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Your Capital Markets Snapshot: Labor Market Weakens, Rate Cuts in Focus

Last week was a loaded week for US labor market data, and it contained clear signs of a softening U.S. labor market. August jobs data showed only 22,000 jobs were added, well below expectations, and the unemployment rate rose to 4.3%. This weaker labor data increased expectations for Federal Reserve rate cuts, with markets expectations for a rate cut of either 25 or 50 basis points at the September meeting. Eyes will be on this week’s CPI and PPI releases, which will provide the last read on inflation going into the September meeting. Treasury yields fell sharply, supporting consumer and corporate borrowing, while the yield curve steepened, benefiting lenders. Equity markets were volatile to end the week, with the S&P 500 hitting an all-time high before pulling back following Friday’s nonfarm report. Despite the volatility, the S&P 500 and Nasdaq managed to post slightly positive weeks while the Dow Jones slipped slightly. Gold rallied to a record high, and mortgage rates saw their largest one-day drop in over a year.

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Your Capital Markets Snapshot: Equity Markets Experienced Modest Declines

Last week, equity markets experienced modest declines as midweek gains were offset by a Friday sell-off ahead of the Labor Day weekend. The S&P 500 briefly reached a new all-time high Thursday before slipping back below. AI remained a dominant  market driver, with NVIDIA’s earnings drawing significant attention.  Its muted stock reaction highlighted the challenge of lofty expectations. Economic data was generally positive, including an upward revision to Q2 GDP growth and resilient consumer spending. However, inflation ticked higher, with core PCE rising to 2.9%. Expectations for a September rate cut from the Federal Reserve continue to grow. Market breadth improved across large and small cap stocks (measured by stocks trading above their 200-day moving averages), suggesting healthy underlying sentiment. Market history suggests we may experience seasonal volatility risks in September and October; however, fundamentals remain supportive so this could create opportunities to strategically rebalance across asset classes.

Your Capital Markets Snapshot: Markets Reacted Positively Following News of a Potential Fed Pivot

Last week, markets reacted positively following the Federal Reserve’s annual Jackson Hole symposium, where Chair Jerome Powell signaled a change in monetary policy may be necessary. Markets reacted with rising expectations of a rate cut at the September meeting. This dovish tone sparked a strong Friday rally, lifting the S&P 500 to a modest weekly gain despite sliding for five consecutive days prior. Under the surface, market leadership rotated from mega-cap tech stocks to cyclical and value sectors. Bond yields fell across the curve as expectations for a September rate cut climbed to nearly 90%, and futures markets priced in two cuts this year. Economic data was mixed: PMI readings surprised to the upside, while jobless claims ticked higher. Retail earnings from Walmart, Target, and Lowe’s highlighted resilient consumer spending despite tariff-related cost pressures. Overall, markets appear optimistic, supported by a potential Fed pivot and broadening equity participation, though volatility risks remain as inflation and labor trends evolve.

Your Capital Markets Snapshot: Markets Responded to a Mix of Data, Results, and Geopolitical Developments

Last week, markets responded to a mix of inflation data, earnings results, and geopolitical developments. The Consumer Price Index (CPI) rose 0.2% month-over-month, in line with expectations, while core CPI climbed to 3.1%, the highest since February, driven by rising service costs. However, the Producer Price Index (PPI) surprised to the upside, increasing 0.9%, raising concerns about future consumer price pressures. Despite this, equity markets remained resilient, with the S&P 500 and Nasdaq gaining around 1% and the Dow Jones 1.8% over the week. Small-cap and value stocks outperformed their large-cap and growth peers, possibly signaling a broadening of market leadership as expectations for a September Fed rate cut continue to increase. Earnings season continued to support bullish sentiment, especially in the tech sector, where mega-cap stocks drove much of the growth. Tariff developments also made headlines, with new levies on semiconductors. Overall, markets showed strength but remain sensitive to inflation trends and central bank signals.

