Weekly Market Watch

Market Outlook

Global equities were down for the second consecutive week of the new year as economic data releases caused consensus to reduce the number of interest rate cuts expected from the Federal Reserve in 2025. For example, the ISM^® Services PMI^® accelerated from the prior month, and its Prices Paid report increased to the highest level since early 2023, which raised inflation concerns. Additionally, Friday’s payroll report came in much stronger than expected, signaling that U.S. economic growth remains robust. In our view, these indicators suggest that economic growth is not only healthy, but showing early signs of reacceleration. Rising long-term interest rates negatively impact equity valuations; therefore, smaller capitalization and growth stocks led markets lower last week.

This week, we expect investors to pay close attention to the kickoff of earnings season and the release of the Consumer Price Index (CPI) report — in which consensus expects inflation to accelerate for the third consecutive month.

Table of the Week

Fourth-quarter earnings are expected to grow 11.9%; which, if accurate, would mark the sixth consecutive quarter of positive earnings growth.

Downward revisions have lowered the expected growth rate from the 14.5% expected at the start of the fourth quarter.

Despite significant uncertainty related to potential fiscal policy shifts in 2025, earnings forecasts reflect expectations for a strong year, with a consensus estimate of 14.8% growth for the full year.

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