Stock Market

Amid rising geopolitical risks and economic tensions, the stock market ended a volatile February on a high note on the final day of trading despite being in the red for the month.

The stock market’s three major indices performed as follows in February:

S&P 500 -1.4%
The DOW -1.6%
Nasdaq -3.9%

It was the tech-heavy Nasdaq’s worst month since April 2024.

Jobs and Employment

The U.S. economy added 143,000 jobs in January, while the unemployment rate edged down to 4.0%, according to the latest report from the Bureau of Labor Statistics. Despite challenges such as severe winter weather, the Los Angeles wildfires, and ongoing economic uncertainty, the labor market continues to show resilience.

Revisions to November and December payroll data added an extra 100,000 jobs, painting a stronger picture of job growth at the end of 2024.

Healthcare led job gains, adding 44,000 positions, while retail trade, bolstered by post-holiday hiring, grew by 34,000 jobs, and public sector employment rose by 32,000.

While January’s job growth was slower than previous months, the upward revisions to late 2024 numbers suggest a still-robust labor market.

Inflation:

The U.S. Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.5% in January, following a 0.4% increase in December. Over the past 12 months, the all-items index climbed 3.0% before seasonal adjustment, marking an uptick from 2.9% year-over-year growth in December.

Key contributors to inflation in January included shelter costs (rising 0.4% and contributing nearly 30% of the total increase in CPI), energy prices increased, and food prices for the month.

January’s inflation increase was the largest in nearly 1.5 years, underscoring persistent price pressures across goods and services. This reinforces the Federal Reserve’s cautious stance on interest rate cuts as economic uncertainty continues.

Economists suggest that part of this higher-than-expected inflation stems from seasonal price adjustments by businesses at the start of the year, while others argue that the broader rise in prices signals ongoing inflationary pressures.

Additionally, concerns over potential tariffs on imported goods—a key element of President Donald Trump’s economic agenda—may be contributing to inflationary expectations, leading businesses to preemptively raise prices.

GDP

The U.S. economy grew at an annual rate of 2.3% in Q4 2024, according to second estimates by the U.S. Bureau of Economic Analysis. This marks a slowdown from the 3.1% growth seen in Q3.

Compared to initial estimates, GDP was revised up slightly (by less than 0.1 percentage point), thanks to stronger government spending and exports, though consumer spending and investment were revised downward.

These figures indicate moderate economic growth with steady inflation as the economy navigates shifting investment and trade dynamics.

Equity Market Neutral strategies help navigate market turbulence.

In today’s unpredictable markets, investors are increasingly drawn to equity market neutral (EMN) strategies, which aim to provide stability amid volatility. By balancing long and short positions, EMN strategies seek to isolate alpha—the excess return over a benchmark—while minimizing exposure to market swings.

These strategies have gained traction, especially in recent years, as geopolitical tensions, supply chain disruptions, and aggressive interest rate hikes have led to sharp market fluctuations. Notably, market-neutral hedge funds managed over $70.1 billion in 2023, with an average annualized return of 6% over the past decade, proving their resilience in turbulent times.

Despite their advantages, EMN strategies come with challenges. Success depends on precise stock selection and portfolio construction, and reliance on leverage can amplify risk. Frequent rebalancing and competition for similar trades can also impact returns. However, advancements in AI and data analytics are enhancing these strategies, allowing for more sophisticated risk management and stock selection. As investors navigate an increasingly complex financial landscape, these market-neutral approaches remain a compelling option for diversification and risk mitigation.

Real Estate & Mortgage

The U.S. housing market remains a focal point as experts debate whether home prices will continue their upward trend. Many analysts expect a shift from rapid price surges to more moderate appreciation, with home values projected to rise around 5% by Q4 2025. This anticipated growth is driven by sustained demand, limited inventory, and declining mortgage rates, which could make homeownership more accessible.

In fact, mortgage rates in the U.S. have declined for the fourth consecutive week, offering a positive outlook for prospective homebuyers as the spring market approaches. According to Freddie Mac, the average rate on a 30-year mortgage dipped slightly to 6.87% from 6.89% last week.

Notable Quote

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
– Warren Buffett