit from thrilled to distraught, much like the populace.  I try to keep a steady hand and remain objective about what happens in politics. Let’s take a minute to look at the markets and the potential implications.

Interest rates are lower by 0.75% than they were mid-September 2024 on the overnight lending rate, but longer rates have stubbornly moved higher over the same span.  CD rates have reduced to the low 4% range, but mortgage rates remain about 7% on the 30-year with no points.  Trump just announced a national energy emergency with the US at record domestic oil production.  The national average for gasoline is $3.125, the same as it was in March 2008(!). We are not actually in a national energy emergency- far from it.

The economy could always be better, but taking a static snapshot it is “fine.” Unemployment is 4-5% and inflation around 3%, both historically appeasing numbers for economists.  GDP growth is around 2% per annum, as it has been for years ex-Covid.

Stocks are up about 3% since the New Year, coming off a solid 23% return in 2024 (as measured by the S&P 500).  As noted many times in this forum, tech stocks dominate most large cap indices including the S&P 500.  This implies that the broad stock market will not crumble if tech stays afloat, but also that a tech wreck would take down the broader indices- a true double-edged sword.

In my opinion, the most important decisions coming from the new Trump White House are those related to tariffs.  How big are they, where, and for how long do they stay are anyone’s guess.  I will react, but in this environment I will not predict.

I believe the stock market in aggregate will be sympathetic to the incoming Republican agenda and give it some time- several months, not years- to pass new legislation and make its changes.  January is thus far progressing with fits and starts but, but progressing nonetheless.

I do not expect a stock market comeuppance before the summer, but it feels to me like we ARE due for a correction of some significance starting later in 2025 or early 2026.  Can we effectively trade around this potential period, or should we even bother to “get out” knowing we would be looking to “get back in?"  Time will tell, but also it depends on the client’s situation and the product in question- needless to say, I continue to lack clairvoyance.  

As Chuck used to quote Larry Kudlow in ending our newsletters: "keep the faith, faith is the spirit."