January 15th, 2025: Weekly Market Review

1. Q4-2024’s earnings season starts Wednesday (1/15/25) with JPMorgan Chase’s earnings release. 

The Q4 2024 earnings season is poised to deliver the strongest growth in three years, with S&P 500 companies projected to post an 11.9% year-over-year increase in earnings. Leading the charge is the financial sector, expected to grow earnings by 38.9%, driven by favorable comparisons in banking. Communication services and technology sectors are also set to shine, with anticipated growth of 20.7% and 13.9%, respectively, reflecting demand for media, telecom, and digital solutions.  Revenue growth for the S&P 500 is forecasted at 4.6%, marking the 17th consecutive quarter of expansion. While technology companies are expected to lead this growth, elevated valuations remain a concern, with the index’s forward P/E ratio at 21.4, above its five-year average.   

However, consumer sentiment remains clouded by labor market uncertainties. Persistent announcements of layoffs across sectors have heightened anxiety, even as companies report improved earnings. These job cuts, often aimed at optimizing costs, signal potential vulnerabilities within the economy despite the rosy financial outlook.  Adding to the unease, many companies are beginning to lose pricing power. With inflation stabilizing and consumer resistance to higher prices growing, management teams face the challenge of sustaining profitability without relying on price increases. This shift forces businesses to focus inward, scrutinizing their operations for efficiency gains and cost reductions. The adage, “a dollar saved is a dollar earned,” becomes increasingly relevant in this context, as cutting expenses can directly bolster the bottom line.  This duality—rising earnings alongside consumer unease—underscores the complex interplay between macroeconomic conditions and corporate performance. While strong earnings are a positive indicator, sustained growth will depend on how effectively companies navigate operational challenges and restore consumer confidence in the labor market.  REF: WSJ, DailyShot

2. In a dynamic interest rate environment, incorporating the FolioBeyond Alternative Income and Interest Rate Hedge ETF (RISR) – Interest Rate Hedged ETFs – into your bond portfolio can provide critical protection against rising rates. 

Traditional bonds are vulnerable to interest rate increases, which erode their prices as yields climb. RISR mitigates this risk by employing strategies that benefit from rising rates, such as shorting Treasury futures or holding interest rate swaps.

By including RISR in the bond allocation, you diversify your portfolio’s exposure to interest rate risk while preserving potential upside. This hedge is particularly valuable during periods of economic uncertainty or Federal Reserve tightening cycles, when volatility in fixed-income markets is heightened.  Ultimately, RISR complements a core bond allocation by reducing duration risk and enhancing resilience, making it a pragmatic choice for investors seeking stability in uncertain markets.  Click onto picture below to access video. REF: RISR, Fact Sheet

**With the current macro-economic backdrop, below are areas we currently favor:

• Fixed Income – Short-term Corporates (Low-Beta)
• Fixed Income – Corporates High Yield as Opportunistic Allocation (Low-Beta)
• Businesses that contribute to and benefit from AI & Automation (Market-Risk)
• Financials (Market-Risk)
• Small Cap & Mid Cap Stocks (Market-Risk)
• Utilities (Market-Risk)
• Healthcare & Biotechnology (Market-Risk)
• Gold (Market-Risk)
• Industrials (Market-Risk)

3. The Consumer Electronics Show (CES) 2025 brought together over 4,500 exhibitors and 141,000 attendees, unveiling a mix of futuristic concepts and near-ready products. 

