Usually, we don’t discuss a single day’s events in the market in these market reports, but this Wednesday, January 15th is hard to ignore. The groovy drum beat thumping out of the New York Stock Exchange might just make you wonder how quickly you can crash the party. I’m picking up the Good Vibrations …
Through the confetti you can just make out the numbers on the board – the S&P 500 up 1.92% or 112 point, the Nasdaq up a whopping 2.53%. It’s a bit late for New Year’s. So, what got this party started?
One-tenth of one percent. Yep. Isn’t that exciting? The Core CPI annual rate came in this morning a 3.2%, which was just a bit better than the 3.3% outlook1. Traders know the Core CPI is the number the Fed is looking at on interest rates.
Inflation has been the thorn in the side of the monkey on the back of the stock market since late 2021. After all, eggs are back up 36% over the last year after being down the year before – and if Dad can’t cook omelets this year, we’re in trouble, because there’s no other recipes he knows.
But one-tenth of one percent? Seems preposterous that such a small shift in inflation expectations could have everyone pushing their chips in the middle of the table. But let’s stop and look around a minute. There were 256,000 jobs added in December, and if you put inflation out of your mind for just a second, that’s a very positive sign. According to transcripts from FactSet, CEO confidence is higher as they are generally feeling better about the direction of the economy since Donald Trump was elected in November2. A Chicago Fed Survey showed similar results. There’s even peace in the Middle East as Israel and Hamas reached a ceasefire deal that will free hostages3. Talk about your Good Vibrations …
It was good timing as well. There were megacap tech stocks in correction territory prior to today and momentum had been broken since December. The post-election Trump rally gains had all but been wiped away. Not so anymore.
The lesson we take from this is that it’s a volatile market. It doesn’t take much of a datapoint to come in and seize the day creating large gains or losses very quickly. Don’t read too much into any one thing. Don’t overreact. It’s one day. A 65-year-old woman can expect to live about 22 years4. That’s around 8,030 days. A 65-year-old man can expect to live about 20 years. That’s around 7,300 days. That’s a lot of days. So don’t make huge moves based on one day of data. There are many more to come (hopefully).
We’re in that moment that requires discipline and that’s precisely what we’re focused on. While the vibrations may be good today, we’re planning for many tomorrows to come for you. So, we’re not overreacting and neither should you. But for now, we’ll take the good vibrations and enjoy them while they last. If you have concerns about your positioning and feel you need to adopt an animal, whether it’s a bear or a bull, give us a call and we’ll get together.
Source:
1https://www.cnbc.com/2025/01/15/cpi-inflation-december-2024-.html
3 https://www.usatoday.com/story/news/world/2025/01/15/israel-hamas-gaza-ceasfire/77041454007/
4https://www.usatoday.com/story/news/world/2025/01/15/israel-hamas-gaza-ceasfire/77041454007/
