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February Market Commentary: A New Administration Steps In Thumbnail

February Market Commentary: A New Administration Steps In

Markets & Economy

January Recap and February Outlook

January felt never-ending, bringing extreme weather disasters that served as a stark reminder of the climate crisis. Meanwhile, the new administration hit the ground running with abrasive rhetoric, especially on tariffs. Markets wobbled at first, but a quick reversal signaled that Wall Street isn’t too worried yet. So far, it looks like corporate interests will keep humming along, despite the political theatrics.

At the end of January, the Federal Reserve held rates steady as expected. But their statement had a hawkish tone, reinforcing that, despite the administration’s preference for swift rate cuts, the Fed seems intent on keeping borrowing costs high, something that disproportionately affects working families and first-time homebuyers.

Let’s dig into the data:

  • Inflation ticked up slightly - The Consumer Price Index (CPI) rose 2.9% over the past 12 months, matching economist forecasts but still straining household budgets.
  • January’s job report missed expectations - 143,000 new jobs were added, falling short of the 170,000 projected. However, the unemployment rate dropped to 4%, though that doesn’t tell the full story of wage stagnation and rising costs of living.
  • Consumer confidence slipped again - The Conference Board’s Consumer Confidence Index fell for the second straight month, reflecting growing economic frustration among everyday Americans.
  • The Fed held rates steady - Short-term rates remain between 4.25% and 4.5%, keeping borrowing costs high for small businesses and working families.

What Does It All Mean?

By the numbers, the new administration inherited a strong economy. But it’s important to remember that the stock market is not the economy. GDP growth and corporate profits may look solid, but everyday Americans are still struggling with high prices on essentials, wage suppression, and a housing market that’s increasingly out of reach.

The Federal Reserve’s stance suggests they’re still more focused on pleasing Wall Street than addressing economic inequality. Meanwhile, declining consumer confidence reflects the real disconnect between data-driven optimism and lived experiences of financial strain.

The new administration has come out swinging with aggressive policies, but who stands to benefit remains to be seen. Bold trade policies, particularly tariff threats on Mexico and Canada, have been walked back for now, something the markets seemed to have expected. However, if these policies move forward, it’s potentially working-class Americans who will bear the brunt of higher costs, with corporations likely to pass these costs along to the consumer in an effort to protect their margins.

One small bright spot? Shelter costs, the biggest component of inflation, showed the smallest annual increase since early 2022. However, affordability remains a crisis, with homeownership feeling increasingly unattainable for younger generations weighed down by student debt and stagnant wages.

At the Fed’s January meeting, inflation remained their top concern. They even removed language from their December statement that acknowledged “progress” toward their 2% target. Instead, they described the labor market as “solid” while calling inflation “somewhat elevated.” But let’s be clear: The so-called “solid” labor market still isn’t delivering wage growth that keeps up with costs, and corporate profits remain at record highs. The latest jobs report, despite a slight miss, doesn’t yet signal enough weakness to force the Fed’s hand on rate cuts.

Chart of the Month: A Slower January, But Workers Still Under Pressure

U.S. Non-Farm Payrolls

Source: U.S. Bureau of Labor Statistics, CNN

January Equity Market Highlights

  • The S&P 500 gained 2.70%—good news for investors, but stock market gains don’t trickle down.
  • The Dow Jones Industrial Average rose 4.70%
  • The S&P MidCap 400 increased 3.78%
  • The S&P SmallCap 600 gained 2.85%

Source: S&P Global. Data as of January 31, 2025.

Markets had a strong January, and if history is any guide, that could mean a strong year ahead. The old adage “as January goes, so goes the year” has held true 70.8% of the time since 1929. Notably, market gains weren’t just limited to the tech giants; they were more broadly distributed across sectors.

Meanwhile, Q4 earnings have been stronger than expected, with 77% of reporting companies beating estimates, a historical high. Corporate America continues to thrive, despite many everyday people feeling left behind.

January Bond Market Highlights

  • The 10-year U.S. Treasury yield finished January at 4.55%, down slightly from 4.58% in December.
  • The 30-year U.S. Treasury yield ticked up to 4.80%, from 4.78%.
  • The Bloomberg U.S. Aggregate Bond Index returned -0.27%.
  • The Bloomberg Municipal Bond Index returned -0.51%.

The Takeaway 

Tax season is here, and for many people, that means a tax refund. Here are some thoughtful ways to put it to good use:

  • Invest in ways that reflect your values. 
  • Pay down high-interest debt. 
  • Donate to local causes.

Beyond your refund, now is a good time to reassess your tax strategy for the long term: 

  • Are you maximizing tax-advantaged accounts? Can you increase your 401(k) or IRA contributions?
  • Charitable giving strategies: Are you using tax-efficient ways to support causes that matter to you?
  • If you’re a business owner: Are you making the most of deductions that support your team and long-term business sustainability? 
  • If you’re selling an asset or handling an inheritance: Have you explored tax-efficient strategies that align with your financial goals?

Financial planning doesn’t need to be just about building wealth – it can also be about making intentional choices that reflect your priorities. If you want to align your financial strategy with your values, we’re here to help.

This work is powered by Advisor I/O under the Terms of Service and may be a derivative of the original. The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.