Let’s not make too much of Friday’s outsized sell-off in the equity markets as earlier in the week both the S&P 500 along with the U.S. Total Market Index both closed at record highs. Currently, the market is looking past any initial impact on the economy from the tariffs, choosing to focus on perhaps the possible long-term benefit. At some point in time, that may change. Nonetheless, we continue to believe that stocks should be supported from any meaningful downturn by strong earnings, but also limited to the upside until the dust settles a bit in Washington.
· Oh wow! This bears watching. The iShares MSCI ACWI ex US ETF (ACWX), a fund that seeks to track the investment results of the MSCI (Morgan Stanley Capital International) ACWI (All Country World Index) excluding the United States has shot up 7.15% thus far in 2025, far outpacing the SPDR S&P 500 ETF Trust (SPY) which has advanced 2.36%. Before we make too much of this keep in mind that the returns of the SPY have far outpaced that of the ACWX over any statistically meaningful period dating back twenty years. That said, a regression to the mean at some point should be expected.
· Walmart (WMT) reported stellar earnings, expressed a note of caution regarding the future. Shares of Walmart slipped five-plus percent Friday, despite reporting earnings that exceeded estimates. Perhaps the cause for the selloff were sentiments expressed during an interview by Chief Executive Officer, John David Rainey. Rainey acknowledged that Walmart was not immune to the impact of tariffs and that the company would “work really hard to keep prices low for our members and customers.”
· According to the Wall Street Journal, United Health (UNH) is on the wrong end of a Justice Department probe of its Medicare Billing Practices. According to the DOJ, United Health inappropriately documenting diagnoses that trigger extra payments from Medicare. In a statement, UNH refuted the charges, “any suggestion that our practices are fraudulent is outrageous and false.” The stock price of the health care provide fell seven-plus percent on Friday.
· Housing Remains a headwind to Economic Growth as according to the National Association of Realtors (NAR), the median age of homebuyers rose by 7 years to 56 during 2024, this as the median age of first-time homebuyers increased to 38 years old in 2024 from 35 one year prior. According to the recently released Profile of Homebuyers and Sellers 2024 “first-time homebuyers decreased to 24 percent of the market share (32 percent last year). This year now marks the lowest share since NAR began collecting data in 1981.” (Source; National Association of Realtors)
· To Our Clients. After two strong years in for the equity markets, many Non-Qualified Accounts should expect realized capital gains during 2025 when filing their taxes during the spring of 2026 as we continue to trim some winners. There is a difference between the correct course of action as compared to that which perhaps you wish you had taken with the benefit of hindsight. Please note that we will attempt to minimize these gains wherever possible. Any questions, please contact Fagan Associates.
It’s The Economy…”
· Sales of Existing Homes fell 4.9% to a Seasonally Adjusted Annualized Rate (SAAR) of 4.08 million units during January from 4.29 million during December (2.0% y/y). According to the National Association of Realtors (NAR) “total housing inventory registered at the end of January was 1.18 million units, up 3.5% from December and 16.8% from one year ago (1.01 million). Unsold inventory sits at a 3.5-month supply at the current sales pace, up from 3.2 months in December and 3.0 months in January 2024.” The report also noted that “the median existing home price for all housing types in January was $396,900, up 4.8% from one year ago ($378,600).” (Source, National Association of Realtors)
· The University of Michigan reported that the Final February Reading of Consumer Sentiment fell to 64.7 from a final January 71.1. The final February expectations component fell to 64.0 from a final January 69.3. And lastly, the final February current conditions component fell to 65.7 from a final January 74.0. According to the Survey of Consumers Director, Joanne Hsu, “consumer sentiment extended its early month decline, sliding nearly 10% from January. The decrease was unanimous across groups by age, income and wealth. All five index components deteriorated this month, led by a 19% plunge in buying conditions for durables, in large part due to fears that tariff-induced price increases are imminent.” (Source, University of Michigan)
· Housing Starts plunged 9.8% or by 149,000 to a seasonally adjusted annualized rate (SAAR) of 1,366,000 during January as compared to 1,515,000 in December (-0.7% y/y). December Housing Starts had risen to their highest level since February 2024. Of note is the fact that according to the U.S. Census Bureau there must be approximately 350,000 housing starts per year to replace those lost to natural causes, man-induced causes or by the growing U.S. population. During January, Single-family housing starts fell 8 4% or 91,000 to 993,000 from 1,084,000 (-1.8% y/y). Meanwhile Multifamily housing starts slumped 11.0% to 355,000 in January (-13.5% y/y) from 399,000 during December. Building Permits, a key barometer of future starts, rose 1,000 to 1,483,000 in January as compared to December (-1.7% y/y). (Source, U.S. Census Bureau)
· Mortgage Rates according to the Federal Home Loan Mortgage Corporation (FreddieMac), “mortgage rates decreased slightly this week. The 30-year fixed-rate mortgage has stayed just under 7% for five consecutive weeks and in that time that fluctuated less than 20 basis points. This stability continues to bode well for potential buyers and sellers as the spring home-buying season approaches.” (Source, Federal Home Loan Mortgage Corporation)
Upcoming Economic Reports scheduled to be released this week include the following; on Tuesday, February Consumer Confidence and January Money Supply (M2) Data from the Federal Reserve; on Wednesday, January Sales of New Homes; on Thursday, the Weekly Report of Initial Claims for Unemployment Benefits, January Durable Goods Orders and Q4 Gross Domestic Product (Second Estimate); and, on Friday, January Personal Income and Spending along with January Wholesale Inventories.
Q4-2024 Earnings Season Has Begin To Wind Down. Nonetheless, several companies of note are scheduled to report, to include – Home Depot (HD), Intuit (INTU), Nvidia (NVDA), TJX (TJX), Lowe’s (LOW), Salesforce (CRM), Anheuser-Busch (BUD), Dell Technologies (DELL), and EOG Resources (EOG).
General Disclosure:“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
