Weekly Market Report: February 14th, 2025

Market Anecdotes

• We’re now 77% of the way through 4Q earnings reports for the S&P 500 with impressive top and bottom line growth of 16.9% and 5.2% respectively. Beat rates and beat margins of 76% and 7.3% are generally in line with historical averages.
• The bullish camp remains focused on tax cuts, deregulation, a strong consumer, a healthy economy, and the burgeoning AI boom, the latter of which Bespoke’s weekend research note offered an interesting parallel to the internet boom of the 1990’s.
• A hot Inflation report came and went while tariff taxes again grabbed headlines but their categorization as ‘reciprocal’ and slightly more diplomatic ‘negotiable’ tone rather than ‘unilateral’ tone calmed markets.
• The 10yr UST yields have fallen from over 4.8% back toward 4.4% but with the average outstanding mortgage rate at 4% and the current 30yr mortgage rate at 6.8%, borrowers are still faced with some uphill math when looking at buying a home.
• While healthy payrolls and unemployment rate, emerging signs of a slowing labor market warrants careful attention as evidenced by some alternative survey measures.
• Given the notable policy uncertainty, Bespoke noted last week that starting the week after the election, the S&P 500 has remained in a relatively tight trading range of less than 10% which ranks in the 13th lowest percentile of 100-day trading ranges since 1993.
• An amazing technical note on growth stocks is that the NASDAQ 100 has closed above its 200 dma for 485 consecutive days, its second longest such streak on record.
  • The Federal budget deficit of -7% is under a microscope and last week saw the initial HOR proposal which outlined extending the 2017 tax cuts accompanied by spending cuts over $1tn.
• Treasury auctions last week were mixed with a strong 3yr auction Tuesday followed by a weak (and CPI print impacted) 10yr auction Wednesday.
• Seven Fed speaking engagements and Powell’s testimony to the Senate Banking Committee offered no material updates of note, echoing the FOMC is in no hurry to adjust rates, downside risks to the labor market have faded, and the neutral rate has risen meaningfully.

Economic Release Highlights

• Headline and core CPI for January registered annual readings of 3.0% and 3.3% alongside MoM readings of 0.5% and 0.4%, above consensus expectations across the board.
• Headline and core PPI for January registered annual readings of 3.5% and 3.6% alongside MoM readings of 0.4% and 0.3%, above consensus expectations for all except the core MoM reading..
• Retail Sales in January missed expectations for the headline (-0.9% vs -0.1% and ex-vehicles (-0.4% vs 0.3%) readings while ex-vehicles & gas fell 0.5% following December’s 0.5% gain.
• Industrial Production grew 0.5%, beating the spot consensus forecast of 0.3% and above the high end of the range (0.1% to 0.4%).
• The NFIB Small Business Optimism Index for January registered 102.8, down slightly from December’s 105.1 and below the consensus expectation of 104.7.

Weekly Market Report: February 7th, 2025

Last week markets took in a large slate of 4Q earnings reports, a full economic calendar, and several policy maker narratives on the speaking circuit. Some of the mega cap names (AMZN, TSLA, GOOGL) lagged last week pulling growth stocks down slightly more than value stocks. U.S. equity markets were down slightly for the week while developed international (+0.47%) and emerging markets (+1.12%) notched respectable gains thanks in part to a slight decline in the USD of 0.30%. Oil closed the week down 2.1% but the broader commodity markets (+0.23%) were up with healthy rallies in metals, both industrial and precious as well as grain contracts.

