Weekly Market Insights | Stocks Decline Slightly as New Year Dawns

^{The major stock market indices edged lower for the shortened holiday week despite a powerful rally on Friday to close out the first week of the new year. The Standard & Poor’s 500 Index lost 0.48%, while the Nasdaq Composite Index slid 0.51%. The Dow Jones Industrial Average fell 0.60%. The MSCI EAFE Index, which tracks developed overseas stock markets, dropped 0.90%.}

Selling Then Buying

Stocks were under pressure right out of the gate on Monday on worries over the loss of 2024 year-end momentum. By the end of trading on Monday, markets recovered some losses, but the selling picked up again on Tuesday.^3,4

After being closed for the New Year’s holiday on Wednesday, stocks opened higher for the first trading day of 2025, but sellers gained the upper hand by the end of trading. On Friday, Investors perked up with technology stocks leading a strong recovery rally that erased most of the week’s losses.^5,6

Megacap’s Mega Influence

Mega-cap technology stocks have captured many headlines over the last two years as the S&P 500 posted double-digit returns (24 percent for 2023 and 23 percent for 2024).
And for a good reason, as mega-cap technology stocks were doing most of the hard lifting over the years. For example, during the past 12 months of trading, more than half (53%) of the S&P 500’s return can be attributed to the Magnificent Seven– the seven mega-cap technology companies that most investors would consider household names.

However, the rising dollar and higher yields are becoming more direct headwinds on the major equity market indices, as it was the hot data and dollar surge that contributed to stocks giving back gains. I think that relationship will continue and the higher yields and the greenback go, the more it will directly pressure stocks.

For now, it appears the rise in yields is taking a breather and rightly so given the large 4th quarter 2024 rally, but there is no reason to believe the rise in yields is over unless 1) U.S. growth suddenly rolls over or 2) Inflation metrics drop sharply. Until one of those two things happens, the path of least resistance in yields remains higher, especially with the out of control rising deficits.

GOLD finished out 2024 with a record-breaking year on a positive note as robust central bank buying, geopolitical uncertainties and monetary policy easing fueled the safe-haven metal's strongest annual performance since 2010. Gold prices have hit record highs in six months and gained about 26% for 2024 as one of the best performing asset classes with the biggest annual jump since 2010, and last scaled a record high of $2,790.15 on October 31st 2024 after a series of record-breaking rallies throughout the year.

BITCOIN enjoyed record gains in 2024, but has historically moved in the opposite direction of the U.S. Dollar Index (DXY), which gauges the greenback's exchange rate against major fiat currencies, including the euro. Strength in the dollar largely comes ahead of President-elect Donald Trump stepping into office in late January, where he has promised several policies to help the economy in the coming years.

US DOLLAR - We have witnessed that as the dollar strengthens, dollar-denominated assets become more attractive compared to cryptocurrencies. In the past, investors have preferred traditional investments like U.S. Treasuries or stocks, which have afforded good returns in a strong dollar environment. Stay tuned as Bitcoin again attempts to exceed $100,000.

Over in the FIXED INCOME markets, the swift move upward in long-term interest rates following a Fed rate cut is nearly unprecedented in modern monetary history. The bond prices will keep declining, driving yields ever higher the more the Fed talks about less rate cuts in 2025. If the Fed does not back off the rate-cutting talk, bond yields will go as high as needed to start thwarting inflation as perceived by the Fed which is a growing headwind for stock prices.

This Week: Key Economic Data

Monday:Fed Official Lisa Cook speaks. Factory Orders.

Tuesday:Fed Official Thomas Barkin speaks. International Trade in Goods and Services.

Wednesday:FOMC Minutes released. ADP Employment Report. Fed Official Christopher Waller speaks.

Thursday:Stock market closed for President Carter’s state funeral.

Friday:Employment Situation. Consumer Sentiment.

^{Source: Investors Business Daily - Econoday economic calendar; January 3, 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

Wednesday:Jefferies Financial Group Inc. (JEF)

Thursday:Infosys (INFY), Constellation Brands Inc. (STZ)

Friday:Bank of America Corporation (BAC), Wells Fargo & Company (WFC), BlackRock, Inc. (BLK), Delta Air Lines, Inc. (DAL)

^{Source: Zacks, January 3, 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.}

“The biggest disease today is not leprosy or tuberculosis, but rather the feeling of being unwanted.”

– Mother Teresa

Tips for Good Recordkeeping

When you file your tax return, the first step is to prepare your records. Good recordkeeping throughout the year can make filing your taxes easier. 

Here are some recordkeeping tips:

• Identify all sources of income.
• Keep track of expenses.
• Add tax records to your files as you receive them to make filing easier. 
• Organize support items that you may need to clarify your tax 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 IRS⁸

How to Drink More Water Throughout the Day

Drinking enough water is essential to keep you feeling your best. While there aren’t any strict rules on exactly how much water you should drink, you should listen to your body to ensure you’re getting enough. 

Here are some tips on how to drink more water throughout the day:

• Keep a reusable water bottle with you, saving plastic and making drinking water more convenient (and fun). 
• Set reminders on your phone to drink water, or “anchor” drinking water to other habits throughout your day (for example, drink some water at the end of every meeting).
• Replace other drinks, such as coffee and soda, with water.
• Drink a glass of water before every meal.
• Flavor your water with fruit or healthy water enhancers.

Tip adapted from Healthline⁹

David put on a white shirt with three large holes in it and went to the grocery store. No one gave him a funny look; no one objected to it. What kind of shirt was David wearing?

Last week’s riddle: Throughout Friday, Hanna asks her mother the same four-word question. On each occasion, her mother gives her a different answer. What is the question?
Answer: "What time is it?"

Surfing Pulau Panaitan

Jakarta, Banten, Indonesia

Footnotes and Sources

^{1. The Wall Street Journal, January 3, 2025}

^{2. Investing.com, January 3, 2025}

^{3. CNBC.com, December 30, 2024}

^{4. The Wall Street Journal, December 31, 2024}

^{5. CNBC.com, January 2, 2025}

^{6. CNBC.com, January 3, 2025}

^{7.  The Wall Street Journal, December 31, 2024}

^{8. IRS.gov, October 2, 2024}

^{9. Healthline, October 3, 2024}