HI Market View Commentary 01-13-2025
NEXT week Monday is Martin Luther King day so he Commentary is Tuesday 01/21
Oil and Energy will be down as they lose purchasing power as the flood gates open up
Deregulation already and will continue to help Financials
More Tariffs maybe???? Autos and EV
Predictions: The Ugly Sweater Of Financial Markets
Posted: January 8, 2025
By: Mike Carlone
Category: Advisor Practice Management
The months of November, December, and January are chock full of traditions. Family dinners, presents, tree-cutting journeys, ugly sweater parties, and matching pajamas (don’t ask) are all emblematic of this time of year.
In the financial markets, the equivalent to the ugly sweater party is the making of market predictions for the year ahead. Sure, it’s fun, they’re cute, and they grab attention. But ultimately, they are useless and thus a waste of time. (Yes, I’m aware I sound like Scrooge right now.)
One need look no further than 2024 to be reminded (once again) of the futility of market predictions. By some accounts, the average of 2024 forecasts had the S&P 500 Index closing at 4,861, yet in reality the year closed with the benchmark index closing higher than 5,880 – that’s an error of about 21%…on average. Yikes.
In this century, the highest annual return for the S&P 500 was 32.4% in 2013. The roughly 25% increase for last year puts 2024 in seventh position. This interactive chart highlights these data points and is an interesting way to consider annual returns in the context of a bigger picture.
Just in case anyone is tempted to chalk up the 2024 prediction misses by financial services “experts” as simply a bad year for forecasting, I would suggest you consider the following chart from Avantis Investors, which highlights how consensus estimates have not been within 10% of the actual return during the last seven years, from 2018 to 2024. In fact, the closest the predictions have come was 14% in both 2018 and 2020, when the S&P 500 fell 6.2% on a predicted rise of 7.5% (2018) and rose 16% when predicted to increase only 2% (2020).
Consensus S&P 500 Estimates vs. Actual Returns (2018 to 2024)
Source: Avantis Investors, “Monthly ETF Field Guide,” November 2024
Data from 1/1/2018 to 11/30/2024. Sources: Emily McCormick, “What Wall Street Strategists Forecast for the S&P 500 in 2019,” Yahoo Finance, December 31, 2018; Jeff Sommer, “Clueless About 2020, Wall Street Forecasters Are at It Again for 2021,” New York Times, December 18, 2020; Jeff Sommer, “Forget Stock Predictions for Next Year. Focus on the Next Decade,” New York Times, December 16, 2022; Senad Karaahmetovic, “Top Wall Street Strategists Give Their S&P 500 Forecasts for 2023,” Investing.com, December 27, 2022; and Tom Aspray, “Should You Worry That Strategists Keep Raising Their S&P 500 Targets?” Forbes, October 20, 2024. Past performance is no guarantee of future results.
Blueprint Investment Partners has also shared numerous examples of utterly useless market predictions from the “experts” over the last several years.
Predictions AND Certainties are Worthless Without a Plan of Attack
Before I get too up in arms about the inaccuracy of predictions, we should take a step back and remind ourselves that even IF these predictions were accurate, it still wouldn’t guarantee success for a financial advisor or their clients.
For example, if one knows the market will be at a certain level at a certain point but doesn’t know the exact path to take to benefit from the foreknowledge, then where’s the value? This is even more problematic when a withdrawal needs to be taken before the known market endpoint.
Furthermore, we should not take for granted that investors will have the fortitude to sit through certain levels of volatility and drawdown even if they are confident in the ultimate destination. Look no further than reality to test for yourself whether that statement is true: The S&P 500 Index has averaged a strong return over many decades, and yet studies consistently show that investors underperform.
Predictions are More Dangerous than Guesses
What makes predictions dangerous, particularly reliance on them, is that it limits a financial advisor’s ability to take advantage of favorable market environments.
To illustrate, let’s assume an advisor believed 2024 would produce only modest returns and set their target at 4,800 for the S&P 500. Within the first quarter, the index exceeded 5,000. The advisor might have been tempted to take risk off the table. Perhaps they let it go as high as 5,500 before cutting risk. That would have left money on the table that could be crucial during down periods. It also would have left them out of position during the market’s continued march higher.
Sometimes what’s even more emotionally difficult than missing a rally is trying to figure out when to get back in.
At Blueprint Investment Partners, we talk about these challenges all the time. And until systematic trend following becomes mainstream, we will continue to do so.
The beauty of a systematic investing process is that it assumes nothing about markets and takes emotion completely out of the equation. A result is that we are rarely “out of position” with the markets. For example, we have repeatedly highlighted the absurd run by NVIDIA and how we have benefited accordingly.
7,400? 6,666? 6,600? 6,500?
Without any context, random numbers like those in the header above do not carry much meaning. In this case, that sequence of random, useless numbers captures some of the “expert” 2025 predictions for S&P 500 Index returns from the likes of JPMorgan Chase, Morgan Stanley, Goldman Sachs, Bank of America, and RBC. Almost comically, the average of those predictions isn’t too far off from the S&P 50’s average yearly return (thanks guys, very helpful).
