In Markets "In a Nutshell"

Markets “In a Nutshell” for February 17, 2025

Investment Week at a Glance

Stocks finished higher for the week. The Dow Jones Industrial Average rose 0.5%, the S&P 500 was up 1.5%, and the NASDAQ rose 2.6%. Foreign stocks (MSCI EAFE) were also up, rising 2.1%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 4.48%.  (Data source: Wall Street Journal)

Inflation Hotter Than Expected

The January CPI came in above expectations as it rose 0.5% in January and a 3% year-over-year increase. This was the largest year-over-year increase since June. Core CPI which excludes food and energy, ticked higher to 3.3% driven by an increase in prices for goods and services. Inflation continues to stick around the 3% range, well above the Fed’s goal of 2% inflation. Chances of a Fed rate cut continue to drop as there is now only one rate cut for 2025 priced in and probability of no rate cut continues to increase. The equity market has been able to shrug off inflation worries and continue to move higher but if we see inflation continue to move higher, equities could start to move lower.

Market Leadership Continues to Broaden

The Magnificent 7 (Apple, Microsoft, Amazon, Alphabet, Meta, NVIDIA, and Tesla) have been the market leaders for quite some time as they now make up roughly 1/3 of the S&P 500 index. Market leadership may be changing soon as earnings are not growing as fast as they once did for the Mag 7. Sales growth for Q4 was the slowest it has been since 2022 for the Mag 7. S&P 500 earnings growth and Mag 7 earnings growth were nearly identical for Q4, just two years ago the spread was 67% in favor of the Mag 7. When we look at sector performance for 2025, technology is ranked 9th out of 11 as other sectors have started to outperform.

Airbnb Beats Earnings, Stock Shoots Higher

Airbnb reported earnings on Thursday and closed up over 14% on Friday. The company reported higher than expected earnings and revenue and said over 111 million nights and experiences were booked in the 4th quarter. The move higher in the stock now gives Airbnb a market cap over $100 billion. The company will need to continue to see strong growth to justify its high valuation of a forward P/E ratio of over 35. Airbnb has a current market cap larger than that of Hilton & Marriott.

Quiz:

What is the historical average inflation rate in the United States (1914-2025)? (Scroll Down for Answer)

  1.    1.7%
  2.    2.4%
  3.    3.3%
  4.    4.1%

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

Answer:

3. 3.3%. The average inflation rate in the Unites States is 3.3% from 1914-2025. Although the Fed is trying to bring inflation down, we are slightly below the historical average.

 

 

 

 

 

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