Market Anecdotes

• Last week took the S&P 500 to 62% of the way through fourth quarter earnings reports with blended top and bottom-line growth of 16.4% and 5.2%, respectively. Beat rates and margins have been as expected with earnings but revenues have been below the norm.
• Tariff tax narratives again factored negatively into financial markets with Trump announcing he plans to issue more tariffs this week with most studies estimating a minor reduction to U.S. GDP of 0.5% (announced tariffs only) and a boost to CPI of 0.7%.
• Inflation expectations of the financial markets and consumers are closely monitored by the FOMC through various financial market metrics and survey data, both of which have risen due to growth expectations, tariff risks, and stubborn prices.
• UST Secretary Bessent spoke out last week against tariffs and reiterated the administration’s focus on lowering the 10yr UST yield, reigning in fiscal deficits to 3%, increasing oil production by 3 mbpd, and generating 3% GDP growth.
• The Fed speaking circuit was packed last week with thirteen appearances and a clear tone of ‘wait and see’ given the healthy labor market and above target inflation at this time.

Economic Release Highlights

• January Payrolls (143,000 vs 168,000) were slightly below forecast but within the consensus range of 125,000-225,000. The Unemployment Rate fell one tick to 4.0%. Average Hourly Earnings were above forecast for both MoM (0.5% vs 0.3%) and YoY (4.1% vs 3.8%) readings.
• The December JOLT Survey registered 7.6M openings, below the spot forecast of 8.0M and the consensus range of 7.8M-8.14M.
• January ISM Services Index fell short of the spot forecast (52.8 vs 54.0) and toward the low end of the consensus range.
• January ISM Manufacturing Index came in slightly above the spot forecast (50.9 vs 49.5) but was within consensus range.
• The February UofM Consumer Sentiment fell from January’s 71.1 reading to 67.8, well below the spot consensus estimate of 72.0 and the forecast range of 69.0-73.1. One year inflation expectations surged from 3.3% to 4.3% on the month.

Weekly Market Report: January 31st, 2025

Market Anecdotes

• POTUS followed through on his tariff threats, levying 25% on all Mexican imports and most Canadian imports along with a 10% levy on Chinese imports. Uncertainty with Inflation, supply chains, and negotiating parameters surrounding illicit drug trade and immigration remain.
• A big earnings slate last week, including several of the ‘Mag 7s’, took us to 36% of the S&P reported with blended bottom line growth of 13.2%, beat rates of 77% and beat margins of 5%. Blended revenue growth is currently at 5% with a beat rate of 63% and beat margin of 0.9%.
• Equity market valuations, which feed into long-term expected returns and drive the equity risk premium, are lofty by most measures with the S&P 500 at 22x, even when excluding several big technology names or looking at other domestic equity indices.
• The FOMC held steady as expected last week while the ECB and BoC both cut by 25bps. The ECB cut both the refi and deposit rates to 2.9% and 2.75% respectively while the BoC took rates down to 3%.
• Market expectations for the next rate cut in the U.S. are currently in June of this year.

Economic Release Highlights

• PCE inflation in December was in line with consensus for both headline MoM (0.4%) and YoY (2.6%) as well as core MoM (0.2%) and YoY (2.8%). PCE (0.7% vs 0.5%) was stronger than forecast while Personal Income of 0.4% was right in line.
• The Employment Cost Index for 4Q was in line with consensus expectation at 0.9% QoQ with an annual growth rate of 3.8%.
• The first estimate of 4Q U.S. GDP came in slightly short of forecast (2.3% vs 2.6%), slowing down from the final 3Q reading of 3.1%. PCE was strong and beat the spot forecast (4.2% vs 3.1%).
• Eurozone 4Q GDP cooled from QoQ 0.4% to 0% with YoY growth of 0.9%, slightly below forecast.
• International Trade in Goods saw the trade gap widen from $-103.5B to -$122.1B where import growth cooled from 4.3% to 3.9% MoM and exports fell from +3.3% to -4.5%.
• Consumer Confidence did not recover as forecasted (104.1 vs 106.3) from November and December readings of 112.8 and 109.5 respectively.
• Durable Goods Orders missed forecasts to the downside (-2.2% vs 0.8%) while Ex-Transportation (0.3% vs 0.4%), and Ex-Transportation & Gas (0.5% vs 0.3%) readings were mixed.
• The Case-Shiller Home Price Index in November increased 0.4% MoM and 4.3% YoY, both slightly ahead of the spot consensus but within the forecast range.
• Pending Home Sales in December fell 5.5%, well below the prior month (2.2%), spot forecast (0.4%), and forecast range while New Home Sales of 698k were slightly above the 672k forecast.

