AE Wealth Management: Weekly Market Insights | 1/5/25 – 1/11/25
Weekly Market Commentary
THE WEEK IN REVIEW: Jan. 5 – 11, 2025
Holiday joy didn’t linger into January
Well, that was not an auspicious beginning to the year. The U.S. stock market retreated in the first full week of 2025 after starting off on an optimistic note due to speculation about softer Trump administration tariffs. However, the mood shifted after those speculations were refuted and concerning economic data — primarily around inflation and jobs — emerged.
On the inflation side, the ISM Services Index climbed to 54.1 in December, mostly due to surging prices.1 Then Federal Reserve Governor Michelle Bowman noted that inflation has held “uncomfortably above” the Fed’s 2% long-term target (although she did acknowledge that significant progress had been made).2 The Fed’s December meeting minutes backed up this sentiment, revealing officials anticipate the path to reaching target inflation “could take longer than previously anticipated.”3 In other words, another rate cut at the late January meeting seems unlikely.
Markets also didn’t seem to like the latest employment numbers, which painted a picture of continued economic resilience. The Bureau of Labor Statistics’ nonfarm payroll report showed an increase of 256,000 jobs, way higher than the expected +155,000.4 The private sector also added 122,000 jobs, according to ADP.5 Meanwhile, the unemployment rate improved to 4.1% and weekly jobless claims decreased to 201,000, an 11-month low.6,7
The jobs report triggered a response in the bond market and pushed Treasury yields higher, with the 10-year note reaching its highest level since November 2023.8 The pressure extended to mortgage rates, with 30-year rates once again surpassing 7% by the end of the week.9
All the data paints the picture of an economy at a crossroads. Strong employment and persistent inflation will likely delay anticipated (and priced-in) rate cuts, which have increased market uncertainty and volatility in the past couple of weeks. If these continue, markets may need to adjust their expectations for monetary policy in the coming months. Unfortunately, that wasn’t what markets wanted to hear headed into a new year — and the major indexes all ended the week down significantly as a result.
Coming this week
- Inflation will once again be a market mover this week, as we get the newest Producer Price Index (PPI) and Consumer Price Index (CPI) numbers. CPI is forecasted to come in at 2.9% — still well above the Fed’s target 2% level.10 We’ll hear what they think about the latest numbers as several Fed officials make the speaking rounds on Tuesday and Wednesday.
- Other data scheduled for this week won’t be nearly as significant (or interesting). On Thursday, we’ll see U.S. retail sales, the import price index, business inventories and the Philadelphia Fed manufacturing survey. Friday will feature housing starts, building permits, industrial production and capacity utilization.
Index Performance Returns % | |||||
| S&P 500 | -1.94% | -0.93% | 21.82% | 7.66% | 12.28% |
| NASDAQ | -2.34% | -0.77% | 28.00% | 8.64% | 15.86% |
| DJIA | -1.86% | -1.42% | 11.26% | 5.15% | 7.79% |
Interest Rates: | |||||
| UST 10 YR Government Bond Yield | 4.76% | 4.63% | |||
| Germany 10 YR | 2.57% | 2.40% | |||
| Japan 10 YR | 1.21% | 1.11% | |||
| 30 YR Mortgage | 7.03% | 6.99% | |||
| Oil | $78.16/ppb | $70.27/ppb | |||
| Regular Gas | $3.07/ppg | $3.03/ppg | |||
| All data as of Jan. 10, 2025 | |||||
Sources:
1 PR Newswire. Jan. 7, 2025. “Services PMI® at 54.1%; December 2024 Services ISM® Report on Business®.” https://www.prnewswire.com/news-releases/services-pmi-at-54-1-december-2024-services-ism-report-on-business-302343431.html. Accessed Jan. 12, 2025.
2 FederalReserve.gov. Jan. 9, 2025. “Reflections on 2024: Monetary Policy, Economic Performance, and Lessons for Banking Regulation.” https://www.federalreserve.gov/newsevents/speech/bowman20250109a.htm. Accessed Jan. 12, 2025.
3 FederalReserve.gov. Jan. 8, 2025. “Minutes of the Federal Open Market Committee: December 17-18, 2024.” https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20241218.pdf. Accessed Jan. 12, 2025.
4 Bureau of Labor Statistics. Jan. 10, 2025. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed Jan. 12, 2025.
5 ADP Research. December 2024. “ADP® National Employment Report.” https://adpemploymentreport.com/. Accessed Jan. 12, 2025.
6 Bureau of Labor Statistics. Jan. 10, 2025. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed Jan. 12, 2025.
7 Lucia Mutikani. Reuters. Jan. 8, 2025. “US weekly jobless claims at 11-month low amid labor market stability.” https://www.reuters.com/world/us/us-weekly-jobless-claims-unexpectedly-fall-2025-01-08/. Accessed Jan. 12, 2025.
8 CNBC. “U.S. 10 Year Treasury.” https://www.cnbc.com/quotes/US.10. Accessed Jan. 12, 2025.
9 Jeff Ostrowski. Bankrate. Jan. 10, 2025. “Rates increase | Current mortgage and refinance rates for January 10, 2025.” https://www.bankrate.com/mortgages/todays-rates/mortgage-rates-for-friday-january-10-2025/. Accessed Jan. 12, 2025.
10 MarketWatch. “U.S. Economic Calendar.” https://www.marketwatch.com/economy-politics/calendar. Accessed Jan. 12, 2025.
AE Wealth Management, LLC (“AEWM”) is an SEC Registered Investment Adviser (RIA) located in Topeka, Kansas. Registration does not denote any level of skill or qualification. The advisory firm providing you this report is an independent financial services firm and is not an affiliate company of AE Wealth Management, LLC. AEWM works with a variety of independent advisors. Some of the advisors are Investment Adviser Representatives (IAR) who provide investment advisory services through AEWM. Some of the advisors are Registered Investment Advisers providing investment advisory services that incorporate some of the products available through AEWM.
Information regarding the RIA offering the investment advisory services can be found on https://brokercheck.finra.org/.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The information and opinions contained herein, provided by third parties, have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by AE Wealth Management.
This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. None of the information contained herein shall constitute an offer to sell or solicit any offer to buy a security or insurance product.
1/25 – 4122384-2