AE Wealth Management: Weekly Market Insights | 2/16/25 – 2/22/25
Weekly Market Commentary
THE WEEK IN REVIEW: Feb. 16-22, 2025
Markets post new records but retreat sharply to end week
With markets closed last Monday for Presidents Day, the tug-of-war between tariffs and inflation versus earnings took a break as calm returned to the market in the first half of the week. We saw record highs in the S&P 500 on Tuesday (6,129.58) and again on Wednesday (6,144.15), the third record close for the S&P 500 in 2025.1 The Dow was also closing in on 45,000 on Wednesday while the Nasdaq was above 20,000 for the third straight session as it inched toward its record from last December.2,3 Plus, yields retreated after the Federal Reserve meeting minutes showed an “easing bias” (more on that in the next section).4
But the calm was shattered on Thursday and Friday. First, Walmart topped earnings and revenue estimates for its fiscal fourth quarter but said profit growth will slow in the current fiscal year even as sales continue to climb.5 The news whacked the company’s stock by more than 6% and caused markets to get a bit jittery; at one point the Dow shed over 600 points before recouping some of the losses by day’s end.
Then the week ended on a sour note. Markets went lower after learning the Justice Department is investigating UnitedHealth Group’s Medicare billing practices.6 Plus, consumer sentiment came in below expectations as fears from higher prices via increased tariffs weighed on the U.S. consumer. To top it all off, existing home sales missed consensus estimates in January.7
With so much negativity, the market blew a gasket, and the Dow shed nearly 700 points on Friday. What started out as a promising week ended with the worst day so far this year for markets. We’ve said many times that there’s nothing more fragile than markets hitting new highs. The psychology at work is as follows:
- The market just hit a new high.
- How can the markets possibly go higher?
- What can go wrong?
- I am jumping out at the first hint of something bad.
That’s the cycle. There are any number of things that can go wrong, such as: How will the proposed tariffs impact inflation? Will inflation come down? Will the Fed ever cut rates again — and, if so, when? Will governmental cost-cutting drive us into a recession? And so on.
The problem? Every time we hit a new high and decide to get out, we risk missing out on the next one. Last year the S&P 500 hit 57 new record highs.8 If you got out every time the S&P 500 set a new record, you likely didn’t have a year investing in 2024. Yes, sometimes you will be right — but many more times you’ll be missing out.
Investing is a long-term prospect and isn’t designed to provide immediate gratification. When markets get touchy, you’ll be tempted to get out and maybe even feel discomfort. But if you stick to your plan and work the averages, you’ll come out ahead in the long run. Last week was a classic example of just how fragile markets are when we hit new records.
Meeting minutes reveal Fed’s concerns
The minutes from the Fed’s most recent meeting indicated they want to see “further progress on inflation” before cutting rates again.9 That was good enough news to boost markets and make yields dip slightly by mid-week before they did an about-face on Thursday and Friday. But a majority of Fed members endorsed a “careful approach” to further monetary policy decisions in light of what they described as “the current high degree of uncertainty.”
The Fed is worried about not only inflation but also how the new administration’s agenda will play out, including policies on tariffs, immigration and budget cuts and their impact on the economy. With President Trump’s emerging focus on the 10-year Treasury note yield, it appears the Fed is not only on the sidelines but at risk of being further away from the action (and possibly even on the bench). Newly minted Treasury Secretary Scott Bessent recently said:
“The president wants lower interest rates and … he and I are focused on the 10-year Treasury … He is not calling on the Fed to lower rates. He believes that if we … deregulate the economy, if we get this tax bill done, if we get energy down, then rates will take care of themselves, and the dollar will take care of itself.”10
That’s new. We’re trying a whole lot of things these days; the Fed lowered rates by 50 basis points (0.50%) in September and market rates went up, a response that didn’t cause immediate concern for the Fed. But it did raise questions about how effectively monetary policy is influencing the broader economy. How will the Fed get back in the game? It feels like they’re just spectators like the rest of us.