Weekly Market Report: January 24th, 2025

Market Anecdotes

• An interesting observation on U.S. versus European stocks is that, while the U.S. has dominated most of the past five years, European stocks have surged to begin the year, up 4.7% on a currency adjusted basis, while U.S. is up a still healthy 3%+.
• A one-year look back at large caps versus small caps shows the post-election surge in small caps faltered during December’s spike in interest rates while growth stocks’ dominance over value stocks, a consistent trend over the past 10yrs (ex/2022), has stayed firmly intact.
• Q4 earnings growth looks like it’s on a path to impress with small, mid, and “the 493” posting healthy numbers early in the season. FactSet is reporting blended earnings and revenue growth of 12.7% and 4.6% respectively.
• Keeping a close eye on Treasury auctions and bond yields last week showed a healthy appetite for UST on the longer end of the curve with interest rates staying relatively flat for the week.
• Markets are hopeful that fiscal policy takes the shape described by incoming Treasury secretary Scott Bessent where he noted tax policy being in line with historical averages and spending policy well above historical averages.
• D.C. policy indications last week included the announcement of a sizable $500b government AI investment initiative and 25% tariff indications for Columbia, Mexico, and Canada. Keys are ROI on AI and how inflationary/anti-growth impacts of tariffs feed into growth and financial markets.
• Global monetary policy is mixed with markets expecting FOMC rate cuts potentially beginning in May while the BoJ last week raised rates 25 bps (to 0.50%) as expected.
• The quarterly KC Fed Energy Survey responses are a good reminder that market prices, not regulatory red tape, is the primary driver of oil production where respondents noted average profitability breakeven of $64 but a price of $89 to substantially increase production.
• Bianco Research noted ‘off-exchange’ trading volumes recently surpassed the 50% level, but the rapid increase has been driven by retail speculation in sub-$1 stocks.

Economic Release Highlights

• January’s U.S. PMI (M,S) registered 50.1, 52.8 with manufacturing coming in above consensus and services below and overall composite cooling from 55.4 to 52.4.
• The January PMI release from the Eurozone and UK (C,M,S) came in slightly above consensus expectations at (50.2, 46.1, 51.4) and (50.9, 48.2, 51.2) respectively. China’s CFLP PMI for January of (50.1, 49.1, 50.2) softened versus the prior month and fell short of the spot forecast.
• December Existing Home Sales of 4.24M were up 2.2% MoM and are up 9.3% YoY, slightly more than consensus expectations.
• January’s final UofM Consumer sentiment reading was revised downward from 73.2 to 71.1.

Weekly Market Report: January 17th, 2025

Market Anecdotes

• Economic data last week generally served to cool the ‘no landing’ scenario with data reflecting moderating core services inflation, reinforcing notions of a cooling labor market and taking Fed policy expectations back toward where they were prior to last week’s jobs report. 
• The rise in interest rates since mid-September is a key market dynamic at this time and last week provided some much needed respite from the more recent leg higher since December 6th.
• Corporate earnings kicked off last week with Q424 expectations at 7.3% alongside downwardly revised but still robust 2025 quarterly growth of Q1 11.2%, Q2 9.4%, and Q3 12.7%. 
• An illustration from The Daily Shot painted a helpful illustration of U.S. equity category valuations reinforcing expensive headline and momentum indices countered by cheap small caps.
• An additional valuation note last week by Alpine Macro highlighted the U.S. equity risk premium currently near a 23 year low which speaks to the relative attractiveness of the S&P 500 to U.S. Treasury bonds.
• Forces underpinning the strong USD include relative global growth dynamics, a less aggressive Fed easing cycle, rising USD market-based bond yields, geopolitical risks, and overall bullish sentiment surrounding the USD.
• BCA noted the increase in UofM survey data on consumer inflation expectations was not reinforced by the NY Fed consumer survey on inflation where forward expectations were much more muted.

