WEEKLY MARKET SUMMARY
Global Equities: Fourth quarter 2025 earnings season kicked off with major banks reporting mixed results, while economic data was mostly positive as markets slipped but remained near all-time highs. The S&P 500 closed out the week down -0.4%, while the Dow Jones Industrial Average ended -0.3% and the Nasdaq Composite finished -0.7% lower. US Small Cap stocks showed relative strength, gaining 2.1% during the weekly session. Shares of Foreign Developed Market stocks ended 0.7% higher and Emerging Markets gained 1.3%.
Fixed Income: Rates edged higher as strong economic data pushed the probability of a 2026 Fed rate cut out to the second half of the year. The 10-Year US Treasury yield broke through what had been strong resistance at 4.2% to end the week at 4.23%. 10-Year and 20-Year TIPS auctions met with healthy demand, while corporate bond issuance has surged thus far in January, reaching $435 billion in the first half of the month, up 30% from the same period last year.
Commodities: US West Texas Intermediate Crude prices ended the week relatively unchanged at $59.40 amidst volatility over potential US military action in Iran. Gold prices reached yet another all-time high, eclipsing $4,630 per ounce. Silver was the standout performer, soaring to a record high above $93 per ounce, extending what has been a staggering gain of more than 180% in the last year.
WEEKLY ECONOMIC SUMMARY
Inflation Steady: The latest Consumer Price Index (CPI) report on inflation showed prices rose at an annual rate of 2.7%, while Core inflation (ex-food and energy) was slightly lower at 2.6%. Shelter inflation, which was marked at 0% in October and November due to missing data from the government shutdown, rose to 0.4% during the month, for an annual rate of 3.2%. The CPI data paints a picture of inflation trending in the right direction, with the three-month annualized trend right around the Fed’s 2% target. A separate report on Producer Prices showed higher inflation on input prices, up 3.0% largely attributable to higher energy costs.
Fed Chair Drama: The week kicked off with news that President Trump’s Justice Department was pursuing criminal charges against Fed Chair Jerome Powell due to statements made before Congress regarding the construction project at the Fed headquarters, which has run significantly over budget. The market reacted negatively, with many lawmakers from both parties publicly criticizing the move as a weaponization of the justice department. Reports indicated that Treasury Secretary Scott Bessent was unhappy with the news, which is rumored to have come at the suggestion of FHFA Director Bill Pulte, a vocal critic of Powell. Trump attempted to distance himself from the matter, stating he did not know anything about the subpoenas.
Housing Market Challenges: Housing affordability is a major issue for the Trump administration as rising prices and a shortage of homes have pushed the median age of a US homebuyer to 59 years old, up from 49 just two years ago and up from 39 twenty years ago. President Trump announced last week that Fannie Mae and Freddie Mac would buy mortgage-backed securities to spur demand from lenders, but the market will likely need a combination of lower mortgage rates and more home construction to resolve the supply and demand imbalances. Mortgage rates fell slightly on the news, dipping below 6% and triggering a 29% spike in loan applications, with a 40% surge in refinancing activity.
CHART OF THE WEEK
The Chart of the Week average 30-Year Fixed-Rate mortgages in the US going back to 1971. The horizonal bar shows the average mortgage rate during the period of 7.7%. While mortgage rates hovering around 6% are lower than the long-term average, the average price of a US home rose by approximately 60% from 2019 to 2024, putting home ownership out of reach for many Americans. Fed interest rate cuts can only indirectly influence mortgage rates, and thus far have had no impact. To ease housing affordability, the Trump administration is adopting some unorthodox approaches, including an anticipated exemption for homebuyers to pull funds out of their 401k retirement plans to be announced soon.
