January 2025
Market Update
(all values as of 04.30.2025)

Stock Indices:

Dow Jones 40,669
S&P 500 5,569
Nasdaq 17,446

Bond Sector Yields:

2 Yr Treasury 3.60%
10 Yr Treasury 4.17%
10 Yr Municipal 3.36%
High Yield 7.69%

YTD Market Returns:

Dow Jones -4.41%
S&P 500 -5.31%
Nasdaq -9.65%
MSCI-EAFE 12.00%
MSCI-Europe 15.70%
MSCI-Pacific 5.80%
MSCI-Emg Mkt 4.40%
 
US Agg Bond 3.18%
US Corp Bond 2.27%
US Gov’t Bond 3.13%

Commodity Prices:

Gold 3,298
Silver 32.78
Oil (WTI) 58.22

Currencies:

Dollar / Euro 1.13
Dollar / Pound 1.34
Yen / Dollar 142.35
Canadian /Dollar 0.72

Macro Overview

Presidential campaigning and expectations about the Fed’s direction with rates enthralled the markets in 2024. Equity indices finished the year positively, yet demonstrated hesitation throughout the year. Expectations surrounding the depth of interest rate decreases by the Fed differed as inflation data continued to hinder the trajectory of reductions.

Cryptocurrency and AI were all the rage in 2024, as enthusiasm and speculation surrounding the future of both garnered investor attention.  Cryptocurrency has surged on speculation that perhaps digital money might become a form of legitimate global currency in the future and even replacing currencies from certain countries.

Lingering inflation worries weighed on markets as data revealed that prices remained stubbornly elevated, particularly with food and housing expenses. Consumers became more selective in 2024 as the costs for essential goods and services rose, leaving less to spend on discretionary items.

The Treasury Department confirmed reports that it was hacked by a China backed hacker in late December. Several Treasury employee workstations and unspecified documents were accessed after a key from a third-party software service provider was stolen. The agency disclosed the breach in a letter to the Senate Banking Committee.

Social Security and Supplemental Security Income (SSI) benefits for more than 72.5 million Americans will increase 2.5 percent in 2025. The 2.5 percent cost-of-living adjustment (COLA) will begin with benefits payable to nearly 68 million Social Security beneficiaries in January 2025. Increased payments to nearly 7.5 million SSI recipients began on December 31, 2024.

Escalating federal deficits and expanding government debt issuance rattled the U.S. Treasury debt market, sending Treasury yields higher towards the end of 2024. Weakening demand for newly issued Treasury bonds also placed pressure on bond prices, with the yield on the benchmark 10-year Treasury bond ending 2024 at 4.58%, up from 3.95% at the beginning of 2024. (Sources: Fed, Treasury Dept., SS Admin., Labor Dept.)

 
The average American household spends about 32.9% of their income on housing

Rates End Year With Uncertainty – Fixed Income Overview

Tensions rose surrounding the Treasury market as the weighted average interest rate on outstanding Treasury debt is currently around 3.3%, a 15-year high. Additional Treasury debt issuance has become a contention as weakened demand for new bonds became more apparent.

Bond yields were challenged throughout 2024 as uncertainty surrounding the Fed’s decision to reduce rates lingered. The Fed’s initial rate reduction in September 2024 was the commencement of additional rate cuts over the next couple of years. Inflation data will be the primary driver of the Fed’s trajectory for rate cuts in 2025. (Sources: Treasury Dept., Federal Reserve)

Equity Indices Enter 2025 With Hesitation – Domestic Equity Update

Equity indices finished 2024 with gains across all eleven sectors of the S&P 500 Index. The communication services, financials, consumer discretionary, and the utilities sector saw the largest gains in 2024.

Equity indices hesitated their upward trend in December as inflation data hindered the Fed from reducing rates more aggressively. Analysts will be focused on earnings and cabinet appointments whose influence on company directives and initiatives can be critical. (Sources: S&P, Bloomberg, Dow Jones, Nasdaq)

Percentage of Average Wage Going Towards Housing Highest Since 2007 – Housing Market Update

A persistent shortage of housing along with elevating mortgage rates and rising insurance costs have made the cost of home ownership and renting excessive for many. The percentage of income spent on housing has increased significantly in recent years, making affordability a major concern for many households.

The average American household spends about 32.9% of their total earnings on housing costs. However, this figure can vary widely depending on location and whether someone rents or owns their home. Some parts of the country command much higher housing and rental costs than other parts of the country, thus encompassing varied percentages on how much is spent on housing relative to income. Additionally, incomes also vary among various states and cities contingent on demographics.

It has been generally recommended spending no more than 30% of gross income on housing costs, a guideline known as the “30% rule”. The guideline has been a standard benchmark for decades, however, it may now be considered outdated and overly simplistic today.

