Author: Kenzie

September 8, 2025

US stocks delivered another record-setting month in August, the fourth consecutive period of gains, as the market seized on friendly interest rate indications and ignored a weak July employment report. The benchmark S&P 500 index gained 2.03% during the month, notching a series of new highs before retreating modestly. Smaller companies, in both the mid- and small-cap spaces, fared even better on investor consensus that a September interest rate cut is all but assured. The Russell 2000 exploded 7% higher during the month, which portends well for market breadth and participation beyond large-caps and technology. All in all, the rally broadened out in August with the potential for continued runway, both of which are encouraging signs as we head into summer’s final month.

August also rounded out the Q2 earnings season, which has been robust by most anyone’s standards. Earnings growth in the S&P 500 came in at nearly 12% year-over-year, well above forecasts and marking the third consecutive quarter of double-digit growth. Concurrently, 81% of companies beat earnings per share and revenue estimates, which is higher than both the 5- and 10-year averages. All the above combine to suggest that so far, the impact of tariffs on corporate performance has been muted. Although tariff implications remain a risk to financial markets, it appears that many companies are well versed in strategies to sidestep the worst impacts, drawing on experience from the COVID-19 pandemic and inflation ramp of 2022.

There were important developments in the bond world during the month. During the Fed’s annual Jackson Hole Symposium, often used as an opportunity to highlight coming policy shifts, Jerome Powell delivered the kind of remarks that the bond market has been waiting for. Citing broad economic conditions, specifically “downside risks to employment,” Powell indicated that potential policy adjustments may be in the offing (read: the bank may lower interest rates soon). This was a clear signal that future interest rate cuts are not only possible, they are probable given the combination of data under consideration. Although there is no guarantee of a September rate cut, the markets cheered on the dovish language and quickly priced in new odds of greater than 80%.

Accordingly, the bond market rallied in August, with the US Aggregate Index gaining 1.32%, bringing its yearly returns to the 5% level. We saw continued normalization of the yield curve, with short-term rates declining as long-term rates increased. Corporate and high yield bonds outperformed treasuries as credit spreads tightened, suggesting resilience on the part of the larger market. With a possible interest rate cut and a supportive credit environment, the potential for bonds to continue to deliver strong risk-adjusted total returns remains intact.

Economic data in August were mixed, continuing the trend in recent months. Inflation continues to hover slightly above the Fed’s original 2% target, with August’s readings coming in at 2.7% annually (Consumer Price Index) and 3.1% annually (Core CPI). Clearly, the central bank is still facing challenges in bringing prices across the economy down, although the numbers have stabilized in recent months and as of yet we have not seen concerning signs of any tariff-related inflation. Labor market data also sent varied messages, with jobless claims mixed (initial claims easing, continuing claims remaining elevated) and new job growth slowing. This signals that the economy could be stagnating, which could be a headwind for growth, but also strengthens the case for future monetary easing, which could be a tailwind for growth. Confusing and mixed, for sure. But not altogether terrible.

Looking forward, financial markets enter September with strong momentum, but with the usual host of risks (rising bond yields, elevated valuations, and geopolitical concerns). The employment report on September 5th will be a key indicator of the short-term direction of the labor market. Expectations are low – only 75K jobs created – and the unemployment rate is expected to tick up. We also have August inflation and other key economic releases. Thus far, the rally off April lows has been supported by tariff relief, strong corporate earnings, and future interest rate cuts. The path forward for the markets will most likely be determined by the interaction of these three elements. We are hoping for the best, as always.

As the new school year begins and summer breeze gives way to autumn leaves, we thank you all for your continued trust and support.

Sincerely,
Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

August 6, 2025

They say that good things come in threes. At present, that checks out, as July continued the rally which began in mid-April, sending stocks higher for the third month in a row (4th for NASDAQ). The widely followed S&P500 clocked its third-best July in nearly 50 years, recording 10 all-time highs and gaining 2.2% during the month. The broad market was aided by sustained strength in technology and AI-related sectors, in addition to a strong rebound in megacap tech names (Magnificent Seven). Trade deals also provided an additional boost, as the US inked several new deals before the August 1st deadline, most notably with the EU and Japan. All in all, it was a great month for equity investors and the indices remain at or near all-time high levels.

