“Talent wins games. But teamwork and intelligence win championships.” – Michael Jordan
Valued Clients,
We hope that the start to 2025 has been a great one for you. The beginning of 2025 in the stock market has been an interesting one. With mixes of upward and downward movement, it can be hard to gauge the long-term trend of the stock market. Our focus has stayed on some of the items we highlighted coming into 2025, the Fed, earnings, technology and AI stocks, as well as some new factors, including tariffs and regulatory policy.
The key points coming into 2025 are still very relevant almost two months into the year. Although the Fed does not officially meet again until mid-March, they remain in focus as they mull over further rate cuts. As of now, there is only a 4.5% chance of a rate cut in March. (CME Group)
Another focus has been earnings, which has played a key role in upward movement. As of now, the earnings growth rate for Q4 2024 is 18.2% (up from 16.9% just a week ago), if that holds, it will be the highest year over year earnings growth rate since Q4 2021. (FACTSET) The S&P 493 reported positive y/y EPS growth in 4Q24 after seeing negative y/y EPS growth almost every quarter since 2022, and this y/y growth should continue through 2025. Currently, 10 of 11 sectors show consensus EPS growth stronger in 2025 than in 2024, with the only outlier being tech (and it’s still strong growth). (Raymond James)
After two years of strong growth in Technology stocks, we are starting to see some movement the other way. Currently, 6 of 7 stocks in the “Magnificent 7” are down year to date. After a period of so much growth, sideways and downward action can be expected. While AI is still a cost to most companies, it does lift our long-term outlook on those looking for useful application.
Tariffs and inflation have made their way through the news cycle as well, causing concern for investors. A key point we rarely see mentioned is that, while tariffs do push prices higher, a sustained high inflation requires tariffs being increased for multiple years. (Forbes) We do have some history to reference this situation, as the Trump administration imposed tariffs on China in 2018. That year was full of newly imposed tariffs and retaliation tariffs, and then followed by a 2019 full of suspension and reduction of tariffs.
We thank you again for allowing us to be a part of your financial journey. We continue to believe that stocks are in a bull market, with many years left in its’ path. Volatility will always be a part of the market, but we believe that stocks are still in a long-term upward trend. If that changes, we will adjust.
Harry S. Williamson, WMS
Director
First Vice President, Investments
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Williamson Wealth Management and not necessarily those of Raymond James. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
