Market Update – January 20th, 2025

Sound Planning Group Team

Financial Markets

Stocks finished the week slightly lower as markets weighed geopolitical tensions against stable economic data and early bank earnings, with the Nasdaq down 0.66%, the S&P 500 down 0.38%, and the Dow down 0.29% last week. Tuesday morning trading showed continued caution, reflecting concerns over U.S.-Greenland tensions and the potential for new tariffs on European imports, keeping markets focused on near-term risks.

Market News

December CPI

December’s inflation data came in largely in line with expectations, with headline CPI inflation holding steady at 2.7% year over year and core inflation at 2.6%. On a monthly basis, prices rose 0.3% for headline CPI and 0.2% for core, reflecting continued progress toward disinflation but at a gradual pace.

By category, grocery prices rose 0.7% in December and were up 2.4% from a year earlier, while prices for dining out also increased 0.7% in the month and 4.1% year over year. Although annual inflation in these categories remains relatively contained, the sharp increases in December highlight pockets of hot short-term inflationary pressure.

Energy costs increased 2.3% from a year ago, though underlying categories saw some divergence. Gasoline prices declined 3.4% annually, providing modest relief, while utility costs rose sharply, with electricity prices up 6.7% and natural gas services up 10.8% year over year, including a 4.4% increase during the month of December alone. Shelter inflation continued to cool, easing to a 3.2% annual pace, reinforcing one of the more constructive disinflationary trends seen in recent months.

Overall, the December CPI report showed stable disinflation trends, though pockets of firmer inflation indicate prices risks are not fully resolved and progress may continue to be uneven.

Source: Bureau of Labor Statistics

November PPI

Producer prices rose 0.2% in November, with headline PPI up 3.0% and core PPI up 3.5% year over year, slightly higher than October’s readings of 2.8% and 3.4%, respectively.

By category, inflation pressures were concentrated in energy, which climbed 4.6% for the month, as well as transportation and warehousing (+0.3%) and other services (+0.3%). Trade services saw modest deflation (-0.8% MoM), while wholesale food prices remained flat, helping to contain overall inflation.

Although wholesale inflation rose in November, much of the increase came from volatile categories like energy, while services prices remained flat, suggesting the rise in producer price inflation may be short-lived.

Source: Bureau of Labor Statistics

Retail Sales

November retail sales came in slightly above expectations, rising 0.6% month over month as the holiday shopping season began, led by strong auto sales. On an annual basis, retail sales increased 3.6%, with nonstore retailers (largely online shopping) up 7.2% and dining out up 4.9% from the same time last year. October’s figures were revised lower, a minor setback, but the data continue to reflect a longer-term trend of stable and resilient U.S. consumer demand.

Source: U.S. Census Bureau

Bank Earnings

Bank earnings kicked off last week, providing an early look at fourth-quarter fundamentals and offering insight into broader economic conditions. Results from the largest U.S. banks were generally positive, though not without a few areas of risk.

JPMorgan Chase reported fourth-quarter results that exceeded expectations, supported by stronger than expected trading revenue, partially offset by a one-time, preannounced charge related to its takeover of the Apple Card loan portfolio from Goldman Sachs. Bank of America also topped estimates, driven by solid net interest income and strength in trading revenue.

Similarly, Citigroup beat estimates on both top and bottom lines, reflecting progress in its restructuring efforts. Wells Fargo was the outlier, missing on both the top and bottom lines, in part due to layoff-related expenses tied to workforce reductions. However, these actions may support profitability in the coming quarters, particularly following the recent lifting of the bank’s government-mandated asset cap.

Following the earnings releases, bank shares faced some pressure during the week amid renewed discussion of proposals to cap credit card interest rates at 10%, a policy that would weigh heavily on profitability across the industry if enacted. Adding to a more cautious tone, JPMorgan CEO Jamie Dimon highlighted ongoing risks tied to geopolitical uncertainty, persistent inflation, and elevated asset prices. Even so, early bank earnings suggest a resilient sector, though risks remain in focus as the Q4 reporting season continues.

Existing Home Sales

Home sales picked up in December, with existing home sales volumes rising 5.1% month over month and 1.4% from a year ago. The total number of homes for sale increased to 1.18 million, up 3.5% from December 2024, while supply stood at 3.3 months, slightly below November but above last year’s 3.2 months. The median sales price remained relatively stable, rising just 0.4% year over year to $405,400. The data reflected a trend of rising inventory, modest disinflation, and sales volumes that remain subdued relative to the post-pandemic housing boom.

Source: National Association of Realtors

Summary

Last week’s market action reflected a balance of cautious optimism and heightened risk awareness. Inflation data remained largely in line with expectations, showing continued progress in disinflation, while retail sales and housing data pointed to stable consumer demand and a quiet real estate market. Early fourth quarters bank earnings were generally positive, highlighting the sector’s underlying strength, though concerns over proposed credit card interest rate caps and broader geopolitical risks kept markets attentive to potential headwinds.

In closing, we want to express our sincere gratitude to our valued readers and loyal customers for entrusting us with your financial well-being. Your continued support is the cornerstone of our success, and we are committed to serving you with the utmost dedication and professionalism. As we navigate the ever-changing financial landscape together, we encourage you to reach out to us if there have been any shifts in your risk tolerance or if you have experienced any material changes in your Investment Policy Statement objectives or constraints. Your financial goals are our top priority, and we are here to adapt and tailor our strategies to align with your evolving needs, whether they pertain to risk and return objectives or constraints such as time horizon, taxes, liquidity needs, legal issues, unique circumstances, or changes in your financial planning and retirement objectives. Your feedback and communication are essential in helping us ensure your financial success. Thank you once again for your trust and partnership with Synergy Asset Management. We look forward to continuing this journey together.

We appreciate your continued trust.

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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