Q2 earnings season kicked off heartily, with ~60% of S&P500 companies having reported thus far. The results have been solid, with most companies exceeding guidance and expectations. As of this writing, nearly 83% of companies have conveyed earnings-per-share above estimates, which exceeds the 5- and 10-year averages of 78% and 75% respectively. Arguably even more important, forward guidance and the tone of earnings calls continue to come in positive and optimistic – especially in tech and other AI-related sectors – which bodes well for future corporate performance. Although we do see weakness in certain sectors such as consumer discretionary (airlines, hospitality, restaurants), the headline numbers look strong, providing a tailwind for markets that have heretofore been concerned mostly with tariffs and trade.

The passage of the One Big Beautiful Bill Act (OBBBA) – by the slimmest of margins – also enhanced market sentiment. Signed on July 4th, this sweeping legislation reshaped the landscape of many policy areas, including taxes, healthcare, energy, and others. Critically, most of the provisions in the 2017 Tax Cuts and Jobs Act were made permanent, easing market fears of higher future tax rates. The OBBBA set a ceiling on the income tax at 37% for joint filers exceeding $750K of income. Other key outcomes for the bill include increased standard and SALT deductions, no taxes on overtime and tips, an increase in the child tax credit, and a new brand of IRAs for minors entitled “Trump Accounts.” Although OBBA is expected to produce generationally large budget deficits while in effect, it has the potential to provide a massive stimulative impulse for the economy, which thus far the markets have celebrated.

Major bond markets retreated slightly in July, as fixed income investors pondered the outlook for interest rates and the economy. Modestly higher interest rates during the month, predicated on the mostly strong economic data, resulted in the US Aggregate Bond index falling just a bit (-0.26%). The bond market appears to be comfortable with a “goldilocks economy” – not too hot, not too slow – and although there have been intermittent periods of volatility this year, for the most part bonds have been quiet and stable. Even the Federal Reserve’s July decision to hold interest rates steady in a 4.25-4.5% range did not excite the bond market very much, despite the central bank casting doubts on if and when an eventual cut may occur. After the July payrolls report, the odds of a September cut rose significantly, but it is still anyone’s guess if Jerome Powell is ready to normalize rates (and by how much).

Looking ahead, the calendar flips to August, which is generally not a strong month for equities (especially growth and tech). Since the early 1970s, the NASDAQ has averaged a monthly gain of just 0.3%. Since 2010, August has seen an average return of -0.45%, with over half of those years negative. Combine that with the prospect of tariff inflation, an uncertain interest rate picture, and the remarkable rally from April, and the market may be due to take a breather. You can only sprint for so long before you need to pause and catch your breath.

August also concludes the Q2 earnings season and will contain the usual package of economic releases: jobs, inflation, and GDP. The Federal Reserve holds its annual Jackson Hole symposium, which will likely offer insight into future interest rate policy. With several major political initiatives out of the way, stock and bond markets are likely to direct their focus on economic data and corporate fundamentals.

Overall, we remain in a good position for the back half of the year. The tried-and-true principles of diversification, discipline, and time horizon remain in place, and we stand ready to accept whatever the market may throw at us. As we move into the Dog Days of Summer, we would like to thank our clients, friends, and family for their steadfast trust and support. We are truly grateful for it.

Sincerely,

Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

July 8, 2025

Stocks rallied sharply in June, with both the S&P500 and NASDAQ indices ending the month and quarter at new all-time highs. After an impressive May performance, the S&P500 gained 5.1% in June for the index’s first back-to-back monthly gains since September of last year. While tariffs and trade policy dominated headlines in early spring, this month it was Middle East turmoil which drove market direction. After the June 13th Israeli airstrike of critical Iranian nuclear facilities, which also took out several key military leaders and civilian scientists, President Trump was able to broker a deal between the two nations which ended the conflict after just 12 days of action. Equities rallied hard during the back half of the month to complete a powerful, V-shaped recovery from the intraday lows put it on April 8th.

2025 has been an incredibly volatile year for equities, with both a 21% drawdown from February highs and a subsequent 26.4% rally (S&P500). But if one were to look at stocks through the first half of the year, one would note that 2025 appears to be a very average year. Stocks are up 5.5% and bonds are up just slightly less. But this “average” performance masks an extremely unstable period with outsized downside momentum. As investors, we have had to endure a lot of ambiguity and unsettling news this year. It is truly amazing that, despite all the challenges laid out above, both stocks and bonds are doing just fine as we enter the second half of the year. On ward and upward from here (we hope).