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Your Capital Markets Snapshot: US Equities Rebounded Strongly

Last week, US equities rebounded strongly, led by technology and consumer discretionary stocks, with the S&P 500 gaining over 2% and the NASDAQ hitting a new record high. Corporate earnings continued to deliver upside surprises, especially among AI- related firms. Overall, reported EPS growth for Q2 climbed to 11.4%. Treasuries experienced slightly weaker demand at auctions. Yields experienced a modest steepening as short-term rates continue to tick lower while long-term rates higher. Renewed expectations of an impending rate cut appear to be part of the causes of falling short-term yields. Uncertainty on US monetary, trade, and taxation policies are contributing to rising long-term rates. The services sector, which accounts for around 70% of US GDP, showed mixed signals but still appears to be signaling the sector is expanding, albeit at a slowing rate. Tariffs increased from the April 10% baseline for more than 90 countries, including a new 100% rate on semiconductors, though exemptions softened the impact. Tariffs vary widely from 10% to 50%, but most countries are facing rates within the 10% - 20% range.

Your Capital Markets Snapshot: Markets Continued Upward Trajectory

Markets continued their upward trajectory, as the S&P 500 and Nasdaq continue climbing to new all-time highs. Markets have been buoyed by strong Q2 earnings, new trade deals, and resilient economic data. This upcoming week is loadedwith earnings and economic releases, which introduces the potential for increased short-term volatility on the back of any surprises. Thus far Q2 is off to a strong start for earnings releases. With just under half of the S&P 500 companies reporting this week, we will get more clarity on the strength of earnings growth and potential impacts of US tariff policy on future growth prospects. A recent string of trade deals has led to decreasing uncertainty around US trade policy and created a template for future negotiations. While geopolitical tensions remain elevated in parts of the world, equity markets have showed resilience, supported by solid fundamentals and corporate performance. As valuations are high relative to history, a strong earnings season is important to support the recent growth trend.

Your Capital Markets Snapshot: Nasdaq Reaches New All-time Highs

Last week, U.S. capital markets continued their upward momentum, with the S&P 500 and Nasdaq reaching new all-time highs, buoyed by strong corporate earnings and resilient economic data. Retail sales rebounded sharply in June, and inflation data remained within manageable levels, helping to support investor sentiment. Earnings season kicked off with better-than-expected results from major banks and tech firms, although some stocks like Netflix saw muted reactions despite strong reports. Geopolitical tensions added some uncertainty, particularly with the potential for US tariff policy to influence inflation and trade dynamics going forward. Meanwhile, the Federal Reserve signaled a cautious stance, with markets pricing in potential rate cuts later this year. Overall, despite some volatility and policy uncertainty, markets remained supported by solid fundamentals and investor optimism heading into the heart of earnings season.

Your Capital Markets Snapshot: U.S. Capital Markets Continued Strong Upward Momentum

Last week, U.S. capital markets continued their strong upward momentum, with the S&P 500 and Nasdaq reaching new all-time highs. This rally was fueled by a combination of easing geopolitical tensions in the Middle East, falling oil prices, and a robust performance from mega-cap tech stocks. A better-than-expected U.S. jobs report also boosted investor sentiment, showing 147,000 new jobs added in June and a slight drop in the unemployment rate to 4.1%. However, the labor force participation rate declined, and private sector hiring was relatively soft, tempering some of the optimism. Markets also responded positively to a new U.S.-Vietnam trade agreement, which provided clarity on tariffs despite higher rates than previously expected. Meanwhile, Congress passed a significant tax and spending bill, which is expected to offer a modest economic boost in 2026 but raises concerns about long-term federal debt. Bond yields rose as the strong jobs data reduced expectations for imminent Fed rate cuts, with the 2-year Treasury yield climbing notably. Overall, while bullish momentum remains strong, markets may face volatility ahead due to potential trade developments and overbought conditions.

Your Capital Markets Snapshot: US Equity Markets Surged

US equity markets surged as the S&P 500 and Nasdaq both climbed over 3% and posted record highs. Megacap technology stocks led the charge, driven by strong earnings and AI-related optimism. The broader rally was partially fueled by easing geopolitical tensions in the Middle East, which led to a sharp drop in oil prices. U.S. crude fell from over $75 to around $65 per barrel. This decline helped ease inflation concerns and supported consumer sentiment. Meanwhile, the Federal Reserve signaled a continued path toward rate cuts, with markets now pricing in two to three cuts by year-end. Increased expectations of lower long-term rates helped further boost equity valuations. However, trade tensions resurfaced late in the week as the U.S. abruptly ended talks with Canada over a digital services tax, triggering some intraday volatility.