While there are plenty of questionable traditions this time of year – like ugly sweaters, Christmas carols sung off-key, and market predictions – there are also some good ones, such as New Year’s resolutions. At Blueprint Investment Partners, our resolution is the same as always: We resolve to continue our disciplined executing of the trend-following systems that have allowed us to have…uh, if you’ll pardon me…peace on earth and goodwill between our partnering advisors in 2024.
We also resolve to continue exploring new ways to enhance the execution of our strategies and how we serve our valued clients. Our wish is that financial advisors will take some time in this new year to evaluate what matters most to them and seek us out to determine if we can help them get the most out of their practice in 2025 – whether that means growth, process improvement, or freeing up more time to spend with their family. We want nothing more than to help advisors succeed.
Sourcing for this post: Barchart.com, S&P 500 Index ($SPX), 1/31/2024; Avantis Investors, “Monthly ETF Field Guide,” November 2024; and Slickcharts.com, S&P 500 Total Returns, 1/1/1926 to 12/31/2024
Mike Carlone
HI 6,804 End of 2025 27PE Future x $252 EPS (9.1%)
YES growth will still most likely come from Mag 7 Stocks. YES we are still leaning towards NASDAQ index stocks BUT financials should; also beat the S&P 500
Earnings dates:
AAPL 01/30 AMC
BA 01/28 BMO
BABA 02/06 BMO
BAC 01/17 BMO
BIDU 02/26 est BMO
DG 03/13 est BMO
DIS 02/05 BMO
F 02/05 AMC
GM 01/28 BMO
GOOGL 02/04 est AMC
JCI 01/28 est BMO
JPM 01/15 BMO
KO 02/11 est BMO
LMT 01/28 BMO
META 01/29 AMC
MU 03/19 est AMC
NVDA 02/26 AMC
O 02/20 est AMC
SQ 02/20 AMC
TGT 03/12 est BMO
UAA 02/07 BMO
V 01/30 AMC
VZ 01/24 BMO
ZION 01/21 AMC
https://www.briefing.com/the-big-picture
The Big Picture
Last Updated: 10-Jan-25 15:51 ET | Archive
An important tell is coming with fourth quarter earnings reports
The fourth quarter reporting period is the reporting period that feels like it never ends. That is because year-end accounting is enmeshed with the quarterly reports. Things will get rolling in the coming week when the big banks start to report their results, but we won’t be putting a lid on this particular reporting period until early March.
It will be a long, cold stretch between now and then for a crew based in Chicago, yet the stock market has a chance to heat up if the results and, importantly, the guidance impress. If they don’t, then it may be a long, cold stretch for a stock market that is also wrestling with rising interest rates.
Full, Rich, and Fiery
It isn’t breaking new ground to suggest the earnings multiple for the market cap-weighted S&P 500 is high on a historical basis. Currently, it sits at 21.6x forward 12-month earnings, down from 22.5 seen in early December but still high relative to the 10-yr average of 18.1, according to FactSet.
We have discussed before, however, that the earnings multiple for the equal-weighted S&P 500 is less demanding on an absolute and relative basis. It sits at 16.4x forward twelve-month earnings versus a 10-yr average of 16.5x. On this basis, the market is not overvalued.
Sill, someone like Warren Buffett might contend that “the stock market” is overvalued in a big way when looking at the ratio of the Wilshire 5000 market capitalization to nominal GDP.
That happens to be known as the “Buffett Indicator” after he observed in a 2001 Forbes Magazine interview that, “If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200%–as it did in 1999 and a part of 2000–you are playing with fire.” Today, it sits at 202%.
One’s view of the stock market’s valuation, then, may just boil down to one’s risk tolerance, yet we will say this: the stock market’s valuation ranges from full to rich to fiery, partly because a lot of good earnings news has been priced into it — not just past earnings news but future earnings news that is expected to be even better.
That is why there is a lot riding on the fourth quarter reports to start the new year. Companies will be providing a lot of qualitative and quantitative guidance for the first quarter and year ahead that will validate, or invalidate, the market’s optimistic outlook.
Riding High
According to FactSet, the fourth quarter blended earnings growth rate is 11.7%. That is down from 14.5% on September 30, yet it would still mark the highest year-over-year growth rate since the fourth quarter of 2021.
But wait, it gets better. The first quarter earnings growth rate is projected to be 11.8% and for calendar year 2025 it is projected to be 14.8%. So, one can see expectations are riding high into 2025.
For the fourth quarter, the financial sector is expected to deliver the strongest growth (39.5%) followed by the communication services (20.8%), information technology (13.9%), consumer discretionary (12.8%), and utilities (12.5%) sectors.
The remaining sectors are projected to trail the S&P 500 growth rate. Four sectors are expected to have negative year-over-year earnings growth: consumer staples (-1.6%), industrials (-3.7%), materials (-4.6%), and energy (-26.4%).
The overall growth rate will be in a state of flux as the results roll in. BlackRock (BLK), BNY Mellon (BK), Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM), and Wells Fargo (WFC) will get that ball rolling on January 15.
With a new administration pushing deregulation and more market-friendly tax policy, the qualitative guidance out of the big banks should sound pretty encouraging, although they will have to work to temper concerns about the impact of rising interest rates on loan demand and debt issuance/refinancing.