Declining bond yields, in addition to being a tailwind for the upward moves in stocks, bolstered fixed income returns in June. The US Aggregate Bond Index returned 1.15% during the month, corresponding with the 10Y Treasury yield falling by 17 basis points. This decline, largely a result of the previously mentioned unrest in the Middle East (and subsequent flight to safe-haven assets), was somewhat offset by the ever-increasing budget deficit and the recent downgrade of US debt by Moody’s. Nevertheless, bonds managed to post a positive month again and are quietly up just over 4% on the year.

Surprising no one, the Federal Reserve held interest rates steady during its regular June policy meeting. The central bank emphasized it remains in a “data-dependent” status which most investors translate into “wait and see.” The committee did note that low unemployment and a solid labor market points to broadly positive underlying conditions but also said that persistent inflation has contributed in a big way to the bank’s inactivity on rates. The bond market is currently pricing in two 25 basis point rate cuts for the back half of this year, likely starting no earlier than September. As a reminder, the Fed’s last rate cut was in December 2024.

In terms of economic releases, most of the June data showed a continuation of the themes that have played out in recent months: slowing but resilient GDP growth, a tight and robust labor market, and sticky but not terribly high inflation. The June nonfarm payroll report showed the creation of 139K jobs in May, which was above estimates but slightly below April’s reading. The Consumer Price Index, which is the most widely followed and quoted measure of inflation in the economy, increased modestly at 2.4% annualized, which was in line with expectations. All told – not a lot of surprises in the June data. Market participants will be paying close attention to President Trump’s tax and spending package, entitled the “One Big, Beautiful Bill,” which as of this writing is still being debated in both houses of Congress. All eyes will also be pinned to the calendar on July 9th, when the 90-day postponement of “reciprocal tariffs” is due to expire.

Looking forward to the second half of the year, markets will be grappling with tariff strain, ongoing conflict in the Middle East, and the usual slew of economic data. While it is possible (and probably likely, given recent history) that tariffs could be further pushed out beyond July 9th, uncertainty still persists, and we recall how violently the market reacted to tariffs just a few months ago. Meanwhile, despite the interest rate picture likely to stay unchanged during the July 29-30 meeting, the Fed remains focused on balancing its dual mandates of price stability and full employment.

Overall, we are still in a good position as we kick off the second half of the year. Market fundamentals remain sound, and the economy is relatively healthy. While there are near-term risks to be aware of (and prepared for), over the longer horizon, we hope to continue to experience economic growth and further market appreciation.

Thank you for riding alongside us during this wild first half. It has been one of the most interesting stretches in market history, and there has not been a dull moment. We appreciate your interest and support, and as always we stand ready to help as needed.

Sincerely,
Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

June 13, 2025

June 6, 2025

Equities were broadly higher in May, as de-escalation in the global trade war fueled a rally that brought the major indices very close to levels seen just prior to “Liberation Day.” After the intense volatility endured in March and April, stocks entered the monthly at highly oversold levels, setting up for a relief rally at the slightest hint or headline of good news. Sure enough, that is what occurred as equities ripped off their April lows and rewarded patient investors who stuck with the plan during this challenging period. Gains were strong across both domestic and international markets, with both the S&P500 and the NASDAQ recording their best months since November 2023 (+6.3% and +9.6% respectively). After a tumultuous March and April, thus far year-to-date the S&P500 is miraculously positive (+1.1%) while mid- and small-caps remain in the red. Still, coming on the heels of we saw earlier this spring, it is no wonder that investors are breathing a much-needed sigh of relief. At least for now.

Departing from stocks, May brought weakness across the fixed-income complex, as treasury yields backed up throughout the curve and pressured bond prices lower. Yields were higher anywhere between 15-30 basis points depending on maturity, which is not the largest move we have seen this year but was more than enough to compensate for any income generated. Thus, the Aggregate Index fell by around 3/4%. This back up in yields came despite the Federal Reserve holding short-term rates steady, indicating the bond market is more concerned with inflation, budget deficits, and the employment situation.

The other big headline in bond-land was Moody’s Ratings downgrade of US government debt on the 16th. The agency dropped its credit rating one mark from Aaa (the highest possible rating) to Aa1, joining the “downgrade club” of which Fitch and S&P are standing members. The latter two agencies had previously demoted US debt in 2011 and 2023 respectively. The reasons for the downgrade are numerous and varied but primarily arise from the ballooning national debt, which is approaching $37T and expanding at a rate of $2T per year. Other contributing factors include fiscal challenges and continuous congressional conflict over the national debt ceiling. The reaction in both stock and bond markets was relatively muted, and history has shown that short-term losses in these assets following a debt downgrade have been short-lived. The downgrade, while catching headlines for a few days, appears to be a market “nothingburger.”