Your Capital Markets Snapshot: Markets Reflected a Cautious Tone

Last week, markets reflected a cautious tone as investors digested a mix of economic signals and geopolitical developments. The Federal Reserve held interest rates steady for the fourth consecutive meeting, maintaining a patient stance amid lingering inflation and trade uncertainties. Updated projections showed a slight downgrade in 2025 GDP expectations to 1.4% and an upward revision in inflation forecasts, suggesting a stagflationary tilt. Retail sales data was mixed—headline sales declined, but the control group, which feeds into GDP, rose modestly. Housing data was broadly weak, with notable drops in permits and starts, while jobless claims remained stable. Geopolitical tensions, particularly the Israel-Iran conflict, kept oil prices elevated, contributing to market unease. Equity markets, including the S&P 500 and Russell 2000, showed signs of consolidation, with breadth indicators weakening. Overall, markets appear to be in a “wait- and-see” mode, with near-term sentiment slightly bearish barring any major geopolitical or trade-related surprises.

Your Capital Markets Snapshot: Markets Navigated a Complex Mix

Last week, markets navigated a complex mix of geopolitical tension, economic data, and policy expectations. Equities experienced a late-week selloff triggered by Israeli airstrikes on Iranian nuclear facilities and subsequent counterstrikes. Oil prices surged to a four-month high, which raised concerns about inflationary pressures. However, inflation data came in cooler than expected, with CPI and PPI both undershooting forecasts, helping to anchor expectations for potential Fed rate cuts later this year. Treasury yields declined over the week, supported by strong demand in long-term bond auctions. Meanwhile, U.S. and China trade talks progressed, with a tentative framework reached, and consumer sentiment rebounded sharply, suggesting improved confidence. Market breadth also expanded, indicating broader participation in the recent equity rally despite near-term technical volatility.

Your Capital Markets Snapshot: Markets Showed Resilience Last Week

Markets showed resilience last week, with global equities rebounding strongly - driven by solid corporate earnings, easing trade tensions, and a better-than-expected U.S. jobs report. The labor market added 139,000 jobs in May, keeping the unemployment rate steady at 4.2%, which helped ease fears of a sharp economic slowdown. Despite downward revisions to prior months’ job gains and a dip in labor force participation, wage growth continued to outpace inflation. The S&P 500 and other major indexes posted gains, with small-cap stocks outperforming large caps. Volatility declined and oil prices surged. However, uncertainty remains around trade negotiations, fiscal policy debates, and the Federal Reserve’s next moves, with rate cuts not expected until September at the earliest. We are watching upcoming inflation data and Treasury auctions for further market direction.

Your Capital Markets Snapshot: Technology Companies Reported Strong Earnings

Last week, technology companies reported strong earnings, with NVIDIA showing strong growth in AI chip demand despite trade restrictions. However, ongoing tariff disputes continued to create uncertainty, impacting market sentiment. Courts are reviewing Trump’s authority to enact certain tariffs, which has increased the level of uncertainty surrounding US trade policy. The S&P 500 rose by about 6% in May, but US equities are still essentially flat on the year after the volatility of recent months. Despite some downward revisions due to tariff issues, earnings growth for the S&P 500 is projected to remain stable, supported by a strong labor market. Economic indicators showed mixed results, with improvements in consumer confidence and personal income, but an unexpected rise in jobless claims. Investors should stay diversified, strategically rebalance their portfolios, and stay invested as market volatility is expected in the coming months. Time in the market is greater than timing the market.

Your Capital Markets Snapshot: Equities, Bonds, US Dollar Fell Last Week

Equities, bonds, and the US dollar fell last week due to US budget concerns and increased uncertainty surrounding US tariff policies. US debt was downgraded by Moody’s due to concerns about lack of progress from prior Congresses and presidential administrations to curb rising government deficits. Standard & Poor’s (2011) and Fitch (2023) previously downgraded US debt. Now all three major rating agencies align on an AA-rating. A tax bill passed from the House to Senate seeking to extend the 2017 tax cuts with additional provisions. Congressional Budget Office estimates the net impact of tax cuts, new spending, revenue, and additional interest-rate costs to increase the federal budget deficit by $3 trillion over the next decade. Long-term interest rates have been trending upwards since September 2024, when the rate cutting cycle began. The combination of increasing debt levels and higher interest rates are driving federal interest costs to historic highs. Trump threatened the EU with 50% tariffs and Apple with a 25% rate, which served to increase uncertainty around US trade policies and contributed to the down week for equities. As negotiations progress, trade uncertainty should decrease but as last week showed potential for bumps along the way remains.