Meanwhile, multinational companies are going to have to temper concerns about the impact of the strengthening dollar while companies in general are going to have to temper concerns about the impact of potential tariffs.
The latter won’t be easy to do since new tariffs haven’t been enacted, and there is no telling how penal they will be or the countries/products at which they will be aimed, although it is fair to say that China is tops on the new administration’s tariff list.
CY25 earnings estimate have been reined in since September, roughly coinciding with the dollar’s ascendance.
What It All Means
There will be a lot of time to get a fix on the calendar year 2025 earnings line given the extended nature of the fourth quarter earnings reporting period. The cast of that line will happen as companies report their year-end results and analysts fish for information that moves their earnings models.
Clearly for a market trading at best with a full valuation, it won’t want the earnings growth line reeled in. It would presumably be content to see that line remain fixed and even happier if it is let out some more to catch additional earnings growth.
That isn’t getting easier with the dollar strengthening and interest rates rising. The upcoming, and extended, fourth quarter reporting period will be an important tell for a stock market that has been priced for nothing but good earnings news.
—Patrick J. O’Hare, Briefing.com
Where will our markets end this week?
Higher
DJIA – Bearish
SPX – Bearish
COMP – Bearish
Where Will the SPX end January 2025?
01-06-2025 +2.4%
01-13-2025 -2.0%
Earnings:
Mon: KBH,
Tues:
Wed: BLK, BK, C, GS, WFC, FUL, JPM
Thur: FHN, MS, USB, UNH, BAC
Fri: FAST, SLB
Econ Reports:
Mon: Treasury Budget,
Tue PPI, Core PPI
Wed: MBA, CPI, Core CPI, Empire Manufacturing
Thur: Initial Claims, Continuing Claims, Import, Export, Phil Fed, Retail, Retail ex-auto, Business Inventories, NAHB Housing Market Index
Fri: Building Permits, Housing Starts, Capacity Utilization, Industrial Production,
How am I looking to trade?
Now we are protecting for Q1 earnings in 2025
www.myhurleyinvestment.com = Blogsite
info@hurleyinvestments.com = Email
Questions???
SEC Writes Off $10B in Penalties in Past Decade
In general, the Securities and Exchange Commission collects about two-thirds of its financial judgments, officials said, with big banks and Wall Street firms being the most reliable remunerators.
January 2, 2025
This story originally ran on Financial Advisor IQ sister publication FundFire.
The Securities and Exchange Commission has written off nearly $10 billion in enforcement penalties in the past 10 years that it had little or no hope of ever collecting, The Wall Street Journal reports.
For its 2024 fiscal year that ended Sept. 30, the SEC said it obtained orders for $8.2 billion in financial payouts — its highest amount ever. However, the agency is unlikely to collect more than half of that amount. Indeed, the SEC collected just 23% of the penalties it took credit for issuing in the past year, according to data provided to the Journal.
More than half of its $8.2 billion in sanctions — $4.4 billion — was levied against cryptocurrency issuer Terraform Labs. Bankrupt Terraform won’t pay any of the SEC’s penalty if it returns a certain amount of funds to harmed investors as part of its bankruptcy proceeding, per the Journal. Excluding Terraform, the SEC collected 51% of its 2024 penalties.
The commission wrote off $1.4 billion in 2023 alone — after announcing court orders or settlements worth $4.9 billion in financial penalties. The write-offs included fines assessed in prior years, according to data obtained by the Journal through the Freedom of Information Act.
In general, the SEC collects about two-thirds of its financial judgments, officials said. The SEC’s “continuous efforts” mean the commission has returned “billions of dollars to investors in the past four years alone,” a spokesman for the regulator said.
The SEC used to disclose its collection results but stopped the practice in 2019 without any explanation, the Journal reports.
Republican SEC Commissioner Hester Peirce is unhappy with that policy. “If we are going to advertise the numbers that we are imposing, we ought to be transparent about the fact that does not mean that money is flowing to the government and to investors,” Peirce said.
The regulator writes off penalties and other amounts that have not been paid after two years. In some instances, the SEC will have its small-collections office garnish defendants’ wages and place liens on properties, but even in those cases, its success has been mixed, the Journal reports.
In some cases, the SEC keeps seeking remedies through the courts, according to legal records and lawyers involved in such cases. The commission doesn’t disclose its success rate in hunting down its debts.
Big banks and Wall Street firms that regularly interact with the SEC are more likely to pay their penalties on time, defense lawyers and others familiar with the process told the Journal.
https://finance.yahoo.com/news/lockheed-martin-scores-15-5-144500341.html
Lockheed Martin Scores a $15.5 Billion Bonanza for New F-35s. Is the Stock a Buy for 2025?
Rich Smith, The Motley Fool
Sat, Jan 11, 2025, 7:45
Lockheed Martin’s (NYSE: LMT) F-35 Lightning II stealth fighter jet is the gift that keeps on giving. Estimated to be worth $1 trillion in total lifetime value, the F-35 warplane remains easily Lockheed’s most important product. And this was demonstrated once again just late last year, when the week before Christmas saw the Pentagon deliver three gifts to Lockheed Martin worth $15.5 billion in total.
