Below are the economic and market highlights for the week:
- Core CPI cooled in December, offering consumers hope that inflation will begin drifting downward again in 2025 after showing troubling signs of resistance over the past several months. Excluding food and energy, the Core CPI eased to 0.20% after four consecutive months of 0.30% month-over-month (M/M) increases. That brought the annual core inflation rate to 3.20% from 3.30%. The slowdown was aided by slower shelter inflation, the largest component of the price index, which has a significant bearing on inflation’s trajectory. Shelter prices increased at a 4.6% annual clip, their slowest pace since January 2022. Despite lower core prices, the CPI, the headline inflation gauge, ticked higher in December. The CPI increased 2.90% on an annual basis, up from November’s 2.70%. Energy, food, new and used vehicles, car insurance, and airline fares all fueled the rise. Wholesale prices also showed signs of cooling pipeline inflation pressures. The Producer Price Index (PPI) rose 0.20% M/M while core PPI was flat. On an annual basis, headline PPI and core PPI were up 3.30% and 3.50%, respectively.
- Easing inflationary pressures meant more money in consumers’ pockets. Consumers were ready to spend during the busy holiday shopping season. Retail sales rose 0.40% in December. That was a touch lower than November’s strong 0.80% monthly gain. However, the control group in December’s retail sales report, which excludes several volatile categories and factors into the GDP reading for the quarter, increased by a robust 0.70%. That was above economists’ estimates of 0.40% sales growth.
Stocks & Bonds Rally on Earnings, Inflation Data
Big bank earnings and cooling inflation reignited “animal spirits” on Wall Street this week. Goldman Sachs, JPMorgan, and Bank of America set a positive tone for the Q4 earnings season, posting bumper profits. Strong investment banking, fixed income trading, and interest income helped boost the financial giants’ bottom line. In addition, credit trends and consumer and business lending looked solid. The results helped power the Dow Jones Industrial Average to a 700+ point gain on Wednesday. Fueling more bullish optimism on Wall Street were signs that inflation is once again easing for both consumers and producers. That, in turn, revived investor hopes for more Federal Reserve interest rate cuts in the quarters to come. Bonds rallied on the headlines, sending the 10-year U.S. treasury yield to 4.60% down from a 52-week high of 4.817%. For the week, the Dow and S&P 500 recorded gains of 3.70% and 2.91%, respectively, making it the strongest weekly performance for markets since the post-election Trump bump.
While still early in the reporting season, Q4 earnings have been surprisingly strong thus far. The financial sector is the first to report and its earnings are always highly anticipated since banks are closely tied to the general economy. Analysts expect the financial sector will see the highest year-over-year (Y/Y) earnings growth among the S&P 500 sectors, projected to grow 40%. Across all sectors, Q4 earnings are forecasted to rise 10.40% Y/Y, and when you exclude the volatile energy sector, the Y/Y earnings estimate is expected to rise to 13.50%. We’re just a few days into the reporting season but of the S&P 500 companies that have reported thus far, 81% have reported above analyst expectations. That is above the long-term average of 67%. More impressively, the average upside surprise has been 9.3% according to the statistical forecasting firm, FactSet. From a fundamental standpoint, analysts have been encouraged in seeing earnings participation broaden to the consumer discretionary, financials, utilities and industrials sectors, who have finally gotten their time to shine by outperforming the tech sector over the last six months. Given the S&P 500’s lofty valuation, there is a lot riding on this earnings season. Forward guidance will be critical given the uncertainty around whether companies will get any tailwinds from the Fed in 2025, but thus far, investors have liked what they’ve seen.
The Week Ahead
It will be a busy week for Wall Street with more than 800+ companies reporting earnings. In economic news, S&P Flash PMIs and home sales will be the highlights of the week.
End-of-Life Financial Planning: Preparing for a Loved One’s Terminal Illness
When a loved one is diagnosed with a terminal illness, the emotional toll can be overwhelming. In addition to coping with grief, family members must also face the often complex task of managing their loved one’s financial matters and the eventual settlement of their estate. End-of-life financial planning can ease the burden during such a challenging time. Our advisors are available to help families with this process. To the degree possible, we recommend families and loved ones take the following steps to ensure that they are prepared. While the list below is not comprehensive, being proactive and planning ahead can significantly reduce the stress that may be associated with a very difficult situation.
Communicate Early: If possible, have an open conversation with a terminally ill loved one about their wishes. Knowing their preferences can help guide decisions and ensure their wishes are fulfilled.
Review Legal and Estate Documents: Ensure that a will, trust, or other estate planning documents are up to date. Know how to access these documents, including any durable powers of attorney, health care powers of attorney, living will and directives, estate plan flow chart, and funeral/burial instructions. Have contact information for the legal and financial professionals that helped prepare your loved one’s estate and financial plans.
Gather Individual Details: Have full legal name, aliases, and nicknames, along with date and place of birth, Social Security Number, and legal residence at time of death. Gather names, addresses, dates of birth, and Social Security Numbers for all beneficiaries.
Create an Inventory of Assets: Compile a detailed list of life insurance policies, long term health care, disability insurance, car title(s) and auto insurance, retirement accounts, bank accounts, safe deposit box location(s) and key, and investment accounts. This should include account or policy numbers, log in credentials, and contact information for agents. It is important to understand the exact titling of account registration, the tax identification associated with each account, and any beneficiary or transfer instructions on file. Obtain descriptions of all real estate, including rental properties and rental income, and copies of deeds and deeds of trusts.
Gather last three years of income tax returns: This may show unidentified sources of income that may have been overlooked and will assist with tax planning for the estate and intended beneficiaries.
Obtain Phone and Computer Passwords: Gather passwords to devices such as phone, laptops, computers, and iPads, along with passwords for digital assets for photos, music, or other assets stored in the cloud or on devices and any social media accounts.
The above list is by no means exhaustive, but we hope it serves as a helpful starting point for preparing for the financial challenges associated with a family member or loved one’s terminal illness. As mentioned, our advisors are available to help answer questions you may have about estate settlement and provide helpful guidance as you navigate through this process.