🪔 What to expect this week

and what's happening with the market

Author

Michael Wight
January 13, 2025

Good morning investors! In today’s issue, we’ll look at what to expect ahead and the changing market.

Today we cover:

  • What to expect this week

  • The case for 2025

  • Rising minimum wage

📊 Economy and News 

What to expect this week

Here’s what to keep an eye on this week:

Inflation: A Persistent Concern for Markets

Wednesday's Consumer Price Index (CPI) data is expected to attract considerable attention.

Economists anticipate a 2.9% year-over-year increase in December CPI, highlighting persistent inflationary pressures. While the Federal Reserve was initially optimistic about reducing rates after inflation moderated in September, the annual pace remains above its 2% target. The Fed now projects inflation to reach 2.5% by 2025.

Bank Earnings: Optimism Amid Favorable Conditions

Major U.S. banks are set to report fourth-quarter earnings this week. JPMorgan, Wells Fargo, Citigroup, and Goldman Sachs will release their results on Wednesday, followed by Bank of America and Morgan Stanley on Thursday.

Expectations are high due to robust investment banking fees, strong trading income, and reduced pressure to raise deposit rates. Additionally, optimism surrounding potential deregulation and tax reforms under the Trump administration has bolstered projections for bank profitability.

Analysts estimate that S&P 500 company earnings rose nearly 10% in the fourth quarter compared to a year earlier.

UK Inflation Under Scrutiny

Wednesday's UK inflation data is expected to reflect a 2.6% annual increase in December, remaining above the Bank of England's 2% target.

Recent selloffs in UK government bonds (gilts) have intensified pressure on the new Labour government, already grappling with economic challenges.

China’s Economic Data: A Key Indicator

China will release a range of economic data later this week, including GDP figures, house prices, industrial production, and retail sales.

Global hits:

Worth checking: Airlines cancel more than 3,000 U.S. flights amid storm, Delta slide evacuation at Atlanta.

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📈 Stocks

S&P 500 5,827.04 (-1.54%)
DJIA 41,938.45 (-1.63%)
NASDAQ 19,161.63 (-1.63%)
BRENT CRUDE 79.99 (+3.66%)
* Prices as of Jan 13th, 12:20 AM UTC

What’s happening with the market

The market’s reaction to December’s stronger-than-expected payroll growth (256,000 jobs) and a slight dip in the unemployment rate (to 4.1%) on Friday wasn't as straightforward as a typical positive response.

The S&P 500 dropped 1.5%, not due to a rejection of economic prosperity, but because of concerns about the sustainability of this growth in the context of rising bond yields and the Federal Reserve's tightening policies.

The Fear of Unsustainable Growth

Since the pandemic, early-year economic growth has often faltered, raising concerns about Federal Reserve over-tightening in response to strong jobs data. This could pressure interest rate-sensitive sectors like housing and manufacturing, while uncertainty surrounds how policies on tariffs, immigration, and deregulation will shape inflation, growth, and market risks.

Stocks and Bond Yields: Testing New Levels

Despite recent volatility, stocks remain near post-2016 election levels, with the S&P 500 steady over the past 15 sessions. Meanwhile, the 10-year Treasury yield has surged near April highs, reflecting strong payroll data and diminished expectations for an imminent rate cut.

Macro Concerns: Fed's Action and Market Impact

The Federal Reserve pausing rate hikes isn’t alarming, but higher yields, including 30-year mortgage rates above 7%, are straining housing. Meanwhile, the strong dollar, driven by U.S. economic confidence, raises concerns about global market disruptions and international asset allocation.

Navigating the Market Crossroads

Strong services growth and AI investments may offset housing and manufacturing strains, but market valuations near long-term highs temper optimism. Following strong recent performance, investors are bullish on 2025 despite looming policy uncertainties, leaving the market balancing growth potential against policy risks.

Outlook for 2025: Bull Market and Challenges Ahead

Many analysts remain optimistic about a continued bull market in 2025, though with tempered enthusiasm. The S&P 500’s modest performance over three years suggests it isn’t overextended. Mixed signals are expected in the coming months, but corporate earnings, projected to rise 11.7% in Q4, reflect cautious optimism amid growth challenges and rising interest costs.

