Market Update – January 6th, 2024

Financial Markets

The first week of the new year saw equities struggle to post gains during a relatively quiet week for economic data. As of close on Friday, January 3rd, the Dow Jones Industrial Average declined by -0.6%, the Nasdaq Composite fell by -0.51%, and the S&P 500 slipped by -0.47%. Bonds, however, did have a slightly positive week, with the Barclays Aggregate Bond Index rising 0.18%.

Source: Zacks

Market News

Consumer Confidence

Consumer confidence dropped in December, with The Conference Board’s Consumer Confidence Index falling 8.1 points to 104.7. The drop was driven by a sharp decline in the Expectations Index, which tumbled 12.6 points to 81.1, nearing the recession-warning threshold of 80. Consumers expressed less optimism about future business conditions and income prospects, with the decline most pronounced among those over 35 and households earning between $25,000 and $100,000.

Confidence in the stock market also waned slightly, reflecting heightened economic uncertainty as 2025 approaches. This reversal interrupts the upward momentum seen in recent months, pulling the index back into the stagnant range where it has remained for over two years.

ISM Manufacturing

The ISM Manufacturing Index rose to 49.3% in December, signaling slight improvement but remaining in contraction territory for the ninth consecutive month. While still below the neutral 50% threshold, the latest reading shows potential improvements for the manufacturing sector.

New Orders and Production posted above 50, signaling expansion and offering a slightly bullish indicator of the sector. Deliveries and Backlogs of Orders also improved, while Employment declined. Despite the gains in some components, this marks the 25th time in the past 26 months that the index has been bearish. Overall, December’s improvement is a positive sign, though it could prove to be an outlier in a longer run, bearish manufacturing trend.

Source: Institute of Supply Management

Tesla Deliveries Miss

Tesla shares dropped 6% last Thursday after the company reported vehicle deliveries that fell short of expectations. The company delivered 495,930 vehicles globally in Q4, missing analyst estimates of 510,400 and showing only a slight increase from 484,500 in Q4 2023.

For 2024, Tesla reported 1.78 million deliveries, below projections of 1.8 million and marking its first year-over-year decline, down from 1.8 million in 2023. The news extended Tesla’s recent pullback, with the stock now down nearly 20% from its December 17th all-time high.

Source: Morningstar

Recession Indicators

As 2025 begins, recession indicators continue to send mixed signals, a trend observed for several months. Currently, there are four bearish indicators, three bullish ones, and one neutral, reflecting uncertainty ahead and a case to be made for both the bulls and the bears.

Bearish indicators include the ISM Manufacturing Index, which remains in contraction despite recent improvement, the long-time bearish Leading Economic Indicators Index, the Manufacturing Business Outlook Survey, which shows slight upward momentum but fluctuates, and the CFNAI, which has varied month to month.

For bullish indicators, the ISM Services Index remains strong, supported by consistent post-COVID recovery, while the Employment Trends Index also signals resilience in the labor market. The Anxious Index, which tracks economists’ recession projections, has improved in the last few quarters, with fewer forecasts of a near-term downturn.

While signs of both strength and concern persist in some areas, the overall US economic picture remains mixed, highlighting lingering uncertainty for the year ahead.

Summary

The first week of 2025 began with equities posting modest losses amid sparse economic data, while bonds saw slight gains. Consumer confidence fell sharply in December, with The Conference Board’s Index dropping to 104.7. Manufacturing showed slight improvement, as the ISM Manufacturing Index rose to 49.3%, though it remained in contraction territory for the ninth consecutive month. Tesla missed Q4 delivery expectations, reporting 495,930 vehicles, which sent its stock down -6% and extended its recent pullback. Recession indicators remain mixed, with bearish signals from manufacturing and leading indicators, countered by bullish trends in the services sector and labor market.

We appreciate your continued trust.

Thank you,

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

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