From AI-powered devices to autonomous vehicles, the event highlighted bold ideas shaping tomorrow.  While many innovations will remain concepts, a few, driven by public interest, will reach production and transform daily life. CES 2025 served as a reminder that consumer demand ultimately determines which ideas become reality.  CNET is a leading technology-focused media website and platform that provides news, reviews, and guides on a wide range of topics, including technology, consumer electronics, software, and digital trends.  This week, you can check out the Best of CES 2025 curated by CNET by clicking onto picture below.  REF: CES2025, CNET@CES

Click onto pictures below to access additional information on the Official 2025 Best of CES Winners Awarded by CNET Group.  REF: CNET

• Best AI: Nvidia Cosmos AI model

• Best transportation or mobility: Honda 0 Series

• Best laptop: Asus Zenbook A14

• Best TV or home theater: LG G5 OLED TV

• Best smart home or home tech: Roborock Saros Z70

• Best sustainability: Flint Paper Battery

• Best gaming: Lenovo Legion Go S

• Best wellness or fitness tech: Ozlo Sleepbuds (My Favorite)

• Best mobile: HMD OffGrid

• Best privacy or security: Ultraloq Bolt Mission

• Best weird tech: Kirin Electric Salt Spoon

• Best overall: Nvidia Cosmos AI model

4. World Watch

4A. President-elect Donald Trump has expressed a strong interest in acquiring Greenland, citing its strategic location and abundant natural resources. He has not dismissed the possibility of using economic or military measures to achieve this goal. Greenland, an autonomous Danish territory, is rich in rare earth minerals, oil, and gas, and occupies a pivotal position near the Arctic, making it a focal point for global powers like the U.S., China, and Russia. Denmark has opened private communication channels with Trump’s team to discuss potential military and economic agreements concerning Greenland, aiming to avoid public disputes. While Denmark is open to deeper cooperation, it firmly opposes selling the territory. Greenland’s Prime Minister, Múte Egede, has stated that Greenland has no interest in becoming part of the U.S. However, he expressed openness to strengthening ties with the U.S. concerning security and the exploitation of natural resources.  Trump’s renewed interest in Greenland has energized the island’s independence movement, with some leaders viewing the situation as an opportunity to push for greater autonomy from Denmark. Click onto picture below to access video.  REF: WSJ

4B. The European Central Bank (ECB) is countering investor expectations that stronger inflation, a robust U.S. jobs market, and economic uncertainty tied to Donald Trump will limit the room for interest rate cuts. Despite markets tempering their projections for rate reductions by both the ECB and the Federal Reserve, officials in Frankfurt remain resolute.  Governing Council members, such as Francois Villeroy de Galhau and Yannis Stournaras, have reaffirmed their forecast that the ECB’s deposit rate will decline to approximately 2% by mid-2025, down from its current level of 3%. This stance reflects their confidence in the ECB’s monetary strategy, regardless of external pressures.  The European Central Bank (ECB) has reinforced its focus on supporting economic growth in Europe through expected interest rate cuts, even as the specter of a potential trade war with the United States looms.  See item 4C for additional information on GDP growth in Euro Area.  REF: Bloomberg

4C. Below is an updated snapshot of the current global state of economy according to TradingEconomics as of 1/13/2025.  REF: TradingEconomics

• The unemployment rate in the United States went down to 4.1% in December of 2024 from 4.2% in the previous month, below market expectations of 4.2%.
• China’s annual inflation rate edged down to 0.1% in December 2024 from 0.2% in the previous month, aligning with market estimates and marking the lowest print since March.
• The annual inflation rate in India eased to 5.22% in December of 2024 from 5.38% in the previous month, loosely aligned with market expectations of 5.3%, and remaining within the RBI’s target of within 2 percentage points away from 4%.
• Annual inflation rate in Brazil came in at 4.83% in December 2024, little changed from 4.87% in November.

5. Quant & Technical Corner

Below is a selection of quantitative & technical data we monitor on a regular basis to help gauge the overall financial market conditions and the investment environment.

