Business & Markets Update

Happy MLK Day / Happy Inauguration Day … Hope everyone enjoys their Monday and you’re able to charge up for the week ahead!! Let’s jump into it, plenty to get to.

It was a big week of ‘data points’ last week… lots of data. Wednesday’s December inflation report (CPI) felt like by far the most important economic data point of the year so far. Core CPI came in light vs expectations, which helped ease some inflationary fears, and stocks were off to the races, up up & away. This helped move treasury yields lower, after a multi-week run higher. The yield on 10yr treasuries traded from 4.80% to 4.60%, a significant 5-day move.

Ok- so why did the lower-than-expected inflation report send stocks higher / bonds yields lower / ease investor anxiety? Interest rate expectations. With inflation cooling, the likelihood of a) removing talk of any further rate hikes this year, but more importantly b) seeing 1-2 rate cuts this year, is now unofficially back on the table. Lower rates = cheaper to borrow = encourage spending & economic growth = supportive to corporate earnings and overall stock market valuations. Secondly, declining treasury yields typically mean a shift to riskier assets (stocks), in search of better returns.

Bank earnings kicked off the broader earnings season, and were central to most of the past week’s corporate news flow. The big banks (think JPM, Citi, Goldman, Wells, Morgan Stanley and others) on the whole, beat expectations. We saw positive call-outs from equity and debt underwriting, and net interest income / fee income was also ahead of estimates. I’ll include the weekly performance on those names below, but the financial sector exchange traded fund (XLF), was up north of 6% on the week, for some context on the relative strength. Earnings will roll on this week, with another ~ 10% of the companies inside the S&P 500 set to report Tues-Fri.

There was a mid-week Bloomberg report about Trump (and advisors) exploring a month-by-month ramp up in tariff planning, with the goal of building some leverage as they go and trying to avoid inflation spikes (sounds too good to be true?). Either way, the headline/story was also supportive of stocks going higher on the week, as tariff concerns as a whole have been a (negative) talking point in markets since Trumps reelection in November.

Bullish themes are sort of intact across the board heading into this week (LFG USA!): Inflation appears to be easing, 2025 earnings growth helped by a solid start from companies who reported, market breadth (# of companies going up vs down, we’ve discussed this here a bunch in previous issues) is improving with less reliance on the top 7 stocks to carry the load, and we even have some positive geopolitics news with confirmation of an Israel-Hamas ceasefire that began just yesterday.

Charts / graphics that stuck out to me:

7-day move on the banks mentioned above

Good look at where we stand on inflation front

Banks more willing to lend to consumers

Home equity lines of credit (HELOC) balances are continuing to increase

These charts are usually a good contra-indicator / could be good sign of a continued move higher in stocks

Improved breadth: Rare you see 4-5 consecutive days of positive breadth like this.. good sign of wide participation on the move higher this week, across sectors

Top Reads

Meet the billionaires attending Trump’s Inauguration (Link)

2025 Predictions from Scott Galloway (Link)

Vail Resorts has an epic problem (Link)

Why Harvard MBAs are struggling to land jobs (Link)

Investors pitch new international basketball league that would offer players equity (Link)

Big US bank profits surge as Biden era comes to close (Link)

CBRE to acquire co-working company Industrious (Link)

House passes bill restricting transgender athletes from women’s sports (Link)

Worth Watching

I’ve long admired the CEO of JP Morgan, Jamie Dimon. I just think he’s a real dude, wildly authentic in his communication… the people’s CEO, if you will. He speaks candidly (and in simple terms) about complex topics like the economy, banking, global issues, and way more… and never seems to shy away from taking challenges or controversy head on. He’s also spoken publicly (many times) about what being a good family man looked like to him (while becoming one of the most prominent CEOs in our country) … and why his family-first approach has worked. Perhaps that’s the quality that I admire the most about him.

Anyway, here is a recent sit down with CBS Sunday Morning (that I viewed over a couple train rides, 40 min watch) where he answers questions on why he’s ‘cautiously pessimistic’ about the economy, what he expects from Trump, his view on crypto, the necessary qualities of a good leader, and more. (Watch it here)

Have a great week, kick some butt @ work, kick some butt @ home.

Keep any/all feedback comin' and if there's anything you want to be covered more (or less) in here, I'm all ears!! TC

From the Desk of Todd Cuccia 1/20