At TM3 Wealth, it is important that you are well-informed about what is happening in the markets. Here are a few of the key topics of conversation that deserve the most attention this month. If you have any questions or would like to continue the conversation, please reach out.
Inflation remains in the headlines, though the data was not as bad as the headlines sounded. In January, consumer prices rose more than expected, with CPI increasing by 0.5% and core CPI by 0.4%1. Despite worried headlines about the sharper than expected rise, the “January effect” of regular seasonal adjustments had a significant impact, making the rise appear sharper than the fundamentals may suggest. Also, revisions to past reports show the second half of 2024 had stronger disinflationary trends. The February inflation report will be critical to assessing any new trends or concerns since extrapolating from January’s report can lead investors astray.
Trade policy continues to be a volatile aspect of today’s market and economic environment. It is still unclear what the status quo may look like in a few weeks, let alone a few months from now. Recently announced tariffs on steel and aluminum may roil allies along with the threatened tariffs on the EU and the recently delayed tariffs on Mexico and China. Estimates vary, but if the previously announced tariffs on Canada, China, and Mexico were to be enacted and sustained, it could modestly pull-down US GDP growth rates and job numbers while amplifying inflation. The latest inflation report came in above expectations (though with some important caveats), which could put additional pressure on the Federal Reserve to maintain elevated interest rates for a longer period.
The consumer is always one to watch, but especially so after the latest retail sales report. The report showed in January that consumers pulled back, with retail sales falling 0.9%2, well below expectations. However, this happened after a solid holiday season and likely some advance-buying ahead of looming tariffs. Cold weather may have also played a role, so it may be too early to place a significant amount of weight on the report, but rather another item for investors to keep an eye on. On the jobs front, January saw 143K jobs being added across the economy, a bit lower than expected, though revisions to the previous two months added another 100K jobs3. The unemployment rate fell to 4.0%, and earnings rose 0.48%, exceeding forecasts. Despite January’s slower job growth, the six-month average rose to 178K, the highest since May. Strikes and weather may have contributed to the weaker report as well, so the upcoming reports will be important to determine which direction the jobs market is moving.
The bottom line: The latest economic reports continue to suggest the Federal Reserve is likely to keep rates steady for now and hold off on any further cuts. Over the last few weeks, various reports have been both better- and worse-than-expected, but revisions to their old data have helped dampen the insight or takeaways that the headlines may suggest. Consumer sentiment continues to be rife with political sentiment (in both directions)4 and the consumer’s resilience to multiple slowdown narratives has remained strong in recent times. Recent shakeups in the technology and AI space, along with trade policy, continue to pose risks to investor sentiment and the overall economic outlook.
Sources:
- Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
- Census Bureau, https://www.census.gov/retail/sales.html
- Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
- University of Michigan Surveys of Consumers, http://www.sca.isr.umich.edu
Disclosures
The material presented includes information and opinions provided by a party not related to Thrivent Advisor Network. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent Advisor Network or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products, securities, or services. They also do not include all fees or expenses that may be incurred by investing in specific products. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. The opinions expressed are subject to change as subsequent conditions vary. Thrivent Advisor Network and its affiliates accept no liability for loss or damage of any kind arising from the use of this information.
Investment advisory services offered through Thrivent Advisor Network, LLC., a registered investment adviser and a subsidiary of Thrivent. Clients will separately engage a broker-dealer or custodian to safeguard their investment advisory assets. Review the Thrivent Advisor Network ADV Disclosure Brochure and Wrap-Fee Program Brochure for a full description of services, fees, and expenses. Thrivent Advisor Network LLC advisors may also be registered representatives of a broker-dealer to offer securities products.
Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed were or will be profitable. A summary description of the principal risks of investing in a particular model is available upon request. There can be no assurance that a model will achieve its investment objectives. Investment strategies employed by the advisor in selecting investments for the model portfolio may not result in an increase in the value of your investment or in overall performance equal to other investments. The model portfolio’s investment objectives may be changed at any time without prior notice. Portfolio allocations are based on a model portfolio, which may not be suitable for all investors. Clients should also consider the transactions costs and/or tax consequences that might result from rebalancing a model portfolio. Frequent rebalancing may incur additional costs and/or tax consequences versus less rebalancing. Please notify us if there have been any changes to your financial situation or your investment objectives, or if you would like to place or modify any reasonable restrictions on the management of your account.
Advisory Persons of Thrivent Advisor Network provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. TM3 Wealth and Thrivent Advisor Network, LLC are not affiliated companies. Information in this message is for the intended recipient[s] only. Please visit our website www.tm3wealth.com for important disclosures.
Securities offered through Thrivent Investment Management Inc. (“TIMI”), member FINRA and SIPC, and a subsidiary of Thrivent, the marketing name for Thrivent Financial for Lutherans. Thrivent.com/disclosures. TIMI and TM3 Wealth are not affiliated companies.
This communication may include forward looking statements. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could’” or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to differ materially.
Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.
The United States Census Bureau is a principal agency of the U.S. federal statistical system, responsible for data about the American people and economy.
The University of Michigan Consumer Sentiment Index is an index that tracks consumer attitudes and expectations to determine the changes in consumers’ willingness to buy and to predict their subsequent discretionary expenditures. The index is comprised of measures of attitudes toward personal finances, general business conditions, and market conditions or prices.
