January 26, 2025
ANOTHER STRONG WEEK: The S&P 500 hit another record high before coming down a bit on Friday. Friday's decline was not enough to erase a strong weekly gain (shortened by the Martin Luther King Jr. Day holiday). Global stocks were universally up as well. Financial markets tend to react positively to relaxing of regulations, which the incoming administration has promised. In the first week, there were no major tariff actions taken. Much of the uncertainty of investors regarding the incoming administration has been focused on that issue, and the absence of any major activity on tariffs soothed investors. We'll see what next week holds, but for now it is nice to see no red numbers in the weekly and year-to-date numbers.

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

DON'T EXPECT ANY MOVEMENT BY THE FED: The Fed will meet this coming week, but it is highly unlikely that they will do anything with interest rates. The Fed is looking very closely at what the new administration is doing and how it might affect the economy, but it is way too early to tell. Generally, when the Fed does nothing, Chair Jerome Powell still says something in the announcement that rattles or cheers the markets, and so we wait to hear his words and let the parsing begin.
SIGNS OF LIFE IN THE EXISTING HOME SALES MARKET: In 2024, sales of existing homes in the U.S. were low for the second year in a row. 2024 was the lowest since 1995. However, sales in December rose 2.2% from the prior month, and were 9.3% higher than one year ago. The median price for a house in the U.S. has now hit $407,500, a record high.

...BUT MORTGAGE RATES: While the Fed settles in, mortgage rates rise. The Fed seems to believe that inflation is tamed, it just might take longer than it thought to settle back to 2%. Investors buying bonds are not so convinced, and it is that market that has the most impact on mortgage rates. It seems that bond investors believe inflation will remain pesky and persistent for longer, causing yields on government bonds to stay higher, and that has a strong impact on mortgage rates. Mortgage rates eclipsed 7% again this past week for the first time in half a year. This may have a negative impact on the spring real estate market.
CHINA ATTEMPTS TO RALLY ITS STOCK MARKET: The Chinese government tried to stimulate its stock market last week, but it did not seem to work. Chinese financial regulators announced that state-owned insurance companies would be "encouraged" to invest 30% of their premiums in China's domestic stock market. Additionally, Chinese mutual funds will be required to raise their holdings in Chinese companies by 10% per year for the next three years. China's CSI stock benchmark rose only 0.2% on the day of the announcement.
CASH RESERVE: As financial planners, we are often advising clients as to how much money to have in their "cash reserve" or money that they can get their hands on quickly in case of an unexpected expense. In a recent survey by Bankrate, fully 59% of the Americans it asked did not have a cash reserved of at least $1,000 to cover an unexpected expense. In a survey Bankrate did one year ago, that percentage was 56%, so it got worse. 73% of the respondents blamed inflation, higher interest rates or a change in employment status as the reason for not saving money. That is up from 68% last year.
CREDIT CARD BALANCES: If Americans don't have savings, what happens? They put it on plastic. Since the second quarter of 2021, balances on credit cards have shot up. At that time, total credit card balances were about $423 billion. Currently, the total number, according to the Federal Reserve Bank of Philadelphia, is over $600 billion. During the first quarter of 2021, the amount of credit card holders making just the minimum payment was just under 8%. It has now edged up to 10.5%. These are not good trends, especially with higher interest rates attached to those balances.
PERILOUS TIMES: I grew up in Massachusetts, and so the New England sports teams are in my blood; there is no escaping it. I have lived in the greater Philadelphia area for many years and raised all my children to be fans of their local teams, not my teams. I figured it is always more fun to be a fan of the team of the community in which you grew up. There have been some perilous times in the past because I married a rabid Pittsburgh Steelers fan. She grew up in the Pittsburgh area, and like me, the team she grew up with is inescapable, in her blood. So there have been times in our marriage where we sat on the couch together and navigated how to cheer for our team when the person we love most on the planet might be suffering if your team is winning. But no problem this year, both our teams are out. But my daughter, a rabid Eagles fan, married a man who grew up in the greater Buffalo area, and is a rabid (and I mean rabid) Bills fan. (Yes, he hates the Patriots, but I can live with that.) I was talking to my son-in-law last week, and we were discussing the scenario where both the Bills and the Eagles win this week. "Do I watch the game with Molly? That might be awkward."
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
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"Money, like any other force such as electricity, is amoral and can be used for either good or evil." Martin Luther King, Jr.
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SOURCES:
SIGNS OF LIFE IN THE EXISTING HOME SALES MARKET: https://www.nar.realtor/newsroom/existing-home-sales-ascended-2-2-in-december
...BUT MORTGAGE RATES: https://www.wsj.com/economy/housing/mortgage-rates-top-7-for-first-time-since-mid-2024-024b30f8?mod=economy_feat1_housing_pos3
CHINA ATTEMPTS TO RALLY ITS STOCK MARKET: https://www.wsj.com/finance/stocks/china-steps-up-support-for-countrys-stock-markets-8ccf6bb4?mod=stocks_more_article_pos2
CASH RESERVE: https://www.zerohedge.com/personal-finance/59-percent-americans-dont-have-enough-savings-1000-emergency-report
CREDIT CARD BALANCES:https://www.wsj.com/finance/banking/america-us-credit-card-balances-minimum-payment-867eabd4?mod=finance_lead_pos3
(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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