(Justin Vaughn, Editor, Options Trading Report)
The first week of February was uneventful as investors monitored the ever changing tariff situation, a better than expected jobs report and a parade of good earnings reports, with all boosting the market. The coming week will focus heavily on the CPI (Consumer Price Index report), to be released Wednesday, with more data to come on “wholesale and retail sales,” to track inflation. Many economists and analysts alike don’t see the Fed cutting interest rates in the near future based on fresh data. “The more recent data are indicative of a labor market that has regained its footing,” said Wells Fargo senior economist Sarah House on Friday. Expectations by economists of a near 2.9% CPI, flat from last month (December) possibly trending higher. The University of Michigan Consumer Sentiment Survey, released last Friday revealed that consumer sentiment has decreased to a seven month low. Serious concern over inflation has jumped to its highest reading since November 2023. Despite President’s Trump’s imposing a 25% tariff on incoming steel and aluminum affecting Canada and Mexico, the market reaction was minimal, with all indexes edging upward, the Nasdaq Composite led the way, up 1%, while the Dow Jones Industrial Average and S&P 500 finished just over flatline. Buying of tech, chips and AI stocks drove the Nasdaq up. Tariff policies and enactment ruled the market again Tuesday as investors appeared to take-in-stride the feared announcements. The Trump administration will ensure that the most powerful AI systems are built in the U.S. with American designed and manufactured chips,” Vice President Vance said.
Stocks retreated in nearly every sector Wednesday as the CPI was announced at the market’s opening, setting the stage for a struggling day. The Consumer Price Index edged up to 3% for January, year over year, up from December’s 2.9%. “This is data that’s telling the Fed you’re fine where you are, and if anything there might be some risk that rates aren’t high enough,” said Andy Schneider, senior U.S. economist at BNP Paribas. The market was ‘looking for a better number’ one that would hopefully show a trending decline, to satisfy that inflation is coming down. The Fed’s desired target for inflation, 2% has proven a hard target to reach, giving the Fed’s Governors consternation over whether to raise or not to adjust interest rates. Recent comments from the Fed indicate “a pause is very likely.”
The Glitter of Gold….The Stability Never Wavers, always a ‘shining’ example of a safe haven. Gold surged again Thursday, up $19.00 to $2,947.00 an ounce according to the New York Mercantile Exchange. Future gold contracts that allow buyers and sellers to transact at a predetermined price are extremely popular as gold is now the focus for a safe haven, trading purposes and physical accumulation. As inflation continues to remain ‘hot,’ central banks and investors are flocking to buy gold. Many investors are taking profits, shifting investments to gold. Since January 1st 2025 gold is up over 8%, with MUFG analysts predicting gold to march to new highs of $3,000.00 to $3,500.00 this year. Sperott Managing Partner Ryan McIntyre commented, “We anticipate that gold will continue to perform well in 2025 due to the many uncertainties in the world and ongoing desire for a store of value independent of other assets and institutions.” A timeless metal, sought after for thousands of years, the glitter of gold is forever!
RUMBLINGS ON THE STREET
Jennifer Appel, senior investment director at Investment Consulting firm NEPC, (Referring to President Trump’s tariff moves) WSJ – “There’s been so much noise,” said Ms. Appel. “If investors try to get too cute with their portfolios or how they’re thinking about things, [they] might be making the wrong calls.”
John Ingram, chief investment officer at Crestwood Advisors, WSJ – “The overall takeaway is that the employment markets are still robust, said Mr. Ingram. “From our standpoint it’s consistent with an economy that seems to be accelerating.”
Tony Welch, chief investment officer at Wealth-Management firm SignatureFD, WSJ – “The market really is having to grapple with these opposing forces. You’ve got corporate fundamentals that are marching along pretty well.”
Alan Detmeister, an economist at UBS, WSJ – “The next three months really are the keys for inflation for the year, assuming we’re not hit with huge shocks from tariffs, immigration or some other unexpected change.”
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