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Fundamentals Look Good at the End of a Very Busy News Week: Market Commentary from Cabana’s CEO – February 7, 2025

2 weeks ago

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Between the Trump tariff tango, the new plan for Gaza, the layoffs of thousands of government workers, corporate earnings and this morning’s unemployment data we have had a busy week indeed. Sometimes it is hard to tell what matters to us as investors and what is… well… something else. 

I do know that earnings, interest rates and employment data all matter, so I will stick to that. We are in the middle of earnings season and the vast majority of companies have beaten expectations, pretty much across the board. Of course, it is the future that we are always concerned with, and we are seeing some hesitation to predict the same strength going forward. I suspect that may have something to do with the other news I mentioned at the start of this commentary.  

Interest rates have pulled back from recent highs on the hope that the Trump administration may not create as much inflation as was first thought – whether that be the result of not really going through with tariffs or simply a weakening of demand pressures as we continue to unwind from the pandemic. This latter point isn’t talked about much, but I think we are still feeling the effects of the fiscal and monetary conditions that were put in place during that time. How long these “effects” persist is hard to know but from my desk it feels like we are getting back to normal. We are seeing some of this play out in sector rotation – rotating out of big tech and into other parts of the economy. The blue-chip Dow Jones has outperformed the Nasdaq since the beginning of the year. The same can be said of the equal weight S&P 500 (RSP) compared to the market cap weighted S&P 500 (SPY). This means companies and businesses beyond “The Magnificent Seven” are getting some love and attention. We have seen brief periods of this over the past few years, but this time seems more lasting. I have preached many times that we needed the bull market to spread out and I will say it again here. Participation by energy, healthcare, real estate and other cyclical sectors is a good thing. 

We got the January employment numbers this morning, and the results were net positive in that the report was not too hot and not too cold. Prior reports were revised up and we are seeing bond yields climb back up some, but that is not surprising given the pullback we have seen recently. 

All in all, the “fundamentals” look pretty good for now. Despite some significant volatility this week, the market seems to agree, and we hope to finish the week up. So, everyone enjoy your weekend a try and keep some perspective on everything else. 

At Cabana, we remain in our Bullish Scene and are allocated accordingly across all portfolios. 

Disclaimers

January 17, 2024

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