1/24/25: Market Overview: US Economic Data, Emerging Policies, and Corporate Earnings

In a holiday-shortened week, there was little on the economic data front for market participants to digest, instead investors’ attention was focused on emerging policy details from the new US administration as well as fourth quarter corporate earnings.

We are only a few days into the second Trump presidency, but the market’s initial reaction has been encouraging. The campaign rhetoric surrounding tariffs has softened, particularly with respect to imports from China, easing inflation concerns. A significant investment into technology infrastructure was also announced, supporting US leadership in artificial intelligence. At the annual global economic forum in Davos, Switzerland, the President delivered a special virtual address in which he heralded a golden age of America, telling foreign companies to manufacture in the US, OPEC to lower oil prices and Russia to end the war with Ukraine. President Trump also called on global central banks including the Federal Reserve to lower interest rates.

On the data front, weekly unemployment claims remained modest at 223,000 despite an uptick in California due to the wildfires. The S&P Global US Composite PMI came in at 52.4 with both manufacturing and service components showing readings above 50 signaling expansion. In contrast to business surveys which indicate a surge in optimism since the elections, the University of Michigan Consumer Sentiment Index has remained more subdued, and long-term inflation expectations elevated at 3.2% in January’s final reading. Next week the market will be focused on the Federal Reserve meeting where no change in interest rates is expected from the current target range of 4.25-4.50%. However, the Chandler team expects at least one further cut, by 0.25%, in the first half of 2025.

At the time of writing yields were lower on the week, with the 2-year and 10-year Treasury both down 5 basis points to 4.25% and 4.60%, respectively. The dollar weakened, and stock markets moved higher. Corporate earnings continue to impress, particularly in the banking sector, which is a good barometer for the overall health of the economy.

Next week: Chicago Fed National Activity Index, New Home Sales, Durable Goods Orders, S&P CoreLogic Case Shiller Index, Conference Board Consumer Confidence, 4Q GDP (Advance Reading), PCE Price Index

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