What inflation, retail sales, homebuilder confidence and more are telling us.

It was a busy week of economic data, with reports on inflation and retail sales to sift through. Inflation, frustratingly, was within the same range we have been in for several months, with no meaningful improvement but no meaningful acceleration either. To that point, consumer prices rose 2.9% year-over-year, while the core consumer price index (CPI), which excludes food and energy prices, increased 3.2%. For their part, producer prices rose 3.3% in December, less than the 3.5% gain expected but up from the 3.0% annual increase in November. These relatively benign price reports take some pressure off a Federal Reserve increasingly concerned about an acceleration in cost pressures.

While these reports do little to arrest the likelihood—and need—for a policy pivot near term, it does seemingly afford the central bank more flexibility for policy as the data continues to evolve in the new year and under a new regime in Washington. 

While retail sales rose less than expected in December, the number was still solid enough to show the resilience of the consumer. Furniture, clothing and miscellaneous goods sales all had an especially strong showing, unsurprising given the holiday season.

Less strong were big-ticket items like cars, appliances and building materials, and with interest rates no longer on the decline, that trend could continue. A strong labor market and wage growth continues to support the consistency of consumer spending, even if consumer confidence has waned a bit.

Apparently, homebuilder confidence has not waned, as today’s report on housing starts and building permits, particularly in the multi-family segment, surged higher. Builder confidence has been buoyed by an ongoing shortage of existing homes inventory—many of which are locked up by homeowners reluctant to sell due to elevated mortgage rates. With rates declining much slower than expected, they are building to meet market demand.

Turning to earnings releases, it was boom time for banks, with JP Morgan, Goldman, Citigroup, Morgan Stanley, Bank of America and Wells Fargo topping estimates, thanks to growth in trading and investment revenue, as well as dealmaking. A further thawing of the credit and IPO markets would be welcome in 2025, as it could be a catalyst for markets to leg higher, even in the face of other concerns like inflation and tariff policies. To wit, beleaguered chipmaker Intel is rumored to be an acquisition target, which boosted its shares in today’s trading. The other catalyst for dealmaking could be a change in regulatory regime under President-elect Trump, who will be sworn in on Monday.

Today, the Supreme Court, in a unanimous decision, upheld the law requiring China-based ByteDance to divest its ownership of TikTok by Sunday or face an effective ban of the popular social media app in the U.S. ByteDance has so far refused to sell TikTok, meaning many U.S. users could lose access to the app this weekend. The Supreme Court sided with the Biden administration, upholding the Protecting Americans from Foreign Adversary Controlled Applications Act.

President-elect Donald Trump, who originally favored a TikTok ban during his first administration, has since flip-flopped on the matter. In December, Trump asked the Supreme Court to pause the law’s implementation and allow his administration “the opportunity to pursue a political resolution of the questions at issue in the case.” TikTok CEO Shou Chew will be one of many tech leaders in attendance at Trump’s inauguration and seated on the dais.

The most important news of the week was the announcement of a ceasefire between Israel and Hamas that will take effect on Sunday. The deal is a fragile one, and the logistics of it will be extremely complex—just getting the hostages held by Hamas safely to a handover point will present significant security challenges. However, it is progress, and much needed after 15 months of conflict in the region.

With this ceasefire in place and the Santa Ana winds finally dying down in L.A., our world and our country need a respite to heal and rebuild. This weekend, we honor Dr. Martin Luther King Jr.’s legacy. Among all of his inspirational quotes, a personal favorite is this one: “Even though we face the difficulties of today and tomorrow, I still have a dream.”

That sentiment describing an endless belief in humanity is needed in this moment of time. It is often how I explain to our clients why the stock market can go up and up even when the wall of worries gets higher and higher. Investing at its core is our opportunity to participate in innovation and human progress

We look forward to our conversations in the coming weeks to address how many companies and market segments are built for resilience even if inflation remains sticky, interest rates stay higher, geopolitics remain tense and uncertainty reigns. Higher-for-longer interest rates has also put forward an opportunity in fixed income that is worth considering in these times of uncertainty.

Together we will build a plan to help you achieve your dream.

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