Your Capital Markets Snapshot: US Equity Markets Sharply Rallied

Last week, US equity markets sharply rallied driven by positive trade negotiation developments and economic data. The U.S. and China agreed to reduce tariffs for 90 days while working towards a longer-term deal, which led to a sharp rally in equity markets. Additionally, the U.S. administration announced plans to ease trade restrictions related to artificial-intelligence chips, further boosting investor sentiment and benefitting the tech sector. Economic data releases showed signs of inflation potentially moderating, with the Consumer Price Index rising by 0.2% and Producer Price Index falling by 0.5% in April. Retail sales posted a small monthly increase but may be showing signs of weakening. Despite these positive developments, consumer sentiment remains low, reflecting ongoing uncertainty in the market. Overall, the markets found comfort in hard data and trade deals, but investors should remain prepared for periodic volatility as policy continues to be determined.

Your Capital Markets Snapshot: US Large Cap Stocks Traded Lower, Then Trended Upward

US large cap stocks traded lower to start the week, then trended upward as positive trade news broke around a trade deal with the UK and developing talks with China. Despite the late week rally, US large caps posted modest losses for the week. US mid- and small caps as well as international stocks posted modest gains. Unsurprisingly, the Federal Reserve left the fed funds rate unchanged, highlighting risks of higher inflation and unemployment. Chair Powell maintained his message of waiting for more data to be available on the impacts of tariffs and other metrics before taking further action. Key economic readings related to the services sector were mixed but remained in expansion territory. The start of positive trade developments is reassuring. The US still has a healthy labor market. Despite slowing, corporate earnings are still projected to grow. Increased trade uncertainty is likely to lead to increased volatility and potentially slower economic growth in the short-term. Potential tax reform or deregulation efforts following these trade negotiations could provide stimulus to the markets.

Your Capital Markets Snapshot: Markets Rebound Amid Mixed Signals

Last week, markets experienced a mix of positive and negative developments. U.S. equities rebounded nicely. The S&P 500 is up about 8% over the last two weeks, driven by solid first-quarter economic and earnings data. Corporate earnings growth for Q1 has been positive. About 76% of S&P 500 companies reported positive earnings surprises. However, guidance for Q2 has weakened due to uncertainty around consumer spending and trade tariffs. U.S. GDP growth turned negative in Q1, largely due to a surge in imports ahead of higher tariff rates. Despite this, the labor market appears resilient, with the unemployment rate steady at 4.2% and a positive surprise in job gains. Overall, uncertainty is still high around trade and tariff policies. As the administration softened its positions, markets have since recovered much of the ground given during early April’s selloff and volatility episode. We expect volatility to be present until more certainty around global trade policies occurs. This should provide opportunities to strategically rebalance portfolios and diversify across markets segments and asset classes.

Your Capital Markets Snapshot: Markets Rally Amid Eased Trade Tensions and Fed Concerns

Last week, equity and bond markets experienced a relief rally as the U.S. administration softened its stance on trade and concerns over the Fed's independence eased. This change of position from the Trump administration appears to have helped alleviate trade uncertainty and market volatility with both measures dropping sharply off their recent highs. While this is a positive shift, equity markets are still below their recent highs and likely require more concrete agreements with major countries to return to those levels. As first quarter earnings season continues corporate profits are in focus. Based on releases thus far, it appears mid-single-digit earnings growth could be achievable if the economic slowdown doesn't worsen. While the US equity market continues recovering from their recent drawdown episodes, US fixed income and international equities continue to deliver positive returns on a year-to-date basis. This highlights the importance of maintaining diversification across markets segments and asset classes when constructing and rebalancing portfolios.

