Bolder Money is a team of financial coaches, not financial advisors. We do not provide financial or investment advice, nor do we manage any assets. The following post is provided for educational purposes only and consists of opinions from registered investment advisors. The opinions expressed by these financial advisors do not necessarily reflect the views of Bolder Money.
Factors Impacting the Stock Market in Feb 2025
Let's talk about what's happening in the markets this month. Like the rest of the news, it's a whirlwind!
Tariffs
President Trump's proposed tariffs on Mexico, China, and Canada caused significant downturn in the market.
From U.S. Bank: "As January concluded, Trump spelled out his plans to implement higher tariffs on major trading partners Mexico, Canada and China. As a result, markets dipped on the month’s closing trading day, reducing January’s gains. After falling further on February’s first trading day, market losses were trimmed before day’s end on news from the White House that tariffs on Mexican imports would be delayed. Later, a similar delay was announced on Canadian import tariffs."
Learn more about tariffs with our simple analogy here.
AI
Chinese company DeepSeek launched a free AI assistant with significant publicity, leading it to overcome ChatGPT as the most downloaded AI app on the Apple Store. DeepSeek's announcement led to concerns that the U.S. is losing its lead in the AI race, and the market reacted.
From Reuters: [DeepSeek's announcement] led the tech-heavy Nasdaq (.IXIC) to fall 3.1% on Monday. Nvidia was the Nasdaq's biggest drag, with its shares tumbling just under 17% and marking a record one-day loss in market capitalization for a Wall Street stock, according to LSEG data.
Avoiding Market Whiplash
Since these drops, some stocks have already recovered some of their losses. Others have risen, then fallen again. It's enough to give you whiplash! Since we aren't financial advisors at Bolder, we can't give investment advice, so we reached out to one of our financial advisor partners to hear what they had to say about avoiding panic and what to really think about all the stock market volatility right now.
What Financial Advisors are Saying, Featuring Ryan Sterling of Future You Wealth
From Ryan Sterling, advisor and founder of Future You Wealth:
"Basically, we expect a lot more volatility this year compared to last year but are still constructive on the market overall - looking out at the next 5-10 years. Also, volatility allows people in the wealth building stage of their life to buy stocks at discounted prices. Easier said than done, but if you are building wealth you want to be buying into the volatility (and holding throughout the storm).
We're experiencing turbulence and it will likely get worse at some point throughout the year, but let's stick to the plan and keep moving toward our destination. Headwinds turn into tailwinds and the key is to keep making progress through the headwinds because it will put you in a better place to catch the tailwinds when they present themselves."
The following is an excerpt of Future You Wealth's newsletter sent on January 31, 2025.
The "Keeping You Honest" Market
One month into the new year and we’ve experienced a range of emotions around the market, from excitement to despair. We are calling this the “keep you honest” market – when you think you have it all figured out and ready to hop on the growth express train, the market will give you a day like Monday, down -1.46%, and when you’re ready to run for the hills out of despair, the market will give you a week like last week, up +2%.
So, being too aggressive will leave you exposed to a lot of risk, and being too conservative could leave you missing out on growth.
As always, we’re humble and aware of the risks while maintaining an optimistic stance. In other words, expect growth, but with a lot of volatility. Given time in the market is the most important driver of long-term growth, standing firm against that volatility is our main priority.
The macro perspective: President and the Federal Reserve
Donald Trump’s second term started with a flurry of executive orders and his policies are rippling across the global markets, resulting uncertainty at the core of market volatility. Independent of the presidency, the Federal Reserve is at work. As widely expected, the Fed maintained its federal-funds rate at the current range of 4.25 – 4.50%. The decision marks the first pause since a “recalibration” of policy began in September on fears of a deteriorating labor market.
Some language in the policy statement has changed since the last meeting. Notably, “inflation has made progress toward the committee’s two percent objective” was removed from the statement. When asked about the significance of the change during the post-meeting press conference, Federal Reserve Chair Jerome Powell clarified that this was simply a case of “language cleanup”. Retiring a phrase is not uncommon, and the language in the statement can change over time. The Fed chair added that inflation data since the last Fed meeting had been moving in the right direction.
A shift in sentiment from “dovish” (lower rates) to “hawkish” (higher rates or keeping rates steady) has been brewing over the last three-four months as inflation data has been mixed. Fed funds futures were even pricing in a 25% chance of a Fed hike prior to Wednesday’s meeting.
Is this hawkish sentiment warranted?
In a recent speech at the California Bankers Association, the often-hawkish Fed Governor Michelle Bowman stated she continues to “see upside risks to inflation”.
Perhaps most interesting was her concern that “the current stance of policy may not be as restrictive as others may see it. Given the ongoing strength in the economy, it seems unlikely that the overall level of interest rates and borrowing costs are providing meaningful restraint.”
Fed Governor Christopher Waller gave a far more optimistic outlook in a recent speech in Paris. While he also noted that progress on inflation stalled in the final months of 2024, he believes “that inflation will continue to make progress toward our two percent goal over the medium term and that further reductions will be appropriate.”
He is optimistic on inflation dropping further, citing that much of the inflation last year was driven by increases in imputed prices, like housing services, which are not directly observed but estimated.
So where does that leave us?
Eagerly waiting for the next Fed meeting, of course!
It is important to note that part of the inflation problem is that overall, the economy is good.
Economic data continues to support a soft-landing narrative. Weekly jobless claims remain in the sweet spot of 200,000-240,000, signaling labor market strength and balance. GDP is expected to show Q4 growth between 2.5% and 3.0%, a solid pace that balances healthy expansion with moderate inflation risks. While strong employment can weigh on productivity growth, the overall trajectory for the economy remains very positive. Finally, recent earnings data reinforce optimism, with few companies issuing downward revisions.
In conclusion, the economy and markets are navigating a delicate but encouraging equilibrium. Growth remains robust without overheating and inflation is moderating. The Fed’s cautious stance reinforces stability and will continue to be data dependent.
If stocks can hold onto those gains to finish higher in January, historical data show that the rest of the year tends to be positive for the market. That trend is known as the January Barometer. We’ll see! While we are constructive on the stock market, we do expect to see increased volatility vs. 2024.
Future You Wealth, LLC is an Investment Advisor registered with the U.S. Securities and Exchange Commission (SEC). All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Please contact us at 917-515-4470 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions. Additionally, we recommend you compare any account reports from FYW with the account statements from your Custodian. Please notify us if you do not receive statements from your Custodian on at least a quarterly basis. Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on our website, www.futureyouweatlh.com. This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis.
