Market Update | January 6th - January 10th

The What

Markets experienced some noticeable declines in the past week with each major index recording their second straight week of consecutive losses. 

First, let's look at the S&P 500 which is made up of 500 of the largest companies traded on either the NYSE, Nasdaq, or CBOE! Falling about 1.9% this past week, the S&P now has gone down .9% in total since the start of the year. Next, The Dow Jones Industrial Average, made up of 30 of the most largely traded companies, also lost 1.9 % of its value this past week. Finally, The Nasdaq Composite, made up of 100 innovative tech companies, lost even more value at 2.2%!

Now let's look at some common commodities. Oil prices jumped 3.7% over the week making gas a little more expensive. Additionally, the price of gold also saw a jump to up approximately 1 percent over the week.

The Why

Well, the negative market sentiment can be in part attributed to the federal reserve meeting back in December. In the meeting, the Fed announced they were cutting interest rates by .25%, dropping rates to a range of 4.25-4.5 percent, aimed at boosting economic growth. Cutting rates is meant to boost economic growth because it makes borrowing money cheaper for people and businesses. That sounds like good news, right? Well, not quite.

Why’s that? Well, along with the interest rate cut, the Fed also announced that they will be taking a more cautious approach to rate cuts this year, meaning there will be less rate cuts in 2025 due to inflation worries. This decision from the Fed ultimately outweighed the rate cut benefits as many investors were hoping for a larger amount of rate cuts in 2025. 

At the same time, the U.S. and Canada’s economies showed strong signs heading into 2025. GDP growth is positive, inflation is under control, and wages are rising faster than prices, which is great for consumers. But here’s the tricky part: this does not directly translate to market growth. That’s because these conditions further decrease the need for central banks to lower rates further.

As a result, the markets didn’t react too well. Right after the meeting, stocks became super shaky and started dropping. The S&P 500 saw heavy fluctuations, further reflecting investor uncertainty of the market. The Nasdaq-100, which holds 100 technology-centered stocks, saw even sharper declines. 

Since then, things haven’t improved much. Many of the biggest companies in the world have seen their stock prices take hits of 3–5%, and all the major indexes have dropped.

But don’t worry too much because, after all, this is normal in the market. Sometimes it will go up, sometimes it will go down. That's all part of how it works! One saying to remember: “When in doubt, zoom out.” What that means is, when you look at the bigger picture, markets tend to grow over time, even with some minor bumps along the way. There are also a lot of exciting things happening next week that will give us some insight into what’s ahead for the economy.

What's Next

Let’s take a look at what YOU can be looking forward to each day next week.

On Monday, China is releasing trade data from December which will give the rest of the world some insight into China's trade balance and the world's demand for Chinese exports. On Tuesday, the U.S. Producer Price Index (PPI) for December will be released, telling us how much more or less it costs companies to make and sell their products in December. On Wednesday, the U.S. and U.K. The Consumer Price Index (CPI) for December will release and tell us changes in the everyday cost of living and will also be a strong indicator of inflation. On Thursday, U.S. retail sales data will be released telling us how much money consumers spent in retail businesses for the month of December. Finally, on Friday, China’s GDP data will be released for the last quarter of 2024. This will be a major indicator on how the Chinese economy is performing, and will likely have a large impact on the market.