Your Capital Markets Snapshot: Markets Dip Amid Tariff Uncertainty; Bonds Show Strength

Last week, stock markets couldn’t keep the positive momentum and experienced a modest decline, with the S&P 500 down 1.5% and the Nasdaq dropping around 2.6%. This was driven by uncertainty surrounding tariffs, particularly new export restrictions on semiconductors to China, which affected major U.S. semiconductor companies like NVIDIA. On the positive side, the bond market functioned more orderly, with government bond yields moving lower and the U.S. Aggregate bond index climbing about 1% for the week. The broader markets continue to be influenced by the tariff narrative. Given the increased uncertainty still present in the market, it is important to maintain discipline, ensure portfolio allocations are rebalanced to appropriate ranges and well-diversified. When possible, establish and maintain an emergency cash reserve to help weather any future volatility.

Your Capital Markets Snapshot: Heightened Volatility Persisted Last Week

Heightened volatility persisted last week, this time to both the up and downside as markets reacted to the news of pauses on reciprocal tariffs to all countries that did not retaliate. China was notably excluded and the back-and-forth escalation in tarifflevels with the US added to the volatility experienced last week. Equity markets rebounded off their recent skid but are still well off their February highs. Following the announcement of the tariff pauses, equity markets sharply jumped and posted one of the largest daily gains since World War II. Increased volatility should be expected in the near-term until more certainty emerges around the future of US and global trade policies. Breaking with typical market behavior, US Treasuries and the US Dollar experienced selloffs during this recent volatility shock. Often viewed as “safe haven” assets that investors seek during these episodes, instead last week saw a steepening of the yield curve as long-term rates rose by around 50 basis points.

Your Capital Markets Snapshot: Navigating Volatility with Long-Term Confidence

Volatility continues to be the theme of 2025. Last week, the markets experienced a sharp selloff to end the week following the announcement of aggressive U.S. reciprocal tariffs by President Donald Trump. The tariffs, which included a 10% minimum on all imports and higher rates for countries with larger trade deficits, led to retaliatory measures from China. This sparked risk-off sentiment, causing equities to finish the week sharply lower and U.S. Treasury yields to decline to their lowest since October 2024. Despite the headwinds posed by tariffs, the U.S. economy entered this period from a position of strength, with healthy household balance sheets and labor-market conditions. Investors are advised to stick with their long-term investment strategies, emphasizing diversification to navigate the ongoing market volatility. As we have discussed previously, we believe time in the market is greater than timing the market.

Market Update: April 4, 2025

In today's complex financial landscape, staying informed is key to making sound investment decisions and creating a secure financial future. Our job at DFG is to help our clients navigate the changing financial landscape within the context of their personal financial plan in a way that brings them confidence, comfort, and security. Toward this goal, below is the latest Market Update issued by Daken Vanderburg, CFA, the Chief Investment Officer of MassMutual Wealth Management, which provides commentary on the current state of the economy and explores the impact of tariffs on the markets.As always, the Davis Financial Group Team wants to hear from you – please share your thoughts, questions, and ideas with us at info@davisfinancialgroup.com or give us a call at (413) 584-3098.CRN202803-8317719

Your Capital Markets Snapshot: Tariffs, Inflation, and Market Volatility

Last week, equity markets experienced significant volatility due to the announcement of a 25% tariff on all non-U.S. made autos, which is set to take effect on April 3. This move led to a decline in shares of automakers and parts suppliers, particularly in countries with large auto exposure like Germany and South Korea. Additionally, consumer confidence waned, and core PCE prices increased more than expected, suggesting higher inflation pressures and further dampening investor sentiment. Personal spending came in softer than expected, indicating higher prices might be impacting consumer behavior. Despite these challenges, corporate profits are rising, and the private sector continues to add jobs at a healthy pace. The Federal Reserve is maintaining a wait-and-see approach before taking any further action with respect to interest rates. Once the focus on tariffs passes, there is potential for pro-growth policy measures being announced in the second half of the year. Given the heightened uncertainty in the markets, it remains prudent to ensure portfolios are sufficiently diversified.

