Weekly Market Watch

It’s Not Easy Being Green

Global equities pared losses from earlier last week as geopolitical tensions eased following tariff de-escalations and a “framework” for a deal between the United States and Europe regarding Greenland. Emerging market (EM) equities outperformed, with record monthly inflows into EM exchange-traded funds. Although domestic small-capitalization (cap) stocks had outperformed large cap for 14 consecutive sessions this year through last Thursday, the longest streak since 1996 came to an end on Friday. Despite temporary intraweek bond market volatility, investment grade bond spreads hovered near all-time lows. Notably, the Bank of Japan held interest rates steady, maintaining a hawkish stance amid a stronger growth and inflation outlook.

Market Outlook

The Federal Reserve (Fed) is expected to hold interest rates steady at this week’s Federal Open Market Committee (FOMC) meeting. Last week’s economic data releases remained solid; inflation was in line with expectations and jobless claims came in below expectations, while third-quarter GDP was revised up. Resilient economic data gives the Fed room to pause rate cuts for now, but we expect moderating inflation to lead to further policy easing later in the year. We view the backdrop of solid growth and moderating inflation, supported by improving productivity, as positive for equities.

Table of the Week

Fourth-quarter earnings season continues; 13% of S&P 500^® constituents have now reported and the blended earnings growth rate was unchanged at 8.2% as of the end of last week.

While most sectors saw improvements in the blended growth rate during the week, Financials benefited as banks reported higher net interest income driven by loan growth and net interest margin expansion.

Fourth-quarter earnings ramp up this week with more than 100 companies reporting, including several Magnificent 7 companies.

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