Two gifts for Lockheed Martin
The first and by far biggest gift arrived Dec. 20, when the Pentagon’s daily digest of contract awards showed Lockheed winning orders for 145 F-35 fighter jets worth $11.8 billion. Reported as a contract from the U.S. Navy, this order actually involves deliveries of F-35s for the U.S. Navy, Marine Corps, and Air Force, as well as for U.S. allies Italy and Japan, like so:
- For the Air Force: 48 conventional take-off and landing F-35As
- For the Marine Corps: 16 short take-off and vertical landing (STOVL) F-35Bs, and five carrier-landing F-35Cs
- For the Navy: 14 F-35C aircraft
- For “non-U.S. Department of Defense program partners” that helped Lockheed develop the F-35 (in this case, Italy): 15 F-35As and one F-35B
- For “Foreign Military Sales” customers who are not program partners on the F-35 (namely, Japan): 39 F-35As and seven F-35Bs
The Department of Defense noted that all planes ordered under this contract are due for delivery by June 2027, so the $11.8 billion covered by this contract will be paid out over the next two and a half years. That’s about $4.7 billion per year in additional revenue for Lockheed. But that’s not all Lockheed is getting.
On Dec. 23, the Pentagon awarded Lockheed two more contracts, also routed through Navy funding, for $3.4 billion and $335.7 million, respectively. These additional contracts cover logistics support, including ground maintenance, supply chain management, and training services, as well as various engineering services and specialized testing and tooling equipment for the F-35. Both run through the end of 2025, adding $3.7 billion in total spending.
In total, that’s $15.5 billion worth of new F-35 revenue for Lockheed, front-loaded so that about $8.4 billion of it shows up in 2025.
How big of a deal is this for Lockheed Martin stock?
So we’re talking some objectively big numbers here. But let’s put them in the context of the company we’re talking about: Lockheed Martin, the world’s largest pure-play defense contractor. How big of a deal are these contracts for a company of Lockheed’s size?
Referring to data provided by S&P Global Market Intelligence, the additional $8.4 billion Lockheed will receive from these contracts in 2025 amounts to 30% of the $27.8 billion that Lockheed’s Aeronautics division collected in 2023, the last full year for which we have data. It amounts to only 12.4% of the $67.6 billion in revenue that all of Lockheed Martin collected that year, granted. But even that seems like a big bump in revenue for a company that, according to most stock market analysts, is only growing earnings at about 3% annually over the next five years.
Granted, too, most of this additional revenue is front-loaded into 2025, and the increases in F-35 revenue in 2026 and 2027 will be smaller. But they still amount to nearly 7% growth over 2023 revenue — twice analyst forecasts. This suggests that Wall Street forecasts for Lockheed’s future growth may be conservative.
Is Lockheed Martin stock a buy in 2025?
How fast Lockheed Martin stock ends up growing is a key fact investors need to consider when deciding whether to invest in the stock, which is not objectively cheap.
Priced at 17 times trailing earnings, and slightly more expensive when valued on free cash flow, Lockheed Martin really needs to be growing earnings somewhere in the mid-double-digits before I’d consider buying it. At 3% long-term growth, the stock isn’t anywhere near a bargain price. Even at 7% growth, it’s still probably overpriced.
If Lockheed can grow earnings in the 12% range, however, or ideally even a bit better than that, and paying a 2.7% dividend yield to boot, that is when things start to get a bit more interesting, and Lockheed stock starts looking more attractive as an investment.
And the more big-money F-35 contracts Lockheed Martin wins, the more likely that is to happen.
Should you invest $1,000 in Lockheed Martin right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
Goldman says market ‘increasingly vulnerable’ to correction, recommends downside protection
Published Fri, Jan 10 20254:00 PM EST
Stocks are looking more primed for a correction as the new trading year kicks off, according to Goldman Sachs.
After an unusually strong two-year surge, Peter Oppenheimer, Goldman’s chief global equity strategist, said there could be a short-term digestion period for stocks before further gains can be made. He noted that the two-year performance from 2023 to 2024 ranks in the 93rd percentile over the past 100 years, underscoring just how far up the market has run.
“The powerful rally in equity prices in recent months leaves equities ‘priced for perfection,’” Oppenheimer wrote to clients. “While we expect equity markets to make further progress over the year as a whole — largely driven by earnings — they are increasingly vulnerable to a correction driven either by further rises in bond yields and/or disappointments on growth in economic data or earnings.”
Oppenheimer said stocks have a favorite backdrop overall given that the Federal Reserve is in an interest rate cutting cycle without the economy being in a recessionary period. However, high valuations and unusually high market concentration — in addition to the market’s recent runup — provide Oppenheimer with reason for pause.
In other words, “While we remain broadly positive on equities, the risks of near-term disappointment are rising,” Oppenheimer told clients.
Within this environment, he said to focus on diversification for improving risk-adjusted returns. Downside protection remains attractive, Oppenheimer said, given there are relatively low levels of volatility at the moment.
Some of Oppenheimer’s hypothesis may already be becoming reality. Friday’s slide of more than 1% in the S&P 500 pulled the index into negative territory for 2025.
While Goldman is gearing up for a pullback period, Wall Street is broadly optimistic on where the market will go in 2025. The average market strategist surveyed by CNBC Pro predicts the S&P 500 will end the year at 6,643, or 12.2% higher than where the broad index finished Wednesday’s session.