Your Capital Markets Snapshot: Fed Holds Rates as Markets Shift

Last week, the Federal Reserve decided to keep the federal funds rate unchanged, reflecting a cautious approach amid slowing economic growth and policy uncertainty. Notable observations from the Fed’s meeting include their expectations for slowing GDP growth and higher inflation in the short-term plus plans to slow its balance sheet reduction program in April. By week’s end, U.S. stocks experienced a slight recovery from correction territory but remain down year-to-date. International stocks, particularly in Europe and China, continue to deliver impressive performance to start the year. In the U.S. fixed income markets, bond yields declined, leading to higher bond prices and solid returns. So far this year, investment-grade bonds and emerging-market debt are performing particularly well. The U.S. economy showed signs of cooling from its above-trend pace, but the labor market remained healthy, and manufacturing sectors indicated a recovery.

Your Capital Markets Snapshot: Volatility Continues to Rattle US Equity Markets

Volatility continues to rattle US equity markets, and 2025 continues to highlight the importance of diversification. Last week the S&P 500 dipped into correction territory, down just over 10% from its February highs. The technology-heavy Nasdaq has experienced a more substantial decline of about 14%. This recent downturn is normal, US equity markets average about one 10% correction each year. Increased uncertainty around US trade policy, inflation, and geopolitics means volatility may remain elevated in the near-term. However, the U.S. economy is growing and corporate earnings are strong. These are two bullish indicators that can help anchor markets as the uncertainty resolves itself. Despite the recent downturns, certain sectors within U.S. equities, such as value and cyclical stocks, as well as international markets, like Europe and China, have provided pockets of growth. Bonds have outperformed stocks and provided modestly positive returns so YTD. These opportunities highlight the importance of maintaining a well-diversified portfolio.

Market Update: March 10, 2025

In today's complex financial landscape, staying informed is key to making sound investment decisions and creating a secure financial future. Our job at DFG is to help our clients navigate the changing financial landscape within the context of their personal financial plan in a way that brings them confidence, comfort, and security. Toward this goal, below is the latest Market Update issued by Daken Vanderburg, CFA, the Chief Investment Officer of MassMutual Wealth Management, which provides commentary on the current state of the economy and explores the impact of tariffs on the markets.As always, the Davis Financial Group Team wants to hear from you – please share your thoughts, questions, and ideas with us at info@davisfinancialgroup.com or give us a call at (413) 584-3098. CRN202803-8317719

Your Capital Markets Snapshot: U.S. Economic Growth is Showing Signs of Slowing

U.S. economic growth is showing signs of slowing, with key indicators like retail sales and personal spending surprising to the downside. This slowdown comes amid heightened policy uncertainty, particularly around tariffs and government funding. Markets have reacted defensively, with sectors like health care and consumer staples leading, while technology and consumer discretionary sectors lag. The S&P 500 is negative for the year, as markets continue to consolidate after the last two years of over 20% growth. International equities continue to outperform their US peers, highlighting the importance of diversification in a portfolio context. Additionally, bond markets have seen support as Treasury yields moved lower, reflecting renewed market expectations of multiple potential Fed rate cuts this year. Despite these challenges, the U.S. economy started the year from a position of strength, and there are no immediate concerns of a looming recession.

Your Capital Markets Snapshot: Equity Markets Experienced Notable Volatility

Last week, equity markets experienced notable volatility. The S&P 500 briefly erased its year-to-date gains, driven by growth concerns, trade uncertainty, and deteriorating consumer confidence. Despite these challenges, there are still supporting factors such as positive economic growth, a steady labor market, and strong spending on AI. The Magnificent 7, which had previously led the market, entered correction territory, contributing to the broader index's sideways movement over the past three months. Diversification remains critical, as leadership has shifted away from U.S. large-cap and tech stocks. Overall, while market volatility may persist, the recipe for continued economic expansion and a continuation of the current bull market in stocks remain intact.

Your Capital Markets Snapshot: Markets Displayed a Combination of Optimism and Caution

Last week was mixed for capital markets. US equity markets initially crept upward, with the S&P 500 and Nasdaq posting new all-time highs in the first half of the week. However, weaker than expected retail spending data led to all three major US indices posting losses for the week. Two trends we are monitoring to begin this year include: 1.) U.S. mega-cap technology stocks are lagging the broader market after their recent dominance in 2023 and 2024; and 2.) International equities, largely driven by European markets, are outperforming their U.S. counterparts. Despite some weak economic releases, Treasury yields continue to stabilize after rising for much of September 2024 – January 2025. Last week rates slightly eased falling between 0-8 basis points. Overall, markets displayed a combination of optimism and caution, highlighting the importance of diversification across sectors and regions.