Sources: Department of Labor

 

 

 
The U.S. government holds more than $13 billion in bitcoin

 

New Catch-Up Contributions For Those Aged 60 to 63 Starting in 2025 – Investment Planning

A “catch-up contribution” is an additional amount of money that individuals aged 50 or older can contribute to their retirement accounts, like a 401(k) or IRA, exceeding the standard contribution limit, allowing them to save more for retirement in the later years of their working life; essentially, it’s a way to “catch up” on savings if they started later in life.  Catch-up contributions can significantly boost retirement savings, especially for those who may have not saved enough earlier in their careers.

Starting in 2025, the SECURE 2.0 Act allows eligible participants in IRAs, 401(k)s and 403(b)s, and Government 457 plans, who are ages sixty to sixty-three, to make “super-catch-up contributions” of up to $11,250, for a 2025 grand total of $34,750.

The new “super-catch-up contribution” limit for Simple IRAs in 2025 is $5,250.  This is above the standard contribution limit of $16,500 for a 2025 total of $21,750.

Sources: IRS, Tax Foundation

Where Taxes May Head & The Future of The Tax Cuts and Jobs Act – Tax Policy

What taxes may look like heading into 2025 will be a challenge for individual taxpayers.
The Tax Cuts and Jobs Act (TCJA), which passed in 2017, made tax rate cuts for
businesses permanent, but cuts for individuals are scheduled to expire at the end of
2025. With the newly elected administration, it is expected that the cuts and provisions
will become permanent with Congressional approval.
The Tax Cuts and Jobs Act became effective on January 1, 2018, modifying tax rates
for single and married tax payers. Certain deductions were either capped or eliminated,
including the deduction for state and local income tax, sales tax, and property taxes,
known as the ”SALT deduction”, was capped at $10,000 per tax year. The standard
deduction nearly doubled, from $12,700 to $24,000 for married couples, and from
$6,350 to $12,000 for individual filers.

Sources: IRS, Tax Foundation

 

The Nation’s Largest Asset Markets – Asset Allocation

A survey conducted by the Federal Reserve found that assets in the United States have risen in value over the past few years, as equity and real estate prices rose. Also encompassing asset values are Treasury bonds, commercial real estate, corporate bonds, and farmland.

Equity and real estate values have risen due to a surge in prices while Treasury bond values have risen due to tremendous debt issuance by the federal government. The Federal Reserve tracks and monitors asset values in order to identify any excessive valuations and imbalances.

 Source: www.federalreserve.gov/publications/files/financial-stability-report

 
life expectancy in the U.S. increased to 79.3 years in 2024

U.S. Life Expectancy Rates Increased To Highest Level Since Pandemic – Health & Well Being

Recently released data by the Center of Disease Control and Prevention reveal that life expectancy in the U.S. increased to 79.3 years in 2024. During the pandemic, life expectancy fell as the three leading causes of death in 2020 were heart disease, cancer and Covid-19. Life expectancy for all Americans in 2019 was 78.8 years, falling to 77 years in 2020. Those aged 85 and older saw the most deaths, many experiencing medical complications from Covid-19. In 2020, Covid related deaths exceeded deaths caused by strokes, Alzheimers, diabetes, and kidney disease.

The U.S. Department of Health & Human Services tracks factors contributing to life expectancy including age, gender and race. The most recent data revealed that females are estimated to live to age 83.8 while males are expected to live to 76.1, a seven year difference.

Medical advancements and safer living conditions over the decades have led to a gradual increase in life expectancy. In 1860, life expectancy in the United States was 39, increasing to 69 in 1960, representing a 30 year life span increase in 100 years. (Sources: U.S. Department of Health & Human Services, CDC)

Imports & Tariffs – Domestic Trade Policy

As the president-elect prepares to enter the White House, foreign imports into the U.S. have become a leading agenda item. According to the Commerce Department, the top imports into the U.S. include electronic devices such as mobile phones, computers and TVs, followed by machinery and automobiles. The onset of additional tariffs and import duties might change the makeup of imports dramatically, as consumers tackle higher prices along with some manufacturing possibly shifting to the U.S.

The biggest question everyone has is, how will higher tariffs affect U.S. consumers and the economy. The most dominant imports currently tend to be high margin products such as mobile phones, laptops, and computers. Any additional tariffs might either be partially absorbed by the exporters or passed along to consumers in the form of higher prices. What’s interesting is that the onset of cheap Chinese made products have actually altered consumer behavior in the U.S. over the past twenty years. Before inexpensive TVs made their way into electronic superstores, a typical TV would last years. Today, TVs are considered disposable and are easily replaceable. Should import prices rise, consumers might reconsider replacing products regularly, and instead maintain existing products for longer periods. (Source: Department of Commerce)

 

Advisory services offered through Portland Private Wealth Management, Inc., a U.S. Securities and Exchange Commission (SEC) Registered Investment Adviser. *Market Returns: The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations. All opinions and views expressed constitute judgments as of the date of this newsletter and may change at any time without notice. We do not offer tax advice. Past performance is not a guarantee of future results.