Economic Release Highlights

• December YoY headline (2.9% vs 2.9%) and core (3.2% vs 3.3%) CPI alongside MoM readings of headline (0.4% vs 0.3%) and core (0.2% vs 0.3%).

• PPI in December came in slightly softer than forecast with headline and core MoM readings of 0.2% and 0% respectively. YoY readings of 3.3% and 3.5% were in line with expectations. 

• Headline Retail Sales for December were slightly weaker than expected (0.4% vs 0.6%)

• NFIB Small Business Optimism Index improved to 105.1, a notable move higher from November’s 101.7 reading and above the spot consensus.

• The January NAHB Housing Market Index came in higher than expected (47 vs 45) and improved from December’s level.

• December Housing Starts (+16% MoM) and Permits (-1% MoM) both beat expectations, offering a slightly more upbeat tone to housing market dynamics.

Weekly Market Report: January 10th, 2025

Equity markets subscribed to a ‘good news is bad news’ narrative last week with healthy corporate earnings projections and a strong labor market adding support to the strong growth / Fed pause narrative, pressuring yields to the upside and stock prices downward. Global equity markets, including the U.S. closed down 0.5% to 2% with growth stock underperforming value stocks on the week. Bond yields reached their highest levels since October 2023 with the 10yr closing at 4.77% while the USD (+0.64%) and commodities (+3.13%) both moved higher.

Market Anecdotes

• The question of when stocks will become sensitive to higher bond yields grew louder last week amidst a backdrop of a shift back toward negative stock/bond yield correlations. Ultimately, a mix of fundamentals and market perceptions of prevailing inflation dynamics will dictate.
• The U.S. labor market was in focus last week with the JOLT and Employment Situation reports. The U.S. economy has added over two million jobs in the past year but the average time it’s taking the seven million “unemployed but searching” group has grown from five months to six months.
• Strong labor market reports last week, particularly Friday, led to a surge higher in interest rates and corresponding consolidation in equity markets. Higher market-based interest rates, less aggressive monetary easing, and a strong USD are working to tighten overall financial conditions.
• The question of what is driving bond yields higher points to both inflation concerns and increasing growth expectations with the latter arguably factoring more so than the former.
• FOMC minutes released last week echoed a more cautious approach toward easing but an easing bias, nonetheless. They have ample company in that mindset with 70% of Global central banks easing over the past three months with aggregate rates 550 bps lower.
• We are at the doorstep of 4Q earnings season with the S&P forecasted to post 11.7% growth, which would be its strongest mark since Q4 2021. Based on historical beat rates (75%) and margins (6.7%), it’s likely we may see a number closer to 14%.
• Elevated interest rates and have pushed corporate bankruptcies to their highest level (by issuer #) since the GFC despite nearly twice as many credit situations being addressed out of court, according to Fitch.
• Leuthold noted, thanks to a top-heavy December, year-end 2024 marked the only instance on record where 5 companies had 4% or greater weights in the S&P 500. It had been 2 or 3 for most of the past 5 years, including a peak of three way back in the tech bubble.
• Bianco Research reiterated a word of caution putting any weight in seasonal trends like the “January Effect” by highlighting January’s rank since 1928 (3rd best), compared to since 2000 (worst).

Economic Release Highlights

• The December Employment Situation report for December showed 256k jobs, well above the spot consensus of 165k. The unemployment rate fell unexpectedly one tick to 4.1%. Average Hourly Earnings were in line with the forecast at 0.3% MoM and 3.9% YoY. 