Your Capital Markets Snapshot: Inflation Data Came In Hotter than Expected

Last week, inflation data came in hotter than expected, with the Consumer Price Index (CPI) rising 0.5% month-over- month and 3% year-over-year. The Federal Reserve continues to suggest patience in their approach to cutting rates as inflation stubbornly remains above their 2% target. Expectations for multiple rates cuts this year continue to moderate. International equity markets outperformed their U.S. counterparts, fueled by strong weeks from the German DAX and Stoxx 600. Year to date, both international developed and emerging markets are outpacing U.S. equities of all sizes. Despite the poor inflation readings, the S&P 500 and NASDAQ recorded weekly gains, nearing their all-time highs. So far this year, markets have proven resilient, especially in the face of new tariff announcements and warmer inflation data.

Your Capital Markets Snapshot: The U.S. Economy Continues to Show Solid Growth

The U.S. economy continues to show solid growth with Q4 2024 real GDP growing at an annualized rate of 2.3%, just below expectations of 2.5%. US GDP growth was driven primarily by consumer spending, which increased 4.2% annually (its highest level since Q1 2023). The Federal Reserve held interest rates steady, maintaining a patient approach amid solid economic growth, a healthy labor market, and stubborn inflation trends. Earnings season kicked off with strong results from companies like Apple, Microsoft, and Meta, although Tesla missed estimates. Technology stocks, particularly Nvidia and other chip manufacturers, experienced volatility following Monday’s news from Chinese AI startup DeepSeek that it developed an AI program comparable to OpenAI’s ChatGPT using a fraction of the development costs and computational resources. Much of the sector rebounded later in the week, as the news from DeepSeek was spun as a positive for increasing development and adoption of AI-related technologies. Overall, the S&P 500 is on track for strong earnings growth, with expectations for continued momentum into 2025.

Your Capital Markets Snapshot: Stocks Maintained their Bullish Momentum

Last week, stocks maintained their bullish momentum, driven by a pro-growth fiscal policy shift from the incoming Trump administration. The S&P 500 reached a fresh all-time high (ATH) during the week, while the Dow and NASDAQ also recorded gains but remain below their previous ATHs. Bitcoin prices also hit a new ATH above $109,000 on Inauguration Day before trending down and ending the week essentially flat, fueled by optimism over the administration's crypto- friendly stance. Additionally, Meta Platforms announced a significant increase in AI infrastructure investment, which appeared to reflect positively on its stock price. Despite these positives, there are still concerns about potential inflationary pressures and the trajectory of Treasury yields, particularly longer-term yields. Overall, the market sentiment remained positive, supported by healthy economic indicators and earnings growth.

Your Capital Markets Snapshot: A Strong Positive Week for Most Asset Classes

Last week was a strong positive week for most asset classes, with particularly strong returns for US equities and Bitcoin. The benchmark 10-year Treasury yield briefly reached a 14-month high of 4.8% before retreating due to encouraging inflation data, with core CPI unexpectedly edging lower. Despite strong economic growth and policy uncertainty, the Federal Reserve showed no urgency to cut rates further, leading investors to scale back their expectations for rate cuts this year. The start of the earnings season highlighted the influence of corporate profits on stock market performance, with banks reporting strong results. Overall, the markets saw a mix of volatility and positive momentum, driven by economic and corporate strength.

Your Capital Markets Snapshot: Markets Experienced a Mix of Positive Economic Data

Last week, markets experienced a mix of positive economic data and political developments. Labor market data exceeded expectations, with significant job gains and declining unemployment rates. However, this strong economic performance led to a reassessment of the likelihood of central-bank rate cuts in 2024, as more participants are expecting a pause in cuts and expectations for only one rate cut in the back half of the year are increasing. Changes to interest rate expectations and the strong economic data led government bond yields to rise and stock markets to decline. Despite these changes, the overall economic fundamentals remain resilient, evidenced by strong job gains, decreasing unemployment, and positive economic growth.

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