Key economic data trends during the month were mixed, giving both bulls and bears food for thought. Price inflation continued to moderate in May, with both consumer (CPI) and producer (PPI) prices showing marginal decreases in their year-over-year rates. Core consumer prices also declined, which could prove beneficial to the all-important US consumer, who accounts for roughly 70% of annual GDP. Elsewhere in the economy, manufacturing data and labor market readings both held relatively steady, while consumer sentiment as measured by the Conference Board Index jumped, likely a reflection of renewed optimism that trade war issues could be resolved soon.

In terms of tariffs, tensions have eased meaningfully in recent weeks. Given the heightened levels of volatility, investors were clamoring for good news on this front, and they received it in the form of a US-China agreement on lower absolute levels of tariffs (reduced from 145% to 30% on the US side and 125% to 10% on the China side) for the next 90 days. This tenuous deal between the world’s two largest economies provided hope that the larger tariff picture will eventually settle out at levels much lower (and less scary) than initially thought. It is worth remembering that tariffs were also a source of major market volatility during President Trump’s first administration, as the S&P500 fell nearly 14% from its highs in 2018 to end the year down over 4%. The index subsequently rose and recovered all losses as trade deals materialized, and we hope that will be the case for Trump 2.0 as well.

Looking forward to the last month of spring, we will be paying close attention to any developments on the trade front, in addition to the status and outlook for the US consumer. Thus far, the hard economic data appear resilient and supportive of equities at current valuations. However, any change to tariffs or overall trade policy would have the potential to reignite volatility as we move towards summer. We are not out of the woods yet, but underlying fundamentals remain solid, and our cautiously optimistic outlook is affirmed here.

It has been a wild ride in capital markets over the past few months. We hope, as many of you likely do, that more sanguine days lie ahead. We will continue to monitor the situation on the ground and report back accordingly. As always, we express our sincere gratitude for the trust and confidence you place in us.

Sincerely,

Jason D. Edinger, CFA
Chief Investment Officer
Boston Wealth Strategies

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

May 7, 2025

Stocks sold off in April, as financial markets faced mounting challenges in the wake of “Liberation Day.” Equities were punished and ultimately ended lower for the month, but closed well off the worst levels seen in the tumultuous first half. Market anxiety was driven primarily by the announcement of heavy-handed, “reciprocal” tariffs which imposed a baseline 10% tax on imports from all countries, with select countries like China penalized even heavier. Stock markets tanked swiftly and uniformly after the announcement, with growth companies and “Magnificent 7” areas hit hardest while defensive sectors held up better. Nonetheless, after the April 9th announcement of a 90-day tariff pause, the S&P500 posted its best day since October 2008 and rallied hard in the subsequent weeks, ending the month of April down just a tad at -0.7%. Miraculously, the NASDAQ Composite posted a positive return for the month, after being down double digits just a few short weeks ago. He who limps is still walking.

This incredible about-face was the result of de-escalation and improvements on the trade policy front, as messaging from the White House suggested that deals with Japan and India were nearly complete. Simultaneously, rumors of Fed Chair Powell being replaced by President Trump were quelled, which gave extra wind to the backs of the equity market sails. Corporate earnings, which have taken a back seat to geopolitical headlines of late, have come in strong thus far, with both Microsoft and Meta (two of the darling “Magnificent 7”) reporting impressive financial results and encouraging forward guidance. Stability and continued growth in the biggest and most dominant American companies helped to alleviate investor concerns and contribute to the strong rally we saw to close the month.

Turning our attention to the bond market, it was a month where safety and conservatism mattered, as the risk-off move in equities was mirrored in many fixed income sectors. Corporate and municipal bonds saw weakness in the face of yield back-ups, but higher quality and shorter maturities were able to weather the storm. This repricing was a result of the aforementioned tariffs, and “riskier” segments of the bond market felt a similar pain that their equity counterparts were enduring. Still, fixed income as an asset class held up to its reputation as a diversifier and volatility dampener, with the Aggregate Index gaining 0.39% during the month, bringing its yearly advance to a respectable 3.56%. Bonds are back, as they say.

