Macro Observations

2025 might be a year of change. Now we’re starting to get the data that confirms the economy is slowing. We’re seeing investors finally reacting to their fear too. Recent outperformers include utilities, staples, healthcare, low vol, value and quality. The one thing that I’d been waiting to see, however, is a shift from stocks to bonds. Well, this is what has happened over the past several trading days.

Considering what may be going on in the Washington DC real estate market right now, where many of those laid off were located, it could create some seismic shifts in the housing market. If loan default & delinquency rates are at 12-year highs, consumers are still racking up credit card debt, they’re struggling with inflation and they have no emergency cushion to fall back on, we may be just one catalyst away from the whole thing crashing down.

After again showing some improvement in the 2nd half of 2024, inflation looks like it’s back on the way up again. Even knowing this, the University of Michigan consumer sentiment, which includes a read on forward-looking inflation expectations, was a bit jolting. But was this report the real deal? Had inflation expectations shot that much higher in such a short period of time? Maybe not.