5A. Most recent read on the Fear & Greed Index with data as of 1/13/2024 – 8:00PM-ET is 27 (Fear).  Last week’s data was 35 (Fear) (1-100).  CNNMoney’s Fear & Greed index looks at 7 indicators (Stock Price Momentum, Stock Price Strength, Stock Price Breadth, Put and Call Options, Junk Bond Demand, Market Volatility, and Safe Haven Demand).  Keep in mind this is a contrarian indicator!  REF: Fear&Greed via CNNMoney

5B. St. Louis Fed Financial Stress Index’s (STLFSI4) most recent read is at –0.6291 as of January 9, 2025.  A big spike up from previous readings reflecting the recent turmoil in the banking sector.  Previous week’s data was -0.6404.   This weekly index is not seasonally adjusted.  The STLFSI4 measures the degree of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Each of these variables captures some aspect of financial stress. Accordingly, as the level of financial stress in the economy changes, the data series are likely to move together.  REF: St. Louis Fed

5C. University of Michigan, University of Michigan: Consumer Sentiment for September [UMCSENT] at 71.8, retrieved from FRED, Federal Reserve Bank of St. Louis, December 20, 2024.  Back in June 2022, Consumer Sentiment hit a low point going back to April 1980.  REF: UofM

5D. The Chicago Fed National Activity Index (CFNAI) increased to –0.12 in November from –0.50 in October. Three of the four broad categories of indicators used to construct the index increased from October, but all four categories made negative contributions in November. The index’s three-month moving average, CFNAI-MA3, decreased to –0.31 in November from –0.27 in October.  REF: ChicagoFed, November’s Report

5E. (12/19/2024) The Conference Board Leading Economic Index (LEI) for the US increased by 0.3% in November 2024 to 99.7 (2016=100), nearly reversing its 0.4% decline in October. Over the six-month period between May and November 2024, the LEI declined by 1.6%, slightly less than its 1.9% decline over the previous six months (November 2023 to May 2024). The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by around 7 months. Shaded areas denote recession periods or economic contractions. The dates above the shaded areas show the chronology of peaks and troughs in the business cycle. The ten components of The Conference Board Leading Economic Index® for the U.S. include: Average weekly hours in manufacturing; Average weekly initial claims for unemployment insurance; Manufacturers’ new orders for consumer goods and materials; ISM® Index of New Orders; Manufacturers’ new orders for nondefense capital goods excluding aircraft orders; Building permits for new private housing units; S&P 500® Index of Stock Prices; Leading Credit Index™; Interest rate spread (10-year Treasury bonds less federal funds rate); Average consumer expectations for business conditions.  REF: ConferenceBoard, LEI Report for November  (Released on 1/6/2025)

5F. Probability of U.S. falling into Recession within 3 to 4 months is currently at 58.9% (with data as of 01/07/2025 – Next Report 01/21/2025) according to RecessionAlert Research.  Last release’s data was at 67.2%.  This report is updated every two weeks. REF: RecessionAlertResearch

5G. Yield Curve as of 1/13/2025 is showing Normal.  Spread on the 10-yr Treasury Yield (4.76%) minus yield on the 2-yr Treasury Yield (4.38%) is currently at 38 bps.  REF: Stockcharts   The yield curve—specifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill—is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead.  REF: NYFED

5H. Recent Yields in 10-Year Government Bonds.  REF: Source is from Bloomberg.com, dated 1/13/2025, rates shown below are as of 1/13/2025, subject to change.

The 10-Year US Treasury Yield… REF: StockCharts1, StockCharts2

10-Year Real Interest Rate at 1.81261% as of 12/11/24.  REF: REAINTRATREARAT10Y

Federal government Interest Payments increased $20B+ to $1.1166 Trillion as of Q3-2024.   REF: FRED-A091RC1Q027SBEA

Interest payments as a percentage of GDP increased from 1.84853 in 2022 to 2.37794 as of 10/18/24.   REF: FRED-FYOIGDA188S

5I. (1/13/2025) Today’s National Average 30-Year Fixed Mortgage Rate is 7.26% (All Time High was 8.03% on 10/19/23).   Last week’s data was 7.10%.  This rate is the average 30-year fixed mortgage rates from several different surveys including Mortgage News Daily (daily index), Freddie Mac (weekly survey), Mortgage Bankers Association (weekly survey) and FHFA (monthly survey).  REF: MortgageNewsDaily, Today’s Average Rate

