WEEKLY MARKET RECAP WEEK ENDING JANUARY 24, 2025

Dennis
&
Aaron

The first week of the Trump Administration was one marked by a flurry of market moving as well as not so market moving activity. However, all may have tails to them. Although most investors associate the word volatility with downside movement in the financial markets, investors must be prepared for upside volatility as well, remaining careful not to become too greedy and as a result, change their asset allocation models. We remain cautiously optimistic (we hate that phrase) and will repeat what we have noted here and elsewhere since November fifth in that “absent a policy mistake from either the Trump Administration or the Fed, we think the downside is limited as earnings growth remains adequate to support rich valuations. However, we also believe a substantial move to the upside is improbable until we get clarification of President Trump’s economic policies.”

· President Trump was accompanied by heads of Oracle, Softbank and OpenAI in announcing a joint venture with business of up to $500 billion in artificial intelligence infrastructure to maintain as well as lengthen the lead of the United States in this critical technology. OpenAI CEO Sam Altman tweeted that the project will “not only support the re-industrialization of the United States but also provide a strategic capability to protect the national security of America and its allies.” We agree.

· Fireworks, anyone? The regularly scheduled two-day meeting of the Open Market Committee of the Federal Reserve (FOMC) concludes this Wednesday. This will be closely watched after President Trump stated to attendees of the World Economic Forum, “with oil prices going down, I’ll demand that interest rates drop immediately.” Referring to the Fed and Jerome Powell, Trump followed that statement up later in the day with “I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primary in charge of making that decision.”

· GE Aerospace (GE) announced blowout earnings this past week as revenue came in at $9.9 billion, generating operating profit of $1.9 billion and earnings per share (EPS) of $1.32. All exceeded estimates. CEO Lawrence Culp, Jr. expects the company to post “double-digit revenue and EPS growth with greater than 100% free cash flow conversion” in 2025.

· Enterprise cloud computing giant, Salesforce (CRM) CEO Marc Benioff stated that “we are really moving into a world now of managing humans and agents together” and that the CEOs of today are likely the last who will “manage a workforce of only human beings.” We hope they get it right or us “humans” will be spending a lot more of our time on hold!

· Mortgage Rates according to the Federal Home Loan Mortgage Corporation (FreddieMac), “after crossing the 7%-mark last week, the 30-year fixed-rate mortgage saw its first decline in six weeks. While affordability challenges remain, this is welcome news for potential homebuyers, as reflected in a corresponding uptick in purchase applications.” (Sources, Federal Home Loan Mortgage Corporation, National Association of Realtors)

"It’s The Economy…”

· Sales of Existing Homes rose 2.2% during December to a Seasonally Adjusted Annualized Rate (SAAR) of 4.24 million units from 4.15 million one month prior (9.3% y/y). According to the National Association of Realtors (NAR) “the number of existing homes for sale (NSA) fell 13.5% (+16.2% y/y) to 1.15 million after falling 2.9% in November. The supply of homes on the market at the current selling rate (NSA) fell to3.3 months from 38 months in November. This figure rose to a high of 4.3 months in September. The record low in supply of 1.6 months was reached in January 2022.” The report also noted that “the median price of all existing homes (NSA) held steady (+6.1% y/y) in December at $404,400, with November, revised from $406,100. Prices remained below the $426,900 high this past June. The median price of an existing single-family home also was unchanged (+6.1% y/y) at $409,300 in December.” (Source, National Association of Realtors)

· The University of Michigan reported that the Final January Reading of Consumer Sentiment slipped to 71.1 from a preliminary January 73.2 and from a final December 74.0. The final January expectations component fell to 69.3 from 70.2 as well as from a final December 73.3. Lastly, the final January current conditions component fell to 74.0 from a preliminary January 77.9 and from a final December 75.1. According to the Survey of Consumers Director, Joanne Hsu, “consumer sentiment fell for the first time in six months, edging down 4% from December. While assessments of personal finances inched up for the fifth consecutive month, all other index components pulled back.” (Source, University of Michigan)

Upcoming Economic Reports scheduled to be released this week include the following: on Monday, December Sales of New Homes; on Tuesday, December Orders for Durable Goods, December Consumer Confidence and Money Supply; on Thursday, the Weekly Report of Initial Claims for Unemployment Benefits and the Initial Estimate of Q4 Gross Domestic Product (GDP); and, on Friday, Fourth Quarter Employment Cost Index along with Personal Income and Spending.

Buckle up, as we are in the heart of earnings season. Companies Scheduled to Report Earnings Include – AT&T (T), General Motors (GM), Lockheed Martin (LMT), Danaher (DHR), IBM (IBM), Meta Platforms (META), Microsoft (MSFT), Lam Research (LRCX), Norfolk Southern (NSC), T-Mobile (TMUS), Apple (AAPL), Caterpillar (CAT), Decker Outdoors (DECK), Intel (INTC), Mastercard (MA), Southwest Airlines (LUV), UPS (UPS), Visa (V), Chevron (CVX) and Exxon Mobil (XOM).

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.”

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