Economy
As expected, the Fed left rates unchanged when they convened at their latest Federal Open Market Committee meeting. The current Fed Chair, Jerome Powell, will see his term end on May 15, and President Trump announced his pick for Powell's successor Friday morning. Kevin Warsh, a former Fed governor and husband to Jane Lauder (of the Estée Lauder family), was hand-selected by Trump, and the president is hopeful a Warsh-led FOMC will bring about lower interest rates. During this week's press conference, Powell stated the economy was on firm footing, and barring any significant economic developments, the market believes we won't see another rate cut until Powell leaves. It's important to note that just because the president appoints the Chair of the FOMC, the rest of the committee has a say in the matter, so it will be one of Warsh's jobs to guide the discussion and build a consensus among the voting members.
Next Friday we'll see how many net new jobs were created in the economy for the month of January. A Reuters poll estimates 70,000 jobs were added, which would fit nicely with the recent "slow-hire, slow-fire" environment the labor market has been in. Weekly jobless claims were relatively unchanged, and the four-week average for weekly jobless claims has been trending lower since Labor Day.
Markets
The S&P 500 finished in positive territory for the week up 0.34%, but fell three straight days to end a big week of earnings reports. Not a bad week in the market unless you were concentrated in Microsoft, which fell 10% after it reported higher-than-expected spending on AI and slow growth in its cloud business. The same day, Meta rose 10% with investors rewarding the company for faster-than-expected growth due to AI spending. This is an interesting development as tech stocks have been in the penalty box to start the year while the market as a whole has moved higher. A third of the way through earnings season, and we're seeing earnings growth above expectations for the fourth quarter.
Last year, diversified investors finally saw the benefits of owning things other than US large cap stocks, and 2026 is picking up where 2025 ended. The S&P 500 ended up about 2% higher for January, but was outshined by other asset classes, including foreign developed stocks, emerging markets, small cap stocks, precious metals, and real estate.
What We're Reading
- You Still Need to Save - Allison Schrager
- The Medicare Charge That's Taking a Bigger Bite Out of Social Security- WSJ
Have a great weekend.
Dogwood Wealth Management