February 2, 2025
U.S. ECONOMY GREW AT 2.5% RATE IN 2024: According to the U.S. Bureau of Economic Analysis, the U.S. economy grew at an annualized 2.3% rate in the fourth quarter of 2024. For the entire year, U.S. GDP rose at a 2.5% rate. In 2023, U.S. GDP grew by 3.2%. The Fed projects the U.S. economy to grow by 2.1% this year, and 1.8% in the years to follow.
THE FED SURPRISES NO ONE, AND HOLDS RATES: The Fed explained that economic activity continues to expand "at a solid pace." It acknowledged its goals of achieving full employment and 2% inflation. "Inflation remains somewhat elevated." It maintained the target federal funds rate at 4.25% to 4.5%.
THE DEEPSEEK PANIC: Tech stocks, and in particular stocks involved with artificial intelligence, have been rising for the last two years. Many of us have wondered if their stock values are sustainable. Nvidia, the maker of computer chips in support of the AI boom, has risen dramatically. The week before last, DeepSeek, a Chinese company, released its AI model, and it appeared to perform on par with U.S. AI products but at a much cheaper price tag. On Monday of last week, Nvidia's stock value decreased by 17%. Broadcom fell by more than 10%. Nvidia and other tech stocks stabilized throughout the rest of the week.
HERE COME THE TARIFFS: We've been hearing a lot about tariffs, and last week they became reality. The White House announced on Friday that tariffs would start on imports from Canada, Mexico, and China. Effective on Tuesday, the U.S. will impose a 25% tariff on goods from Mexico and Canada. The tariff on Canadian energy products will only be 10%. The tariff on China is 10%. It was announced that these tariffs will remain in place until the White House is "satisfied that the trading partners have scrubbed out the illicit fentanyl moving into the U.S." Of course, Canada immediately announced a retaliatory tariff by imposing 25% on many U.S. products.
A GOOD MONTH ENDS ON A LOW NOTE: U.S. stocks took a step back because of the Chinese AI scare earlier in the week, and then again after the tariff announcement (see above). So far, 2025 has been positive for the U.S. stock market due largely to solid fourth quarter earnings reports and good economic data. Tariffs impose a lot of uncertainty, and investors took some value off the table as a result.

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

THE PCE INDEX: The U.S. personal consumption index, watched closely by the Fed, rose 0.7% in December, causing the annual rate to rise to 2.6%, up from 2.4% in November. The "core" PCE Index, which strips out energy and food, rose at an annual rate of 2.8%, the same as last month.
U.S. GOVERNMENT SPENDING: Net borrowing by the U.S. government was worth about 5.4% of U.S. GDP in 2019, on average. For the first three quarters of 2024, it was 7.0%. Total spending by the U.S. government in 2019 amounted to 22.6% of GDP. It was running at about 24.6% during the first three quarters of 2024.
BAD BEHAVIOR AND BLACK EYES: When any financial and/or investment advisory firm gets into trouble for bad behavior, it can reflect on the entire industry, so I hate to see it. But it does illustrate how wary clients should be. Last week, it was reported that both Merrill Lynch and Wells Fargo Advisors agreed to pay a total of $60 million to settle charges made by the Securities and Exchange Commission. Why? When money comes into an advisory account, it often comes in as cash. Both firms made the default place for such cash to be a bank deposit sweep program (BDSP). Both firms set an interest rate for these accounts, but as interest rates increased, the difference between these firms BDSPs and other cash sweep alternatives grew to almost 4%, according to the SEC. According to the SEC, this policy was not "reasonably designed" to consider the best interest of the client. Wells Fargo entities agreed to pay $35 million, and Merrill Lynch agreed to pay $25 million. Both firms neither admitted nor denied the SEC's charges or findings.
JOURNEY OF GENEROSITY: My wife and I, along with several other folks, enjoyed a program by Generous Giving called a Journey of Generosity this past week. It is a program that takes parts of two days to complete. It was very well done, and I recommend it. Stonecrop sponsored this particular "journey," and we might do so again if there is interest.
SAYING GOODBYE TO STRAYER COINBAG COMPANY: In 1916, Arthur Clare Strayer, then 25 years old, moved his company, Strayer Coin Bag Co., to a building in New Brighton, PA. He patented a night deposit bag, an invention that propelled Strayer Coin Bag to decades of profitability and success. He ran the company until his death in 1962, at which time my father-in-law, Arthur Clare Strayer's son-in-law, took over the company and ran it for the next few decades until they finally closed. My father-in-law passed two years ago, and my mother-in-law, his wife, passed last month. She was Arthur Clare Strayer's daughter. Neither of my in-laws liked to part with anything. The entire family got together last weekend to celebrate their lives, and go through their possessions, including lots of remaining Strayer coin bags. I have used many of these over the years, including a make-shift brief case the company made me when I got my first law job.

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
"Beware of greed and remain pure and just. Restrain yourself from every vice. He who cannot restrain himself, how will he be able to teach others restraint?" Polycarp
"Do not wear yourself out to get rich; have the wisdom to show restraint. Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle." Proverbs 23:4-5 (NIV)
SOURCES:
U.S. ECONOMY GREW AT 2.5% RATE IN 2024: https://www.bea.gov/news/2025/gross-domestic-product-4th-quarter-and-year-2024-advance-estimate AND https://www.wsj.com/economy/us-gdp-economy-fourth-quarter-2024-9ccb1816?mod=hp_lead_pos1
THE FED SURPRISES NO ONE, AND HOLDS RATES: https://www.federalreserve.gov/newsevents/pressreleases/monetary20250129a.htm
HERE COME THE TARIFFS: https://www.wsj.com/economy/trade/trump-says-tariffs-are-coming-on-computer-chips-steel-and-more-cef9974c?mod=economy_lead_pos2
U.S. GOVERNMENT SPENDING: https://theovershoot.co/p/thinking-about-the-financial-implications
THE DEEPSEEK PANIC: https://www.wsj.com/finance/stocks/the-day-deepseek-turned-tech-and-wall-street-upside-down-f2a70b69?page=1
SAYING GOODBYE TO STRAYER COINBAG COMPANY: https://www.timesonline.com/story/lifestyle/columns/2019/04/02/fame-fortune/5554958007/
(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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