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All-Time Highs and New Administration Policies Take the Spotlight
The S&P 500 hit a new record last week, climbing over 2% as earnings season delivered positive surprises. Fourth-quarter earnings for S&P 500 companies are now expected to rise 12.7% year-over-year. Driven by strong results in financials, this would be the fastest growth in three years. The Dow and NASDAQ also posted weekly gains of about 2%, though they remain just shy of their recent highs. On the global stage, Japan made headlines by raising its interest rate to 0.50%, the highest since 2008, in a bold step to combat decades of economic stagnation.
In the U.S., inflation concerns eased slightly as crude oil prices fell 3%, settling near $74 per barrel after four weeks of gains. However, consumer sentiment dipped for the first time in six months, with more Americans expecting rising inflation and unemployment in 2025. Real estate markets continued to struggle under high interest rates, with existing home sales hitting their lowest level since 1995. On the policy front, the Federal Reserve is widely expected to hold rates steady this week, signaling a pause in its aggressive cutting cycle despite President Trump calling for lower rates already. Investors will closely watch Fed Chair Powell's comments for any clues on future rate moves.
President Trump’s flurry of executive orders focused on energy production, immigration, tariffs, and AI investment. While some measures were more tame than consensus fears, uncertainty still remains as these policies take shape. Early initiatives to boost fossil fuel production, streamline AI infrastructure, and review tariff implementation could lead to market volatility, though pro-growth measures like tax cuts and deregulation are eagerly anticipated in the months ahead.
What This Means for Investors
With solid GDP growth, improving corporate profits, and cooling inflation, the U.S. economy remains on stable footing. Volatility may persist as new policies roll out, and these shifts also create opportunities to buy or take profits to realign portfolios with new direction. Investors should focus on long-term fundamentals, rebalance portfolios, and seek diversification to navigate this evolving environment.
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