Coming this week
- A rare full week of trading will start quietly with no data on Monday.
- We’ll hear from Fed speakers all week. A slip of the tongue can always create market turmoil.
- On Tuesday, we’ll get a read on the housing markets with the S&P Case-Shiller home price index and consumer confidence. The data will continue on Wednesday with new home sales and MBA mortgage applications.
- Weekly jobless claims, pending home sales and the second revision of fourth-quarter 2024 gross domestic product (GDP) will be released on Thursday.
- Finally, we’ll see personal income and spending on Friday, plus the latest personal consumption expenditures (PCE) numbers. This additional measure of inflation was at 0.3% last month and was moving in the wrong direction like all the other recent inflation measures. We need to see improvement here, as PCE is the Fed’s favorite indicator for inflation.11
Index Performance Returns % | |||||
| 1 WK | YTD | 1YR | 3YRS | 5YRS | |
| S&P 500 | -1.66% | 2.24% | 20.70% | 11.41% | 12.49% |
| NASDAQ | -2.51% | 1.10% | 25.31% | 12.95% | 15.31% |
| DJIA | -2.51% | 2.08% | 12.47% | 8.42% | 8.42% |
Interest Rates: | |||||
| 2/21/2025 | 2/14/2024 | ||||
| UST 10 YR Government Bond Yield | 4.43% | 4.48% | |||
| Germany 10 YR | 2.45% | 2.44% | |||
| Japan 10 YR | 1.42% | 1.37% | |||
| 30 YR Mortgage | 6.90% | 6.92% | |||
| Oil | $70.25/ppb | $70.56/ppb | |||
| Regular Gas | $3.15/ppg | $3.16/ppg | |||
| All data as of Feb. 21, 2025 | |||||
Sources:
1 Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Feb. 23, 2025.
2 Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed Feb. 23, 2025.
3 Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed Feb. 23, 2025.
4 CNBC. “U.S. 10 Year Treasury.” https://www.cnbc.com/quotes/US10Y. Accessed Feb. 23, 2025.
5 Melissa Repko. CNBC. Feb. 20, 2025. “Walmart shares drop as retailer says profit growth will slow.” https://www.cnbc.com/2025/02/20/walmart-wmt-q4-2025-earnings.html. Accessed Feb. 23, 2025.
6 Tom Murphy. AP. Feb. 21, 2025. “UnitedHealth shares dive after report of US investigation into Medicare billing.” https://apnews.com/article/unitedhealth-medicare-investigation-report-07c4b1f14c1dd0a472a6a513d451d152. Accessed Feb. 23, 2025.
7 National Association of Realtors®. Feb. 21, 2025. “Existing-Home Sales Decreased 4.9% in January, But Increased Year-Over-Year for Fourth Consecutive Month.” https://www.nar.realtor/newsroom/existing-home-sales-decreased-4-9-in-january-but-increased-year-over-year-for-fourth-consecutive. Accessed Feb. 23, 2025.
8 PBS News. Dec. 26, 2024. “How the stock market defied expectations in 2024, by the numbers.” https://www.pbs.org/newshour/economy/how-the-stock-market-defied-expectations-in-2024-by-the-numbers. Accessed Feb. 23, 2025.
9 FOMC. “Minutes of the Federal Open Market Committee, January 28-29, 2025.” https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20250129.pdf. Accessed Feb. 23, 2025.
10 Howard Schneider. Reuters. Feb. 6, 2025. “Bessent’s focus on 10-year US Treasury yield may let Fed off the hook.” https://www.reuters.com/markets/us/bessents-focus-10-year-us-treasury-yield-may-let-fed-off-hook-2025-02-06/. Accessed Feb. 23, 2025.
11 Diccon Hyatt. Investopedia. Jan. 31, 2025. “PCE Report Shows Fed’s Favorite Inflation Measure Accelerated in December.” https://www.investopedia.com/pce-fed-s-favorite-inflation-measure-accelerated-in-december-8783694. Accessed Feb. 23, 2025.
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