Markets “In a Nutshell” for February 3, 2025
Investment Week at a Glance
Stocks finished mixed for the week. The Dow Jones Industrial Average rose 0.3%, the S&P 500 was down 1.0%, and the NASDAQ fell 1.6%. Foreign stocks (MSCI EAFE) were up, rising 0.9%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 4.54%. (Data source: Wall Street Journal)
U.S. Economy Continues to Grow
4th quarter real GDP was released last week and came in at 2.3% annualized. This was slightly below the expected 2.4%, but it still showed that the economy is growing steadily. Consumer spending was up 4.2% as the consumer remains resilient and shows no signs of slowing down. Unemployment remains low at 4.1% and job openings continue to exceed the number of unemployed people. This would indicate that wage growth will continue to be strong and outpace inflation giving the consumer more spending power. The economy has been able to handle the higher-than-expected rates so far and will look to continue to do so throughout 2025.
Fed Leaves Rates Unchanged
The Fed had its most recent meeting last week and left rates unchanged as expected. The Fed has stopped cutting rates quicker than many expected a few months ago but amid solid economic growth and conditions there currently is no reason to cut rates further. Inflation also remains above the Fed’s goal of 2% but has come down substantially from its peak we saw in 2022. By leaving rates where they are it gives the Fed more flexibility to make a rate cut if economic conditions worsen throughout the year. The Fed won’t meet again until March when it is expected to once again leave rates unchanged. Current projections are for the Fed to make its next rate cut in June of this year.
Trump’s Tariffs Take Effect
On Saturday the tariffs that President Trump had promised took effect. A 25% tariff on goods from Mexico and Canada was placed as well as a 10% levy on imports from China. Between the 3 countries, the United States does about $1.6 trillion in business. Trump said that Americans may have some “short-term pain but that the United States has been ripped off by virtually every country in the World”. Reports are that Trump will speak with the leaders of the nations that tariffs were imposed on, and investors are hopeful a deal can be made so these tariffs are only temporary. Investors will keep a close eye on the situation as it continues to unfold. (CNBC)
Quiz:
When was the last time the Unites States had a trade surplus? (Scroll Down for Answer)
Answer below.
Have a Great Week!
Answer:
4. 1975. The last time the United States had a trade surplus was 1975. The current trade deficit is estimated to be over $1 trillion for 2024. President Trump is hopeful tariffs will reduce this and bring more companies back to producing goods in the United States to avoid these tariffs.
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