Fortis Wealth Management

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www.investfortis.com

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 election campaigning and expectations concerning the Fed’s direction with rates consumed the markets in 2024. Equity indices finished the year positive, notwithstanding volatility throughout the year. Expectations regarding the extent of interest rate decreases by the Fed varied as inflation data hindered the trajectory of reductions.

Artificial intelligence and cryptocurrency were dominant topics in 2024, as enthusiasm and speculation about the future of both garnered investor attention.  Cryptocurrency has surged on speculation that digital money may become a form of legitimate global currency in the future.

Top issues of focus for the incoming presidential administration are deregulation, lower corporate and individual taxes, immigration, reduced government spending, and expanding U.S. manufacturing. Markets are anxiously awaiting final confirmation of cabinet appointments, whose influence can affect the direction of companies and industries.

Lingering inflation worries weighed on markets as data revealed that prices remained stubbornly elevated, particularly for 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 toward the end of 2024. Weakening demand for newly issued Treasury bonds 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

Investor attention on the Treasury market increased as the weighted average interest rate on outstanding Treasury debt is currently around 3.3%, a 15-year high. Additional Treasury debt issuance is a point of contention as weakened demand for new bonds became more apparent.

Bond yields were challenged throughout 2024 as uncertainty lingered regarding the Federal Reserve’s path to reduce the federal funds rate, beginning with an initial rate reduction in September 2024. Inflation data will likely 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 elevated 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 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, and incomes vary among various states and cities based on local industry and demographics.

Financial planners generally recommended spending no more than 30% of income on housing costs, a guideline known as the “30% rule”. The guideline has been a standard benchmark for decades; however, some now consider the rule to be outdated and overly simplistic. Overspending on housing can become an impediment to retirement savings and other financial goals.

Source: Department of Labor

 

 

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

What Is Driving Cryptocurrency – Digital Currency Market Update

The cryptocurrency market has seen significant developments and price movements following the election in anticipation of potential regulatory changes. The nomination of Paul Atkins as the Chair of the Securities and Exchange Commission (SEC) is seen by some analysts as a positive catalyst for the crypto industry. However, unlike stocks, bonds, and real estate, cryptocurrency generally does not produce future expected cash flows to an investor. Therefore, the price is based strictly on what a buyer is willing to pay for it, rather than the net present value of all future cash flows produced for an investor, which is how a traditional financial assets are valued.

The U.S. government currently holds approximately 210,000 bitcoins worth more than $13 billion, a portion of which was seized due to criminal activity. The Securities and Exchange Commission regulates assets it determines to be securities; however, it doesn’t yet regulate digital currencies, but is regulating derivatives related to cryptocurrency.

The most broadly held cryptocurrency is Bitcoin, which is essentially virtual money that is traded digitally by exchanges. Bitcoins can only be purchased and sold with legitimate currency, such as dollars or euros. Each transaction is recorded on the distributed ledger, with the intent of making all transactions secure and visible. The total estimated value of Bitcoins worldwide as of the beginning of December 2024 is over 73 billion dollars.

Bitcoin exists as software, not physical currency, and is not regulated by any country or banking authority. Although U.S. Senate hearings noted that Bitcoin could be used for transactions, it gave no assurance that it would actually become an accepted medium of exchange. Government regulations would need to be created and enforced in order for Bitcoin to become accepted by government entities.

Bitcoins are mined by powerful computers that calculate complex mathematical functions. Total Bitcoin quantity is capped at 21 million and currently there are about 19.5 million that exist worldwide. Bitcoin emerged in 2008, designed by a programmer or group of programmers under the name of Nakamoto, whose real identity remains unknown.

Sources: U.S. Marshalls Service, Bloomberg, Reuters

 
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

Data recently released 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 reported 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.

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 lifespan 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. are 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. Additional tariffs and import duties may change the makeup of imports dramatically, as consumers tackle higher prices and some manufacturing potentially shifts to the U.S.

An imperative question is how will higher tariffs affect U.S. consumers and the economy. The most dominant imports currently tend to be high-margin products. Additional tariffs may be partially absorbed by the exporters or passed along to consumers in the form of higher prices. The introduction of inexpensive Chinese-made products has fundamentally 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 for several 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 of time. (Source: Department of Commerce)

 

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. 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.