Fisher Investments - This Week In Review (Jan. 17, 2025)

Transcript

Austin Standiford:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few things you may have missed this week, what they mean for financial markets, and most importantly, investors.

Now, let's review what happened this week.

First, China exports.

On Monday, China announced it's exports jumped over 10% in December compared to a year ago. Some of that surge could be tied to an earlier than normal Lunar New Year holiday, which may skew some economic data, but it also seems likely American businesses are stocking up in anticipation of President-elect Trump's planned tariffs on Chinese goods.

That proactively makes sense if you're a business worried about potential looming tariffs, but we don't think investors should read too much into this. The tariffs are not a sure thing yet, and it's impossible to predict their exact timing or scale. Even if they do happen, trade between the US and China isn't likely to stop entirely. We've seen similar tough talk in the past, and the effects weren't as bad as many feared.

Next, US inflation is making headlines.

On Wednesday, the latest inflation numbers came in with December's Consumer Price Index accelerated to 2.9% year-over-year. The figure was right on target with expectations. But here's what stood out. While headline inflation accelerated for the third month in a row, core inflation, which leaves out volatile food and energy prices, actually slowed to 3.2%, taking us back to levels we haven't seen since July.

This back and forth in inflation figures highlights a common theme when it comes to market reactions: Sentiment shifts fast on individual data points, but we think it's better to focus on the bigger picture. Historically, the average annual US inflation rate since 1914 is 3.2%, so right now, we're pretty close to normal.

Finally, long-term interest rates.

This week, the US 10-year Treasury yield hit nearly 4.8% on Monday, its highest level since October 2023, when it peaked around 5%. It eased back some since Wednesday's consumer inflation report, but many investors are wondering whether higher long-term interest rates mean trouble for stocks.

It's true the 10-year Treasury yield is important for setting interest rates across the economy. Yet, our research shows stocks don't actually depend on low long-term yields. If we look at history, US stocks and the 10-year Treasury aren't really connected. For example, from 1940s to the 1980s, the 10-year climbed, eventually hitting around 16%, a far cry from where we are today. Long yields remained at or above 4% for decades, from 1960s to the early 2000s. And yet, the US stocks still saw plenty of healthy gains during that time.

So, while higher yields might grab headlines and even sometimes contribute to short-term volatility, history shows they don't necessarily spell doom for stocks.

And that's it for this week.

To learn more about what we're watching. Check out our other series, 3 Things You Need to Know This Week, released each Monday. You can also visit the “Insights” section at fisherinvestments.com for our latest thoughts on markets. Thanks for joining us today and don't forget to subscribe.