1. S&P 500 Earnings Hit Record Highs
With earnings season nearing its end, S&P 500 operating earnings are on track to reach another all-time high, up 10% YoY. Google and Amazon both contributed significantly:
- Google: Q4 revenue increased 12% YoY to a record $96.5 billion, while net income jumped 28% to $26.5 billion.
- Amazon: Q4 revenue climbed 10% YoY to $188 billion, with net income soaring 89% to a record $20 billion.
Key Takeaway: Strong corporate earnings, particularly from tech giants, continue to drive positive market sentiment.
2. Sticky Inflation Keeps the Fed on Hold
The latest CPI report showed a 3% annual inflation rate, the highest since May 2023. Core inflation, at 3.3%, marked the 45th consecutive month above 3%, the longest stretch since the early 1990s. Additionally, producer prices rose 3.5%, their highest level in nearly a year. With inflation drifting further from the Fed’s 2% target, markets are now pricing in a 97% probability that the central bank will keep rates unchanged in March.
Key Takeaway: Persistent inflation is making rate cuts less likely, reinforcing the Fed’s cautious stance on monetary policy.
3. Everything is Up in 2025
Markets continue to rally across multiple asset classes. Stocks, bonds, real estate, commodities, and cryptocurrencies are all up so far this year. Notably, there are now nine U.S. companies with a market cap exceeding $1 trillion: Apple, Nvidia, Microsoft, Amazon, Google, Meta, Tesla, Broadcom, and Berkshire Hathaway. Just seven years ago, there were none.
Key Takeaway: The broad-based rally highlights strong market momentum, with major companies leading the way.
4. Home Price Growth Slows as Affordability Drops
The number of active home listings has risen to 1.8 million, the highest since June 2020. While supply is increasing, high mortgage costs are limiting demand, leading to a 3.8% YoY increase in home prices—a clear slowdown from previous years. If affordability remains stretched and supply continues rising, price appreciation is likely to moderate further in 2025.
Key Takeaway: Housing market momentum is slowing as affordability challenges weigh on buyers.
5. The U.S. Deficit Remains a Concern
The federal budget deficit hit $2.1 trillion over the last year, the highest in 18 months. Deficits exceeding 8% of GDPhave become a defining feature of the 2020s, fueled by rising government spending that has outpaced tax revenue growth. Efforts to cut wasteful spending have begun, with $55 billion in savings already identified through new budget-tracking initiatives.
Key Takeaway: The U.S. government faces a long road to fiscal sustainability, but early spending cuts signal an attempt to address the issue.
6. Eggflation Strikes Again
Egg prices have soared to a record $4.95 per dozen, marking a 238% increase over the past four years—the steepest four-year rise on record. This surge reflects broader inflationary pressures that continue to impact food and consumer staples.
Key Takeaway: Inflation remains a significant factor in household budgets, with food prices showing sustained upward pressure.
7. Noteworthy Market Stats
- Big Tech's dominance: The combined revenue of Amazon, Apple, Google, and Microsoft reached $1.65 trillionover the last 12 months, larger than the GDP of all but 15 countries.
- Amazon AWS: The cloud giant’s 2024 revenue of $108 billion exceeded the total revenue of 468 S&P 500 companies.
- Auto insurance costs: Rates have climbed 55% in three years, the steepest increase since 1975–1978.
- Savings under pressure: The U.S. personal savings rate averaged 4.7% in 2024, reflecting financial strain on consumers.
Key Takeaway: These trends offer a glimpse into shifting consumer behavior and the growing concentration of economic power among a few key players.
Looking ahead to next week, market focus will be on inflation trends, interest rate policy, and continued corporate earnings reports.
