Weekly Market Insights | New Indicators Rattle Investors

Stocks fell last week as concerns about sticky inflation and the pace of economic growth rattled investors. 

The Standard & Poor’s 500 Index declined 1.66 percent, while the Nasdaq Composite Index dropped 2.51 percent. The Dow Jones Industrial Average also fell 2.51 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, was essentially flat (+0.04 percent).^1,2

S&P 500 Hits New High, Then Slips

Following the Presidents’ Day holiday, stock prices were largely range-bound on Tuesday despite some intraday volatility. Then stocks edged higher, shaking off some new tariff talk and disappointing housing starts data. The S&P 500 marked its third record high close of the year on Wednesday.^3,4

On Thursday, stocks were under pressure from the start of trading after a weaker-than-expected outlook from a mega-retailer. The update reinforced some concerns that the economy may be slowing. The selling accelerated on Friday after a consumer sentiment survey showed investors are unsettled about the inflation outlook.

Friday’s decline was the worst for the major market equity indices for 2025.⁵

Economic Jitters

Investors were forced to navigate a week of disappointing news about the economy and inflation.

First, traders were surprised to hear about slowing demand at the country’s biggest retailer, which soured the outlook for the consumer and the economy. Then, the University of Michigan Consumer Confidence survey fell by ten percent in February as consumers expressed concerns about higher inflation ahead of possible new tariffs.⁶

This combination prompted investors to move into a “risk-off” position before the weekend. 

I warned readers in last week's update to expect volatility and a stock market pause after extended gains which often triggers the same argument among pundits of whether sideways movements in equity indices are a healthy reset in investors’ expectations or a worrying loss of momentum and beginning of a correction?

Bullish sentiment from the election coming into 2025 was at historic highs, and the subsequent reset in investor expectations over the past few weeks has come without a lot of technical damage and the equity markets are now consolidating which is typically considered healthy unless we have serious technical damage start to evolve.

Earnings growth and strong sector performance so far this year are evidence of a long-awaited broadening of returns beyond a small group of mega-cap technology companies which is a healthy transition with the AI trade still intact. However, investors should also prepare for a bumpy ride while major policy questions remain and should not expect a repeat of the blockbuster returns in the major equity market indices that we enjoyed in 2023 or 2024.

Gold continues to be a great investment and hedge for our valued clients with solid 1.7% gain for the holiday-shortened trading week with the rally defying the stark headwinds of a relatively stronger dollar and significant rise in Treasury bond yields after the Fed lowered shorter term interest rates earlier in the year.

Over in the debt markets

Federal Reserve officials deliberated whether to slow down or pause the runoff of their nearly $6.8 trillion asset portfolio of mostly government back bonds at their meeting as they face complications in the months ahead stemming from the need to raise the federal debt limit.

The Fed is expected to halt their balance sheet runoff of about $40 Billion dollars a month and reinvest maturing bonds proceeds back into US Treasury Securities out along the yield curve affording coming support for longer dated maturity bond prices.

The currency marketis still being driven primarily by expected central bank policies (the Fed is the least dovish, supporting the dollar, while the ECB and BOE are more dovish, pressuring the euro and pound). Of course, geopolitics are clearly an influence (tariffs and the Russia/Ukraine and Israel wars), so we should expect a generally buoyant dollar and continued volatility in currencies.

Concerns in the Digital Realm

The cryptocurrency space is lacking positive catalysts in the near term and the corrections in crypto markets in recent months have seen both bitcoin (BTC) and ether (ETH) futures near backwardation, which is a sign of lower demand. Backwardation occurs when the spot price of an asset is higher than the price trading in the futures market which is a negative development and indicative of demand weakness by those institutional investors that use regulated CME futures contracts to gain exposure into these two cryptocurrencies.

If demand for bitcoin and ether futures are healthy, the futures cost more than the spot price, and the curve is said to be in contango. Positive crypto initiatives by President Trump's new administration are more likely to kick in during the later part of 2025 with institutional investors likely taking profits now due to a lack of short-term catalysts and the uncertainties of new policy effects on the markets.

This Week: Key Economic Data

Tuesday:  Consumer Confidence. Fed Officials Lorie Logan and Thomas Barkin speak.

Wednesday:  New Home Sales. Fed Officials Thomas Barkin and Raphael Bostic speak.

Thursday:  Gross Domestic Product (GDP). Durable Goods. Weekly Jobless Claims. Pending Home Sales. Fed Balance Sheet.

Friday:  Personal Consumption and Expenditures (PCE) Index.

^{Source: Investors Business Daily - Econoday economic calendar; February 21, 2025
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday:  The Home Depot, Inc. (HD), Intuit Inc. (INTU)

Wednesday:  NVIDIA Corporation (NVDA), Salesforce Inc. (CRM), Lowe’s Companies, Inc. (LOW), The TJX Companies, Inc. (TJX)

Thursday:  Dell Technologies Inc. (DELL)

Friday:  Berkshire Hathaway Inc. (BRK.A,BRK.B)

^{Source: Zacks, February 21, 2025. Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“One man practicing sportsmanship is far better than 50 preaching it."

– Knute Rockne

Receive Your Tax Return Quicker With Direct Deposit

Want to receive your tax return quickly? The IRS recommends filing your return online and providing your direct deposit information. In addition to receiving your refund quicker, using direct deposit has a few other benefits. 

Direct deposit is also fast, secure, and accessible. You must provide your bank account and routing number to sign up for direct deposit. Taxpayers should have this information available when ready to file because the IRS can't accept it after filing a return.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional. 

Tip adapted from IRS⁷

How to Start a Meditation Practice

If you’re interested in starting a meditation practice, the good news is that you don’t need much to get started. Here are some tips:

• First, find a place to meditate. It doesn’t have to be a dedicated space but should be calming and free from distractions.
• Next, set a time limit. Even just 5 minutes of meditation a day is enough to get started.
• Now, it’s time for the actual meditation! Meditation aims to clear your mind of intrusive thoughts and be fully present where you are. Don’t focus on not thinking about anything at all. Instead, watch your thoughts float by as you stay centered on your breath.
• If your mind wanders, it’s okay! Gently bring it back to the present and focus on your breath or something around you.

Tip adapted from Mindful⁸

I have rosy cheeks, I am round and cute – yet debate persists over whether I am vegetable or fruit. What might I be?

Last week’s riddle: I’m comprised of solid ground, and yet I see water all around. What exactly am I?
Answer: An island.

Shanghai at Night

Shanghai, China

Footnotes and Sources

^{1. The Wall Street Journal, February 21, 2025}

^{2. Investing.com, February 21, 2025}

^{3. CNBC.com, February 18, 2025}

^{4. The Wall Street Journal, February 19, 2025}

^{5. CNBC.com, February 21, 2025}

^{6. The Wall Street Journal, February 21, 2025}

^{7. IRS.gov, April 11, 2024}

^{8. Mindful, October 3, 2024}