Conclusion: Market Churn and Investor Expectations

In conclusion, the nearly 8% stock dip since Thanksgiving may reflect a natural reset of inflated expectations. While positivity remains priced in, heightened volatility persists. It’s too soon to predict a significant downturn, but these shifts will likely shape investor sentiment in 2025.

Hopeful: Stellantis’ top priority for the U.S. this year is to grow its retail market share after several years of declining sales in its largest, most crucial market. Also, Eli Lilly is getting into the venture capital business.

Nordstrom goes up: Nordstrom raised its full-year sales outlook after holiday spending came in better than expected at its website and stores. Yet the department store operator stuck by its profit outlook. CEO Erik Nordstrom credited the company’s “efforts to remain competitive in the promotional environment and the strength of our offering.”

Interesting: Disney, Fox and Warner Bros. Discovery call off plans to launch Venu sports streaming service. On the other hand, Tesla is recalling 239,000 vehicles in U.S. over rearview camera failures. Lastly, Amazon is halting some of its diversity, equity and inclusion programs, while also shutting down ‘Try Before You Buy’ rival to Stitch Fix.

💵 Personal Finance

Rising Wages Across the U.S.: A New Era for Minimum Pay

The federal minimum wage has held steady at $7.25 per hour since 2009, but things are now changing.

A New Year, Higher Wages

January 1 marked a significant moment for workers in 21 states, as minimum wages were officially increased. While states like Arizona, Virginia, Connecticut, and Minnesota follow automatic annual adjustments, others such as Florida and Missouri have implemented gradual increases through voter-approved initiatives.

Washington State now boasts the highest statewide minimum wage at $16.66 per hour.

Here’s a glimpse at the updated minimum wages across the states:

  • Alaska: $11.91

  • Arizona: $14.70

  • California: $16.50

  • Colorado: $14.81

  • Connecticut: $16.35

  • Delaware: $15

  • Illinois: $15

  • Maine: $14.65

  • Michigan: $10.56

  • Minnesota: $11.13

  • Missouri: $13.75

  • Montana: $10.55

  • Nebraska: $13.50

  • New Jersey: $15.49

  • New York: $15.50–$16.50 (varies by region)

  • Ohio: $10.70

  • Rhode Island: $15

  • South Dakota: $11.50

  • Vermont: $14.01

  • Virginia: $12.41

  • Washington: $16.66

In addition to these statewide increases, more than 48 cities and localities raised their minimum wages. For instance, workers in Flagstaff, Arizona, now earn at least $17.85 per hour, while Seattle leads the nation with a $20.76 minimum wage.

Who Benefits?

The Economic Policy Institute estimates that more than 9.2 million workers nationwide have received a pay boost thanks to these changes. These increases reflect not only rising costs of living but also a push to reduce economic inequality and support local economies.

Upcoming Adjustments

Several states and jurisdictions have planned additional wage hikes later this year. Oregon will adjust its minimum wage on July 1, increasing from $14.70 per hour based on changes in the Consumer Price Index. Florida will follow suit on September 30, raising its minimum from $13 to $14 per hour. Washington, D.C., will also join the ranks on July 1, raising its current $17.50 per hour wage.

The Bigger Picture

These wage increases symbolize more than higher paychecks—they represent a step toward addressing financial challenges faced by millions of workers. While debates about the economic impact of minimum wage increases continue, the momentum across the U.S. signals a growing commitment to fair compensation for all.

Here’s an old but interesting video on the topic:

💰 Be a Better Investor

“One of the greatest disservices you can do a man is to lend him money that he can’t pay back.”

Jesse Jones

Resources:

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👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.

Disclaimer

This is a paid ($600) advertisement for Boxabl’s Regulation A offering. Please read the offering circular at https://www.boxabl.com/invest/

* Reservations represents a non-binding indication of interest to purchase a Casita. A reservation does not require purchase of a Casita and there is no assurance of how many will result in actual purchases.