Market Insights Recap — Week of February 24, 2025

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank.

D.C. drama continues to run the headlines. Our government runs out of money on March 14th. Another brief shutdown is certainly a possibility. Remember that the $2 trillion in deficit spending per year over the last three years has acted like a stimulus package for the economy. The new administration is focused on shrinking or even ending the deficit spending at some point. Taking away spending is going to have some short-term pain for the economy later this year. 

Turning to stocks, the S&P 500 did touch two new highs last week, and earnings remain strong, growing at 15% year over year. Our full-year 2025 earnings growth forecast: about 10%. Walmart's fourth quarter had a solid 5% growth in revenue. They raised their dividend 13%. They said consumer spending has been resilient and consistent. That's not bad. But stocks look forward 6 to 12 months. And because Walmart cited uncertainty over tariffs, the firm guided 2025 results slightly lower. The major indices, like the S&P 500 and Nasdaq, have repeatedly tried to break out higher. And they're having difficulty sustaining these little rallies. As a result, we're seeing some small divergences in breadth measures like advanced decline line did not make a new high with the S&P as it often does. The percentage of S&P stocks above their moving averages, it's okay. And consumer staples stocks are showing a little life, suggesting rotation away from risk on. 

Longer term, the secular bull is still in place. None of our portfolio positioning signals have shifted. Bonds remain trapped in a trading range with a bias towards moving a little bit lower. They're waiting on Congress in tariffs. No change in our view that the fed is on hold. No rate changes anytime soon. Recent speeches by fed members suggest they're turning their attention back to inflation. Inflation expectations remain elevated. Two-year break-evens in the market are pricing at 3.2%. Two more things we're watching: the Dallas Fed report on regional manufacturing activity. And then NVIDIA's fourth quarter earnings result report. They are the last of the magnificent seven tech companies to report this earnings cycle. With a lot of other big names, it's all about the outlook, not what you did last year. 

In summary, we're already halfway through the first quarter. Early economic numbers suggest a bit slower growth later in the year. Earnings calls are picking up that theme, with a larger-than-usual number of companies guiding full-year results lower. Hey, remember, it's easier to jump over a low bar later. Stock leadership is rotating a bit, and there are some minor divergences out there. Time to pick your spots, be careful and review your plans. Thanks for tuning in, 'til next time.