JPMorgan Tells Staff to Return to the Office Five Days a Week
by Bloomberg News
January 10, 2025
JPMorgan Chase & Co. told all of its employees to return to the office five days a week starting in March, ending a hybrid work-from-home policy that took effect during the pandemic.
Some locations don’t yet have the capacity to accommodate a full return of every employee, and the bank will confirm where it’s possible by the end of this month, the company’s operating committee said in an internal memo Friday, confirming a Bloomberg News report earlier this week.
“We know that some of you prefer a hybrid schedule and respectfully understand that not everyone will agree with this decision,” members of the committee said in the memo. “We think it is the best way to run the company.”
More than half of the bank’s roughly 300,000 employees already come into the office five days a week. For those affected by the new policy, JPMorgan said it will give at least 30 day’s notice prior to a full-time return. The option to work from home “as life events happen” will remain in place, according to the memo.
Aggressive mandates forcing workers back to the office en masse haven’t always proven easy to implement. Amazon.com Inc. last year ordered employees to return five days a week starting in January, but the company had to delay that date for thousands of returning employees because there wasn’t enough space in some cities. Other companies have had to remind employees to adhere to the requirements.
“We know that a lot has changed in our workplaces since returning to the office after the pandemic, and recognize that it will take us some time to get all of our locations ready to accommodate a five-day-a-week schedule,” JPMorgan said in the memo.
10-year Treasury yield spikes to highest level since late 2023 after hotter-than-expected jobs report
Published Fri, Jan 10 20254:25 AM EST
Updated Fri, Jan 10 202512:32 PM EST
In this article
U.S. Treasury yields jumped to their highest level since November 2023 after the latest jobs data came in stronger than economists had forecast.
The 10-year Treasury yield added nearly six basis points at 4.745%. The 2-year Treasury surged more than 10 basis points at 4.369%.
One basis point is equal to 0.01% and yields and prices move in opposite directions.
Treasurys
| TICKER | COMPANY | YIELD | CHANGE |
| US1M | U.S. 1 Month Treasury | 4.313 | 0.005 |
| US3M | U.S. 3 Month Treasury | 4.33 | 0.005 |
| US6M | U.S. 6 Month Treasury | 4.33 | 0.026 |
| US1Y | U.S. 1 Year Treasury | 4.236 | -0.011 |
| US2Y | U.S. 2 Year Treasury | 4.392 | -0.004 |
| US10Y | U.S. 10 Year Treasury | 4.79 | 0.016 |
| US30Y | U.S. 30 Year Treasury | 4.968 | 0.004 |
December’s nonfarm payrolls reading showed much stronger-than-expected job growth. Nonfarm payrolls soared by 256,00 for the month, up from 212,00 in November, the Bureau of Labor Statistics reported Friday. Meanwhile, economists had forecast job growth to rise by 155,000 jobs in December, according to Dow Jones.
The unemployment rate inched lower to 4.1%, one-tenth of a point below expectations.
The strong labor market data makes it less likely that the Federal Reserve will lower interest rates at its policy meeting later this month. Fed funds futures trading data is currently pricing in less than 3% odds of a rate cut at the next meeting.
Fed meeting minutes from December, released Wednesday, showed that officials were worried about inflation and the effect of President-elect Donald Trump’s policies, and indicated that they would be moving more slowly on interest rate cuts in 2025.
Firefighters battle devastating Los Angeles wildfires as winds calm somewhat
Published Thu, Jan 9 20255:49 AM ESTUpdated Thu, Jan 9 20258:58 AM EST
Firefighters battled early Thursday to control a series of major fires in the Los Angeles area that have killed five people, ravaged communities from the Pacific Coast to Pasadena and sent thousands of people frantically fleeing their homes.
Ferocious winds that drove the flames and led to chaotic evacuations have calmed somewhat and were not expected to be as powerful during the day. That could provide an opportunity for firefighters to make progress reining in blazes that have hopscotched across the sprawling region, including massive ones in Pacific Palisades and Altadena.
The latest flames broke out Wednesday evening in the Hollywood Hills, striking closer to the heart of the city and the roots of its entertainment industry and putting densely populated neighborhoods on edge during exceptionally windy and dry conditions. But only about a mile away, the streets around the Hollywood Walk of Fame, the TCL Chinese Theatre and Madame Tussauds were bustling, and onlookers used their phones to record video of the flaming hills.
Within a few hours, firefighters had made major progress on the Sunset Fire. Los Angeles Fire Department Capt. Erik Scott said they were able to keep the fire in check because “we hit it hard and fast and mother nature was a little nicer to us today than she was yesterday.”
A day earlier, hurricane-force winds blew embers through the air, igniting block after block in the coastal neighborhood of Pacific Palisades as well as in Altadena, a community near Pasadena that is about 25 miles (40 kilometers) east. Aircraft had to be grounded for a time because of the winds, hampering firefighting efforts.
Nearly 2,000 homes, businesses and other structures have been destroyed in those blazes — called the Palisades and Eaton fires — and the number is expected to increase. The five deaths recorded so far were from the Eaton Fire.
