Happy New Year! It’s great to be back with the first blog of 2025. We took a short break last week, but now it’s time to dive into what’s been going on in the markets and what to watch in the days ahead. Let’s get started!
Highlights from Last Week
Despite the holiday season, there were a few key updates worth noting:
- Manufacturer Confidence: Confidence among manufacturers improved more than expected in December, with the ISM Manufacturing Index rising to 49.3. This suggests a gradual recovery, even if the index remains slightly below the 50 mark, that signals expansion.
- Pending Home Sales: November was a strong month, with sales jumping 2.2% compared to expectations of just 0.7%. That’s five consecutive months of growth!
- Auto Sales: December saw auto sales hit their highest level since May 2021, with an annualized total of 16.8 million units. This is a positive sign for the industry heading into the new year.
Not everything was rosy, though. Construction spending remained flat in November, highlighting a potential area to monitor in 2025.
Market Snapshot
Here’s a quick look at how markets are shaping up:
Equity Markets
Global equity markets started the year on a cautious note:
- Winners: Energy, utilities, and real estate sectors showed strength.
- Losers: Materials, consumer discretionary, and staples sectors underperformed.
Even with some sectors gaining, international markets struggled, weighed down by a strong U.S. dollar and slower economic growth in China and Europe.
Fixed Income
In the bond market, the Treasury yield curve steepened slightly:
- The 2-year Treasury yield fell to 4.28%, while the 10-year dipped to 4.6%.
- The 30-year Treasury held steady at 4.81%.
The Federal Reserve has signaled that rates may remain elevated throughout 2025, which could influence fixed-income trends in the coming months.
What to Watch This Week
Here’s what’s on the horizon:
- Tuesday: The ISM Services Index for December will be released. Expectations are for service sector confidence to bounce back after a dip in November.
- Wednesday: Minutes from December’s Federal Open Market Committee (FOMC) meeting will be published. Keep an eye on these for insights into the Fed’s thinking on inflation and interest rates.
- Friday: Two key reports will close out the week:
- Employment Report for December: Economists expect 153,000 jobs to have been added, signaling continued strength in the labor market.
- Consumer Sentiment Survey: Preliminary results from the University of Michigan’s January survey will provide clues about how Americans feel about the economy.
Key Takeaways
- The markets are kicking off 2025 with a mix of caution and optimism. Manufacturing and auto sales have shown strength, but global uncertainties linger.
- This week, focus on economic data, particularly employment numbers and the Fed’s meeting minutes, to gauge where things might be headed next.
Tom Hine is a CERTIFIED FINANCIAL PLANNER® and owner of Capital Wealth Management. He works with individuals and families on financial planning, retirement strategies, and investment management. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Connect with Tom.
Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent. One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.
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