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Broad Rally, Improved IMF Projections, and Getting Busted

Writer's picture: Doug MacGrayDoug MacGray

January 19, 2025


MILDLY ENCOURAGING INFLATION NUMBERS: Last week, all eyes were on the U.S. Bureau of Labor Statistics' report on December's Consumer Price Index (CPI). It increased 0.4% in December, which doesn't sound good. Over the last twelve months, the CPI is 2.9%, higher than where the Fed wants it to be, and higher than last month's number of 2.7%. The main culprit for the rise was energy. Energy prices rose 2.6% in December. The "core" CPI (excludes energy and food due to their short term volatility) rose only 0.2%, and the twelve month number was 3.2%, which was a tick lower than November's number of 3.3%. That is the smallest monthly gain in the core CPI since July. Because the Fed watches the core CPI more closely, markets liked this report.


BROAD RALLY: For quite a while, we have heard about tech stocks, and the biggest ones (the "Magnificent Seven") leading the market. That has been a theme for about two years. But of late, the long-term rally in the market has broadened. Such was the case last week. The markets seem to have weathered some of the shock of the Fed being less likely to lower rates in 2025. This week, some mildly encouraging inflation numbers were announced, along with positive economic data (see below), and some good corporate earnings, and a broad rally resulted. The top three sectors in the S&P 500 last week were financials, energy, and materials, not tech. Big banks began to announce their earnings, and Wall Street liked what they saw.



LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.



U.S. RETAIL SALES UP: In December, retail sales increased by 0.4% from the prior month, and were 3.9% higher than one year ago.


INDUSTRIAL PRODUCTION UP IN DECEMBER: U.S. industrial production (a combined measure of mining, utilities, and manufacturing activities) was up 0.9% in December. Manufacturing was up 0.6% after rising 0.4% in November. Industrial production in December was 0.5% higher than a year ago.


AFFORDABLE CITIES: Based on average monthly household spending on ten common bills, Visual Capitalist ranked the 25 most affordable cities in the U.S. among the country's 50 largest. The most affordable, according to this report, is Detroit followed by Cleveland, Dayton, El Paso and Rochester. Interestingly, Philadelphia made the list, coming in at 14th.


THE IMF IMPROVES ITS PROJECTIONS: According to the International Monetary Fund, stronger U.S. demand and slowing inflation will cause more global economic growth. The IMF raised its projection for worldwide growth to 3.3% for 2025 (0.1% higher than its earlier forecast). It projects 3.3% growth for 2026. The report said, "uncertainties are high." That is a good thing for any prognosticator to say. The IMF projects the U.S. economy to grow by 3.3%, and China to grow by 4.6%. The Euro area is only expected to grow by 1.0%. Other large economies expected to grow by less than 2% are Germany (0.3%), France (0.8%), Italy (0.7%), UK (1.6%), Japan (1.1%), Russia (1.4%), and South Africa (1.5%).


BANK FAILURES: There were only two bank failures in 2024. In 2023, there were five, but three were large banks (Silicon Valley Bank and First Republic Bank in California and Signature Bank in New York). The median number of annual bank failures since 1933 is seven.



NICE TRY: There are a lot of advantages to being an empty-nester. But I have experienced one distinct disadvantage. I have this horrible habit of not noticing when my wife gets her hair done. On a day that she gets her hair done, after I get home, she will eventually say, "by the way, I got my hair done today, how do I look?" That is always a sinking feeling. So I enlisted my children to help. When I would come home, one of my kids often came up to me and said, "heads up dad, mom got her hair done today.' It was a great system, and it worked for a while. Now, as an empty-nester, I have to notice on my own, I have gotten better, but I still miss sometimes. Last week, I came home and asked Deb about her day. As she was describing the events of the day, she said, "and then I had a hair appointment." That was my cue, and I jumped on it. "By the way, your hair looks great!" Then Deb stopped, smiled, and said, "but I cancelled it."


Busted.


Have a great week!


Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.



Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545



"I hope the fans have enjoyed listening as much as I've enjoyed doing the games. I don't ever go to the park where I don't have a good day. I don't like losing, but I don't think I ever go to the park where I have a bad day. I don't think once." Bob Uecker


"He who works his land will have abundant food, but he who chases fantasies lacks judgment." Proverbs 12:11 (NIV)


SOURCES:

MILDLY ENCOURAGING INFLATION NUMBERS: https://www.bls.gov/news.release/cpi.nr0.htm


(c) 2025 Anno Domini, Stonecrop Wealth Advisors, LLC, All Rights Reserved


Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.


SDG

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.

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