Some 130,000 people have been put under evacuation orders, as fires have consumed a total of about 42 square miles (108 square kilometers) — nearly the size of the entire city of San Francisco. The Palisades Fire is already the most destructive in Los Angeles history.
More than half a dozen schools in the area were either damaged or destroyed, including Palisades Charter High School, which has been featured in many Hollywood productions, including the 1976 horror movie “Carrie” and the TV series “Teen Wolf,” officials said. UCLA has canceled classes for the week.
In Pasadena, Fire Chief Chad Augustin said the city’s water system was stretched and was further hampered by power outages, but even without those issues, firefighters would not have been able to stop the fire due to the intense winds fanning the flames.
“Those erratic wind gusts were throwing embers for multiple miles ahead of the fire,” he said.
As flames moved through his neighborhood, Jose Velasquez sprayed down his family’s Altadena home with water as embers rained down on the roof. He managed to save their home, which also houses their family business selling churros, a Mexican pastry. Others weren’t so lucky. Many of his neighbors were at work when they lost their homes.
“So we had to call a few people and then we had people messaging, asking if their house was still standing,” he said. “We had to tell them that it’s not.”
In Pacific Palisades, a hillside area along the coast dotted with celebrity homes, the scope of the destruction was just becoming clear.
Block after block of California Mission Style homes and bungalows were reduced to charred remains. Ornate iron railing wrapped around the smoldering frame of one house Swimming pools were blackened with soot, and sports cars slumped on melted tires.
Another fire has hit Sylmar, a middle and working-class area on the northern edge of the San Fernando Valley that has been the site of many devastating blazes.
Fast-moving flames allowed little time to escape
The main fires grew rapidly in distinctly different areas that had two things in common: densely packed streets of homes in places that are choked with vegetation and primed to burn in dry conditions.
Flames moved so quickly that many barely had time to escape. Police sought shelter inside their patrol cars, and residents at a senior living center were pushed in wheelchairs and hospital beds down a street to safety.
In the race to get away in Pacific Palisades, roadways became impassable when scores of people abandoned their vehicles and set out on foot.
Actors lost homes
The flames marched toward highly populated and affluent neighborhoods, including Calabasas and Santa Monica, home to California’s rich and famous.
Mandy Moore, Cary Elwes and Paris Hilton were among the stars who lost homes. Billy Crystal and his wife Janice lost their home of 45 years in the Palisades Fire.
“We raised our children and grandchildren here. Every inch of our house was filled with love. Beautiful memories that can’t be taken away,” the Crystals wrote in the statement.
In Palisades Village, the public library, two major grocery stores, a pair of banks and several boutiques were destroyed.
“It’s just really weird coming back to somewhere that doesn’t really exist anymore,” said Dylan Vincent, who returned to the neighborhood to retrieve some items and saw that his elementary school had burned down and that whole blocks had been flattened.
Higher temperatures and less rain mean a longer fire season
California’s wildfire season is beginning earlier and ending later due to rising temperatures and decreased rainfall tied to climate change, according to recent data. Rains that usually end fire season are often delayed, meaning fires can burn through the winter months, according to the Western Fire Chiefs Association.
Dry winds, including the notorious Santa Anas, have contributed to warmer-than-average temperatures in Southern California, which has not seen more than 0.1 inches (2.5 millimeters) of rain since early May.
The winds increased to 80 mph (129 kph) Wednesday, according to reports received by the National Weather Service. Fire conditions could last through Friday — but wind speeds were expected to be lower on Thursday.
Landmarks get scorched and studios suspend production
President Joe Biden signed a federal emergency declaration after arriving at a Santa Monica fire station for a briefing with Gov. Gavin Newsom, who dispatched National Guard troops to help.
Several Hollywood studios suspended production, and Universal Studios closed its theme park between Pasadena and Pacific Palisades.
U.S. President Joe Biden stands with California Governor Gavin Newsom, as he visits a Santa Monica Fire Station to receive a briefing from Cal Fire officials on the Palisades wildfire, in Santa Monica, Los Angeles County, California, U.S., Jan. 8, 2025.
Kevin Lamarque | Reuters
As of Wednesday evening, more than 330,000 people were without power in southern California, according to the tracking website PowerOutage.us.
Several Southern California landmarks were heavily damaged, including the Reel Inn in Malibu, a seafood restaurant. Owner Teddy Leonard and her husband hope to rebuild.
“When you look at the grand scheme of things, as long as your family is well and everyone’s alive, you’re still winning, right?” she said.
Microsoft confirms performance-based job cuts across departments
Published Wed, Jan 8 20257:19 PM ESTUpdated Thu, Jan 9 20257:36 AM EST
Key Points
- Microsoft is cutting a small percentage of jobs across departments, based on performance.
- “When people are not performing, we take the appropriate action,” a Microsoft spokesperson said in an email, confirming the job cuts.
Microsoft is cutting a small percentage of jobs across departments, based on performance, the company confirmed to CNBC on Wednesday.
“At Microsoft we focus on high-performance talent,” a Microsoft spokesperson said in an email to CNBC on Wednesday. “We are always working on helping people learn and grow. When people are not performing, we take the appropriate action.”
Business Insider reported on the plans late Tuesday.
The job cuts will affect less than 1% of employees, said a person familiar with the matter who asked not to be named in order to discuss private information.