In terms of hard and soft economics, the data were more mixed. The initial reading of Q1 GDP showed a surprising slowdown, falling 0.3% on an annualized basis to its lowest level in three years. It is worth noting, however, that the decline was driven primarily by high frontloaded imports ahead of potential future tariffs, a dynamic that we think (and hope) will be temporary. Consumer sentiment numbers also came in light, dropping to its lowest level in nearly three years. Happily, not all of the monthly reports were bearish, as both CPI (price inflation) and PPI (producer inflation) were cooler than anticipated, assuaging much of the lingering fears that inflation would rear its head yet again. All told, while recent economic data have been mixed, it does not appear that the economy is at high risk of a recession in the near term. Encouraging.

April was a wild month in capital markets, with record volatility and extreme moves in many markets. Stocks moved from a scary -14% to an inspiring +15% from the lows before settling. Volatility has entered the chat. Still, we lean on and benefit from the pillars of our investment process: a sound plan based on fundamentals and common sense that is adhered to across all market environments. This necessarily entails diversification across a broad spectrum of asset classes, a disciplined portfolio management process, and a long-term view. Investment management lives in the world of the unknowns, which is what makes it so challenging (and so rewarding!). But given the unknown range of outcomes, through a robust and rigorous portfolio management process, we hope to provide a successful experience for our clients.

We wish you all the very best as this spring season of renewal unfolds. We thank you genuinely for your trust and support.

Sincerely,
Jason D. Edinger
Chief Investment Officer
Boston Wealth Strategies

April 2, 2025

March 10, 2025

After notching all-time highs intra-month, equity markets fell off considerably to close lower in February, with the S&P500 declining -1.3% for its second negative month in the last three. Weakness was seen especially in technology and other economically sensitive small-cap areas, while defensive sectors like energy and utilities held up well. Continuing the emerging 2025 trends, International stocks (both developed and emerging) outpaced US markets, and the equally weighted S&P index exceeded its market-cap weighted counterpart. Treasury yields fell and safe-haven assets such as gold posted strong gains in the flight to safety. Volatility spiked with the VIX index rising above 20 and holding, a clear signal of market anxiety.

This plunge in sentiment was a result of several bearish themes. Inflation angst intensified, as February’s CPI report showed rising prices which spooked investors and underscored the need for more Fed work to combat sticky inflation. Uncertainty around trade policy also came to the fore, as President Trump expanded his previously announced tariffs to include an additional 25% on vehicle imports, with potential further duties targeting the semiconductor and pharmaceutical industries. Investors are understandably weighing the potential impacts of these aggressive policies, with many economists expecting lower growth and/or higher future inflation. To add insult to injury, economic growth concerns emerged as the both the Conference Board Index and Purchasing Manufacturers Index for services contracted steeply. Risk off, risk off.

Despite the challenging month, there were glimmers of hopes for bulls to hold onto. Corporate earnings growth has shown remarkable resilience, with 75% of reporting S&P500 companies posting positive earnings surprises and 63% exceeding revenue expectations. The blended Q4 earnings growth rate sits at 18.2%, far exceeding market expectations of 11.9% and marking the strongest quarterly performance in over three years. Expectations for 2025 remain high, and if they are met – or exceeded – we could see strong earnings provide some much-needed fundamental support for the post-election rally to continue.

An additional pillar of support could take the form of a lower interest rate environment. During February, Fed Chair Powell testified before Congress and despite comments on holding short-term rates steady, longer-term bond yields fell steadily during the month. Although short-term rates continue to grapple with mixed inflation and labor-market data, the 10-year treasury yield has quietly declined from a peak of 4.79% in January to 4.2% by the end of February. These declining yields supported fixed income returns during the month, which were broadly positive. More importantly, they served as a counterweight to the broad sentiment decline seen in the equity markets and provided ballast to diversified and more bond-heavy allocations.

A quick note here on an important word in the preceding sentence: diversified. For much of recent market history, diversification as an allocation principle has not been overly rewarded. As market breadth and concentration has narrowed it has been a smaller and smaller subset of markets, sectors, and companies that have propelled the market onward, while other neglected sectors have lagged. Often, diversification has felt disappointing. But in recent months, diversification has been well rewarded as market dynamics have shifted and different assets have begun to move in different directions.