• The November JOLT Survey reported 8.098M job openings, well ahead of the forecasted 7.650M and above the range of estimates (7.585M-7.800M).

• The ISM Services Index for December registered 54.1, ahead of spot consensus 53.2

• JP Morgan Global Composite (52.6) and Services (53.8) readings for December both came in slightly above consensus expectations.

• UofM Consumer Sentiment reading for January registered 73.2, slightly below the forecast of 74.5 and oneyear inflation expectations increased notably from 2.8% to 3.3%. Long-term inflation expectations also jump 0.3% to 3.3%.

Weekly Market Report: January 3rd, 2025

Last week bid adieu to 2024 and ushered in 2025 with New Years Day landing right in the middle of the week. The Santa Claus rally failed to materialize with the S&P 500, developed international, and emerging markets all closing down approximately 0.5% due in part to some underperformance across technology and consumer discretionary names. There were no impactful market events last week and trading volume was very thin as expected. Interest rates moved slightly lower on the week with the 10yr yields closing at 4.60%, maintaining the positively sloped yield curve for both 2y/10y and 3mo/10y spreads. Commodities benefited from a 4.8% rise in WTI crude oil, up nearly $4 to close at $73.96 and the USD continued to strengthen, closing up 0.88% for the week.

Market Anecdotes

• While a less aggressive Fed easing cycle may be contributing to cooling stock market momentum, we would highlight the three headed monster of interest rates, crude oil, and a strong USD as an equal, if not greater force.
• With interest rates possibly remaining elevated relative to the past 10 years, a look at long-term growth and value stock performance in higher interest rate environments suggests growth stocks outperform in lowrate environments while value stocks win in higher rate environments.
• Fed Funds futures markets are pricing the Fed on hold until May with a probability weighted 50bps by year end but carrying a relatively wide dispersion with left tail pricing down to 300-325 and right tail pricing of 450-475.
• The corporate earnings environment is expected to remain supportive with analysts seeing S&P 500 earnings growth improving from 9.4% in 2024 to 14.8% in 2025.
• Of note for 2025 is that earnings improvements for “the 493” are expected to improve from 4% in 2024 to 13% in 2025 while the “Magnificent 7” are expected to moderate from 33.5% in 2024 to 21.3% in 2025.
• Bespoke added a notable weak breadth observation that December 2024 saw the fewest positive breadth days (#adv/#decl) of any month since 1990 when they began compiling data.
• Bespoke noted that none of the “Mag 7” stocks made the list (Russell 3000) of the best performing stocks of 2024 which range from +350% to +2,684%. They also did not make the list of the worst performing stocks of 2024 which ranged from -85% to -99%.
• Some market consolidation on the back of extreme positive sentiment and a +25% year may be a welcomed and somewhat expected occurrence with investor sentiment cooling from late summer (and post-election) highs back into more healthy (skeptical) territory.
• A long-term look back at U.S. tariff rates shows the misguided protectionist policies of the early 1930’s, a slight resurgence in the 1960’s, and a steady to declining trend for decades leading up to 2018 with an uncertain path going forward.

Economic Release Highlights

• The ISM Manufacturing Index registered 49.3 in December, above both the spot forecast of 48.5 and the consensus range of 47.5 to 48.6. The final PMI Manufacturing Index was revised higher from 48.3 to 49.4.
• The J.P. Morgan Global Manufacturing PMI registered 49.6 for December.
• Chinese CFLP PMI (C,M,S) improved slightly to 52.2, 50.1, 52.5 with services and composite readings improving approximately two points and manufacturing sentiment maintaining its level.
• Case-Shiller Home Price Index rose 0.3% MoM in October for a YoY increase of 4.2%, both generally in line with expectations.
• Pending Home Sales for November rose 2.2%, above consensus of 0.9% and the forecast range of -0.1% to 1.0%.