Microsoft had 228,000 employees at the end of June. While the company’s net income margin of nearly 38% is close to its highest since the early 2000s, Microsoft’s stock underperformed its peers last year, rising 12% while the Nasdaq gained 29%.
Microsoft’s latest cuts are slim compared with recent downsizing efforts.
In early 2023, the company laid off 10,000 employees and consolidated leases. In January 2024, three months after completing the $75.4 billion Activision Blizzard acquisition, Microsoft’s gaming unit shed 1,900 jobs to reduce overlap.
As 2025 begins, Microsoft faces a more tenuous relationship with artificial intelligence startup OpenAI, which the company has backed to the tune of more than $13 billion. The partnership helped propel Microsoft’s market cap past $3 trillion last year.
Over the summer, Microsoft added OpenAI to its list of competitors. Microsoft CEO Satya Nadella used the phrase “cooperation tension” while discussing the relationship with investors Brad Gerstner and Bill Gurley on a podcast released last month.
Meanwhile, the Microsoft 365 Copilot assistant, which draws on OpenAI technology, has yet to become pervasive in business. Analysts at UBS said in a note last month that they came away from Microsoft’s Ignite conference with the impression that Copilot rollouts “have been a bit slow/underwhelming.”
Microsoft is still touting its growth opportunities. Finance chief Amy Hood said in October that revenue growth from Microsoft’s Azure cloud will speed up in the first half of this year because of greater AI infrastructure capacity.
Fed officials are worried about the inflation impacts from Trump’s policies, minutes show
Published Wed, Jan 8 20252:00 PM ESTUpdated Wed, Jan 8 20253:36 PM EST
Jeff Cox@jeff.cox.7528@JeffCoxCNBCcom
Key Points
- Federal Reserve officials at their December meeting expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have on efforts to reduce it.
- The policymakers said they will move more slowly on interest rate cuts due to the uncertainty, minutes of the meeting showed Wednesday.
- The minutes included at least four mentions about the impact that changes in immigration and trade policy could have on the U.S. economy.
Fed near point of slowing its policy easing following December cut, minutes show
Federal Reserve officials at their December meeting expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have, indicating that they would be moving more slowly on interest rate cuts because of the uncertainty, minutes released Wednesday showed.
Without calling out Trump by name, the meeting summary featured at least four mentions about the effect that changes in immigration and trade policy could have on the U.S. economy.
Since Trump’s November election victory, he has signaled plans for aggressive, punitive tariffs on China, Mexico and Canada as well as the other U.S. trading partners. In addition, he intends to pursue more deregulation and mass deportations.
However, the extent of what Trump’s actions will be and specifically how they will be directed creates a band of ambiguity about what is ahead, which Federal Open Market Committee members said would require caution.
“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes said. “As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy.”
FOMC members voted to lower the central bank’s benchmark borrowing rate to a target range of 4.25%-4.5%.
However, they also reduced their outlook for expected cuts in 2025 to two from four in the previous estimate at September’s meeting, assuming quarter-point increments. The Fed cut a full point off the funds rate since September, and current market pricing is indicating just one or two more moves lower this year. Traders are assigning a nearly 100% chance that the FOMC will stand pat at its Jan. 28-29 meeting, according to the CME Group’s FedWatch gauge.
Minutes indicated that the pace of cuts ahead indeed is likely to be slower.
“In discussing the outlook for monetary policy, participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” the document said.
Moreover, members agreed that “the policy rate was now significantly closer to its neutral value than when the Committee commenced policy easing in September. In addition, many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters.“
Those conditions include inflation readings that remain above the Fed’s 2% annual target, a solid pace of consumer spending, a stable labor market and otherwise strong economic activity in which gross domestic product had been growing at an above-trend clip through 2024.
“A substantial majority of participants observed that, at the current juncture, with its policy stance still meaningfully restrictive, the Committee was well positioned to take time to assess the evolving outlook for economic activity and inflation, including the economy’s responses to the Committee’s earlier policy actions,” the minutes said.
The summary further noted that some members had begun to incorporate policy changes into their forecasts, though how many did so was unclear.
Officials stressed that future policy moves will be dependent on how the data unfolds and are not on a set schedule. The Fed’s preferred gauge showed core inflation running at a 2.4% rate in November, and 2.8% when including food and energy prices, compared with the prior year. The Fed targets inflation at 2%.
In documents handed out at the meeting, most officials indicated that while they see inflation gravitating down to 2%, they don’t forecast that happening until 2027 and expect that near-term risks are to the upside.
At his news conference following the Dec. 18 rate decision, Chair Jerome Powell likened the situation to “driving on a foggy night or walking into a dark room full of furniture. You just slow down.“
That statement reflected that mindset of meeting participants, many of whom “observed that the current high degree of uncertainty made it appropriate for the Committee to take a gradual approach as it moved toward a neutral policy stance,” the minutes said.
The “dot plot” of individual members’ expectations showed that they anticipate two more rate cuts in 2026 and possibly another one or two after, ultimately taking the long-run fed funds rate down to 3%.