The recent spike in the 30-year fixed-rate jumbo mortgage to 7.26%, compared to Freddie Mac’s rate at 6.93% and the Mortgage Bankers Association (MBA) rate at 6.75%, highlights key differences in the mortgage market. Jumbo mortgages, which exceed the conforming loan limits set by government agencies like Freddie Mac, typically carry higher interest rates because they are riskier for lenders. These loans are not backed by government entities, which increases the risk for lenders and, consequently, leads to higher rates. In contrast, Freddie Mac and MBA provide averages for conforming loans, which meet federal guidelines and have lower risk due to government backing, keeping their rates lower.

(1/13/25) Housing Affordability Index for Nov = 99 // Oct = 102.3 // Sep = 105.5 // Aug = 98.6 // July = 95 // June = 93.3 // May = 93.1 // April = 95.9 // March = 101.1 // February = 103.0. Data provided by Yardeni Research.  REF: Yardeni

5J. Velocity of M2 Money Stock (M2V) with current read at 1.390 as of (Q3-2024 updated 12/19/2024).   Previous quarter’s data was 1.389.  The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.  Current Money Stock (M2) report can be viewed in the reference link.   REF: St.LouisFed-M2V

M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. Board of Governors of the Federal Reserve System (US), M2 [M2SL], retrieved from FRED, Federal Reserve Bank of St. Louis; Updated on November 26, 2024.  REF: St.LouisFed-M2

Money Supply M0 in the United States increased to 5,616,500 USD Million in November from 5,567,200 USD Million in October of 2024. Money Supply M0 in the United States averaged 1,160,672.82 USD Million from 1959 until 2024, reaching an all-time high of 6,413,100.00 USD Million in December of 2021 and a record low of 48,400.00 USD Million in February of 1961.   REF: TradingEconomics, M0

5K. In November, the Consumer Price Index for All Urban Consumers rose 0.3 percent, seasonally adjusted, and rose 2.7 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in November (SA); up 3.3 percent over the year (NSA). December 2024 CPI data are scheduled to be released on January 15, 2024, at 8:30AM-ET.  REF: BLS, BLS.GOV

 5L. Technical Analysis of the S&P500 Index.  Click onto reference links below for images.

• Short-term Chart: Bullish to Falling on 1/13/2025 – REF: Short-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Medium-term Chart: Bullish on 1/13/2025 – REF: Medium-term S&P500 Chart by Marc Slavin (Click Here to Access Chart)

• Market Timing Indicators – S&P500 Index as of 1/13/2025 – REF: S&P500 Charts (7 of them) by Joanne Klein’s Top 7 (Click Here to Access Updated Charts)

• A well-defined uptrend channel shown in green with S&P500 still on up trend.  REF: Stockcharts

• S&P500 and CBOE Volatility Index (VIX) as of 1/13/2025.  REF: FRED, Today’s Print

5M. Most recent read on the Crypto Fear & Greed Index with data as of 1/14/2025au is 63 (Greed).  Last week’s data was 78 (Extreme Greed) (1-100).  Fear & Greed Index – A Contrarian Data.  The crypto market behavior is very emotional. People tend to get greedy when the market is rising which results in FOMO (Fear of missing out). Also, people often sell their coins in irrational reaction of seeing red numbers. With the Crypto Fear and Greed Index, the data try to help save investors from their own emotional overreactions. There are two simple assumptions:

• Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
• When Investors are getting too greedy, that means the market is due for a correction.

Therefore, the program for this index analyzes the current sentiment of the Bitcoin market and crunch the numbers into a simple meter from 0 to 100. Zero means “Extreme Fear”, while 100 means “Extreme Greed”.  REF: Alternative.me, Today’sReading

Bitcoin – 10-Year & 2-Year Charts. REF: Stockcharts10Y, Stockcharts2Y