Weekly Market Report: December 27th, 2024

The holiday shortened final full week of 2024 featured a very light economic calendar and continued speculation as to the path forward for markets in 2025. Equity markets continued to digest monetary policy, trade policy, and the impact of prevailing interest rates. Global equity markets recovered slightly from the prior week’s consolidation with U.S. (+0.7%), developed international (+1.8%), and emerging markets (+1.0%) all posting marginal gains. Interest rates again drifted higher with 10yr yield closing at 4.62%, up nearly 100 bps since September 13th. Commodities posted marginal gains with oil up 1.6% to close back up over $70 and the USD building on its strong fourth quarter rally.

Market Anecdotes

• Equity markets have taken note of the move higher in interest rates against a backdrop of policy uncertainty, a marginally more hawkish FOMC, and a relatively healthy economy.
• Based on TLT fund flows, bond market investors seem to have shifted their opinion on Fed policy as it pertains to the long-run inflation objective with fund flows rotating from inflows to outflows beginning in early November.
• In contrast to fund flows, Wall Street forecasters overwhelmingly see bond yields falling in 2025 with only two of twelve banks predicting a further rise in interest rates.
• High interest rates certainly have a tightening effect on the economy and chilling effect on stocks, so does a strengthening USD. The recent rally of +7.7% since late September is similar to July ‘23-Oct ‘23 (+7.5%) but pales next to the persistent +27.4% move from June ‘21 – Sept ‘22.
• Fed funds futures markets are pricing in two 25 bps cuts over the next year, in line with Fed median dot plot at the time of their December meeting.
• The rise in interest rates and distinct possibility of persistently elevated rates for the foreseeable has our eyes on burgeoning credit risk in several direct lending products due to the prevalence of PIK interest structures, an aggressive feature found in many private credit funds.
• The increased prevalence of natural disasters and higher costs of materials have resulted in large home insurance premium increases, compounding the impact of higher mortgage rates on the U.S. housing market.
• With holiday shopping season now in the rearview, MasterCard SpendingPulse reported sales rose 3.8% YoY, more than forecasted and better than the same period last year.

Economic Release Highlights

• Consumer Confidence dipped in December to 104.7 off November’s 111.7 reading.
• New Home Sales in November cane in right at consensus 664k.
• Durable Goods Orders in November fell 1.1%, below the spot forecast of -0.2%. Ex-Transports missed (-0.1% vs 0.3%) while Core Capital Goods grew 0.7%, well above the 0.1% consensus.

Weekly Market Report: December 20th, 2024

Last week markets digested a very busy economic calendar, a highly anticipated FOMC meeting, and some political noise with another U.S. government funding standoff translating to a notable move higher in equity and bond market volatility. The week ended with equity markets down globally with U.S. markets (-2%), developed international markets (-4.8%), and emerging markets (-4%) all losing ground. Interest rates moved higher across the curve as 10yr yields traded back over 4.5% and the curve steeped with both 2yr/10yr and 3mo/10yr becoming more positively sloped. Risk aversion and hawkish Fed narratives contributed to a strengthening USD and weakening commodity markets where oil and industrial metals traded down approximately 1%-3% across the board.

Market Anecdotes

• The FOMC delivered a hawkish 25 bps rate cut to get to a 425-450 target along with cooling market expectations for rate cuts in 2025. Post meeting pressers and speaking engagements made clear the economy is strong and they have time to assess incoming data.
• The BoJ, the only G10 bank in hiking cycle, left rates unchanged at 0.25%.
• 2024, like 2023, has been a remarkable year for AI, consumer, and technology stocks with the Mag 7 rally looking similar, yet different, than historically concentrated markets of the past.
• A recent Barron’s cover echoed bullish Wall Street, fund manager, and household sentiment for 2025 where the Conference Board survey of U.S. households hit its most bullish reading since the survey’s inception and UofM survey noted investors moving aggressively into stocks.
• The surge in immigration is clear from the U.S. Census Bureau data with associated political and economic ripple effects just now taking shape.
• Economic and financial market landscapes heading into 2025 contain ample pros and cons to consider with corporate earnings, economic growth, inflation trends, market interest rates, labor market conditions, and policy all factoring largely into forecasts.

