PFA Updates

Feb 07, 2025

Our investment committee met recently, and we wanted to share some of our current thoughts with you. There has been a flurry of news in the last couple of weeks with the recent administration change, the market shock of China’s AI tool called ‘DeepSeek,’ and our favorite, a new batch of economic data.

From our perspective, January is an important month in the stock market. Historically, since the year 2000, when the S&P 500 is positive in January, the average full-year return for the index has been 12.1%, compared to just 2.9% when January is negative.[1] While there are exceptions to this rule of thumb, and we don’t make long-term investment decisions based solely on one month, we are happy to report that the S&P 500 ended up being up 3% in the first month of 2025.[3]

The good news is that the US economy continues to show resilience, with consumer spending increasing at a moderate rate. Specifically, holiday sales reported this month show that sales exceeded expectations across most parts of the US.[2] We had a very strong jobs report at the start of the month, unemployment remains low at 4.1%, and wage growth continues to outpace inflation.[4]

As a result, we are not making any changes to our portfolios at this time, but we have discussed strategies to reduce risk if needed. Our primary concerns continue to be the impact of inflation and higher interest rates on the economy. Although the Federal Reserve cut interest rates by 1% from September to December 2024, we’ve seen treasury yields increase over that span. Fortunately, the December inflation report was viewed positively as the data came in better than expected.[5]

We are watching closely to see what takes shape in Washington. Some proposals, like tax cuts and deregulation, are viewed positively by the market, while others, like tariffs, are viewed negatively. We’ll have to see which actions are prioritized and which ones become political rhetoric.

Looking ahead, we remain cautiously optimistic. The market's positive start to the year, coupled with solid economic fundamentals, suggests potential for continued growth. However, we will closely monitor inflation, interest rates, and geopolitical developments to adjust our strategy as needed.

Thank you for your continued trust and support. Please don’t hesitate to reach out to us if you have any questions.

Sincerely,
Your PFA Investment Committee

[1] www.fool.com/investing/2025/01/16/could-january-predict-whether-stocks-w...

[2] www.federalreserve.gov/monetarypolicy/beigebook202501-summary.htm

[3] www.finance.yahoo.com/news/p-500-3-january-setting-164925698.html

[4] www.cnbc.com/2025/01/10/jobs-report-december-2024.html

[5] www.cnbc.com/2025/01/15/cpi-inflation-december-2024-.html