We saw that in clear relief during February’s turbulence as technology and risky segments sold off while international stocks, bonds, and more defensive stocks held up. This is a welcome reminder that diversification remains a solid principle around which to construct a portfolio. Spreading allocations across a variety of asset classes, geographies, and vehicles is an effective strategy to reduce the idiosyncratic risk of having a lot of eggs in a single basket. This helps to smooth out what might otherwise be a bumpy ride, which is exactly what we saw in February. Diversification is the bedrock of our asset allocation process at Boston Wealth Strategies, one that we stick with across all market environments, and one that we feel will serve us (and our clients) well into the future. February’s sell-off has provided a welcome reminder of this fact.

Next month we have the usual slew of economic releases, as well as the FOMC meeting on the 19th. We will be watching closely and will keep you posted as developments arise. As ever, we sincerely appreciate your trust and support.

Sincerely,
Jason D. Edinger
Chief Investment Officer
Boston Wealth Strategies

* Disclosure: Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.

February 7, 2025

After concluding 2024 on a challenging note, equities ended January higher, with the Dow Jones Industrial Average leading the way (+4.8%) and the S&P / NASDAQ just slightly behind (+2.8% and +2.3% respectively). Small-caps also notched gains, although they remain underwater from December’s 8% drawdown. Interestingly, market breadth and participation improved materially during the month, with the equal-weight S&P index outperforming the official index by nearly ¾ of a point. This was a welcome about-face from the poor breadth and participation seen in 2023 and 2024, where technology stocks – specifically the Magnificent 7 – enormously outperformed the rest of the market. Still, the legacy index reached several new record highs during the month to close just below all-time highs. Historically, when stocks have risen in the month of January, the calendar year has ended in positive territory approximately 85% of the time. Very healthy.

The impressive performance in equities came on the back of mostly positive developments out of Washington, D.C. Both pro-growth and deregulatory polices unleashed pent-up animal spirits, which combined with a minor dip in bond yields provided stocks with some relief. These supporting dynamics were weighed against new and potentially larger tariffs against Canada, Mexico, and China, which were the topic of much argument despite not being officially announced until early February. Although these aggressive and nationalist policies were somewhat priced in after Donald Trump’s November election win, any surprises or new tariffs against other counties could result higher volatility in the coming weeks.

The artificial intelligence revolution encountered a setback in January, as China’s AI darling startup DeepSeek ignited a sell-off in the technology sector after it’s relative affordability challenged the sky-high CAPEX spending rates for US companies such as Nvidia Corp. This called into question the extent of US dominance in the space and America’s leadership in the global AI race. The market reaction was swift and violent, with Nvidia falling 17% on Monday the 27th, shedding billions in market cap and falling below its 200 daily moving average (DMA) for the first time in 2 years. Nvidia’s market cap loss on that day alone was greater than the market cap of 487 companies within the S&P500. Still, by the end of the week, the markets enjoyed a nice rebound and clawed back some of their losses as DeepSeek’s cost savings appeared to be somewhat “exaggerated.”

Moving on to the Federal Reserve, the central bank did what everyone expected it to do: held interests steady in the 4.25-4.5% range, noting that inflation remains sticky and unemployment has stabilized at a low level. Market reaction was muted, as this meeting and ensuring press conference was mostly quiet and uneventful. Still, Chair Powell did mention that the bank was in no hurry to cut rates further, and most market participants see the Fed holding until at least midyear. It seems that the Fed pause is finally upon us.

In terms of economic data, it was a mixed bag with core inflation coming in slightly ahead of expectations while headline inflation was slightly lower. Much of this sticky inflation is a result of the strong and resilient American consumer, which combined with the tight labor market has provided ongoing support. As is often said, if people have jobs than people have money. And if people have money, they will spend it.

Corporate earnings were also mixed in January, with 36% of S&P500 companies having reported though end-of-month. Of these reporting companies, approximately 77% have boasted earnings per share (EPS) above estimates, especially in the financials and communication sectors. Overall, corporate earnings appear solid but not spectacular, and we will be keeping a close eye as February concludes the Q424 earnings season.

Looking forward, we have the usual slate of monthly economic data (employment, inflation, and GDP), any disappointment in which could be the catalyst for continued market volatility. Perhaps even more important will be ongoing and ever-changing developments with respect to tariffs on trading partners, namely Mexico, Canada, and China. From a seasonality standpoint, February tends to be in the bottom 1/3 in terms of historical monthly returns, averaging just 0.15% over the last decade. We will remain vigilant and react to new data as necessary. Until next month, we thank you greatly for your ongoing trust and support.

Sincerely,
Jason D. Edinger
Chief Investment Officer
Boston Wealth Strategies

February 3, 2025