Economic Release Highlights

• The PIO report showed headline and core inflation running at 2.4% and 2.8% YoY respectively with MoM readings of 0.1%. Personal income and expenditures grew 0.3% and 0.4% MoM.
• The final revision to U.S. GDP surprised to the upside with headline growth and PCE both revised higher from 2.8% to 3.1% and from 3.5% to 3.7% respectively.
• U.S. PMI (C,M,S) registered 56.6, 48.3, 58.5 with a strong services report countering a weak manufacturing report resulting in an improved overall composite reading for December.
• European PMI (C,M,S) at (49.5,45.2,51.4) beat forecasts across the board. UK (50.5,47.3,51.4) beat on services but missed on manufacturing.
• Industrial Production (-0.1% vs 0.3%) and Manufacturing Output (0.2% vs 0.5%) both came in below the consensus estimate for November.
• Headline Retail Sales beat forecasts (0.7% vs 0.5%) but Ex-Vehicles and Ex-Vehicles & Gas both missed the spot consensus estimate (0.2% vs 0.4%).
• UofM Consumer Sentiment came in right at consensus forecast of 74.0 while 1 yr forward inflation expectations moved down from 2.9% to 2.8%.
• The Housing Market Index ticked down one point to 46 in December, below the consensus estimate of 47 and at the lower end of the forecast range.

Weekly Market Report: December 13th, 2024

Market Anecdotes

• 2024 is shaping up to close out with an impressive, albeit more common than one might think, outcome for equity markets characterized by concentrated earnings growth, top heavy performance, challenges for active management, and elevated valuations.
• Inflation dynamics were in focus last week with the CPI release and upcoming FOMC meeting. BLS methodology versus alternative measures again garnered significant attention when assessing underlying inflation dynamics, particularly with housing and wage growth.
• Last week was a blackout week for the FOMC but meetings from other central banks generated headlines with nearly 71% of major central banks now in easing cycles including last week’s ECB (-25bps), SNB (- 50bsp), BoC (-50bps), and the RBA (0bps) moves.
• Bond markets’ renewed focus on U.S. fiscal policy, inflation dynamics, and growth trends last week with interest rates drifting higher and the 10yr/3mo slope uninverting for the first time since July 2022.
• While China signaled intent to ramp up stimulus next year, monetary and credit data in November underwhelmed with new loan growth and total social financing coming in well below market expectations and M2 growth slowing from 7.5% to 7.1%.
• A consideration in early 2025 will be how DC ultimately decides to sequence legislative and executive priorities with the potential for vastly differing market reactions depending on the composition of tariffs, tax cuts, immigration reform, and deregulation initiatives.
• The Tax Foundation estimate of tariffs implemented in 2018, and maintained today, cost Americans approximately $80b/year and the baseline new tariff taxes would amount to a $1.2t tax increase over 10 years, reduce GDP by 0.45%, and cost U.S. workers 344,900 jobs.
• DC policy conversations surrounding federal agencies who acquire residential mortgages with both explicit and implicit federal guarantees are raising some interesting considerations regarding cost of capital, size of the guarantee pool, and mortgage product implications.

Economic Release Highlights

• CPI for November was in line with expectations for both headline and core with YoY readings of 2.7% and 3.3% and MoM readings of 0.3% and 0.3% respectively.
• Continuing Jobless Claims continued to edge higher last week while headline Weekly Jobless Claims surprised a bit to the upside (242k vs 220k) and came in above the consensus forecast range (190k to 225k).
• The November NFIB Small Business Optimism Index jumped from 93.7 to 101.7, well above the 94.5 consensus estimate.