Biden signs bill to increase Social Security benefits for millions of public workers
Published Sun, Jan 5 20254:43 PM ESTUpdated Mon, Jan 6 20257:44 AM EST
Key Points
- On Sunday, President Joe Biden signed the Social Security Fairness Act, paving the way for nearly 3 million public workers to boost their Social Security benefits.
- The bipartisan legislation repeals two provisions that reduced Social Security benefits for certain public workers who also receive pension income.
- Advocacy groups who lobbied for the changes for decades praised the change as a historic move.
President Joe Biden on Sunday signed the Social Security Fairness Act, bipartisan legislation that clears the way for teachers, firefighters, policeman and other public sector workers who also receive pension income to receive increases in their Social Security benefits.
The benefit boost comes as the new law repeals two provisions — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO — that have been in place for more than four decades.
The WEP reduces Social Security benefits for individuals who receive pension or disability benefits from employment where Social Security payroll taxes were not withheld. As of December 2023, that provision affected about 2 million Social Security beneficiaries.
The GPO reduces Social Security benefits for spouses, widows and widowers who also receive income from their own government pensions. In December 2023, the GPO affected almost 750,000 beneficiaries.
“By signing this bill, we’re extending Social Security benefits for millions of teachers, nurses and other public employees and their spouses and survivors,” Biden said Sunday. “That means an estimated average of $360 per month increase.”
That extra income is a “big deal” for middle-class households, he said.
More than 2.5 million Americans will receive a lump-sum payment of thousands of dollars to make up for the shortfall in benefits they should have received in 2024, Biden said.
The Social Security Fairness Act will affect Social Security benefits payable after December 2023. More details on how the benefit increase will be implemented are not yet available, according to the Social Security Administration.
“With the repeal of WEP and GPO, federal retirees, along with so many others, will finally receive the full Social Security benefits they’ve earned,” William Shackelford, president of the National Active and Retired Federal Employees Association, said in a statement.
The bill was passed by the Senate on Dec. 21 with a 76 bipartisan majority vote, including Sens. Sherrod Brown, D-Ohio, and Susan Collins, R-Maine, who co-led the legislation in that chamber. In November, the Social Security Fairness Act was passed by the House with a 327 bipartisan majority, led by Reps. Garret Graves, R-La., and Abigail Spanberger, D-Va.
Advocacy groups who lobbied for the changes praised Biden’s signing of the bill as a historic move.
“Our organization has spent decades lobbying for the repeal of the WEP and GPO,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement. “We endorsed the Social Security Fairness Act — and are gratified to finally see this legislation enacted and signed by the president.”
The provisions have reduced Social Security benefits for decades.
“This victory is more than 40 years in the making, and while we celebrate today, we also reflect on those who were impacted by these provisions but are no longer here to witness this change,” Shackelford said. “Their service and contributions are not lost on us, and we honor their legacy by continuing to advocate for fairness in retirement benefits for all public servants.”
Goldman’s favorite themes for the stock market in 2025 and how to play them
Published Fri, Jan 3 202510:01 AM EST
In this article
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- BURLUNCH
- UBER+0.40 (+0.61%)
Goldman Sachs is keeping some market themes in mind into the new year.
Stocks are coming off an unusually strong two-year period, with 2023 and 2024 both recording gains of more than 20% for the broad S&P 500 index. Now, investors are wondering if the bull market has further steam.
There’s a lot to consider with the potential for more interest rate cuts and a change of party control in Washington. The average target set by market strategists suggests the S&P 500 can rise nearly 13% in 2025, according to CNBC Pro’s survey available exclusively for subscribers.
In a note to clients, Steven Kron, director of Americas equity research, laid out the five trends his team will be keeping an eye on in 2025. He also offered stocks from the firm’s conviction list to play each:
Artificial intelligence
The promise of AI is one of the defining investing ideas yet again, Kron said.
“The markets arguably depend upon the AI theme sustaining through 2025 for stock indices to work,” he said.
However, he said the focus may shift from infrastructure to platforms and applications. Meanwhile, he said there should be a transition within enterprise technology spending to conventional software applications as AI takes up a little less oxygen in the business world.
Within the firm’s conviction list, he pointed to well-known stocks Nvidia and Snowflake, as well as the more under-the-radar Teradyne and Sempra, as ways to play this.
Deregulation and deals
Kron said companies appeared positive on the merger-and-acquisition landscape at Goldman’s financial services conference last month.
That’s due in part to expected changes in the regulatory environment once President-elect Donald Trump takes office later this month. Given this changing landscape, Kron pointed to Citigroup, Evercore, and Vulcan Materials, among others, on its conviction list as ways to get in on the shift.
Power
There are several subtrends within the power space that Goldman is following.
First, there’s the growing demand for power to fuel AI data centers. There’s also the expectation for continued strength in utilities’ capital expenditures given growth in electrification and manufacturing.
From Goldman’s conviction list, Kron pointed to Sempra as a way to get in on this idea.
Deglobalization
Kron pointed to Trump’s proposed tariffs as a reason to pull back on globalization. The Republican has called for 20% fees on all imports, with an extra-high tax of 60% on those coming from China.
He noted that investors will want to keep tabs on how disrupted supply chains become.
For those looking to play the deglobalization trend, Kron once again listed Vulcan, as well as Meritage Homes, as examples.
Consumer resiliency
While there’s always reason to believe something could break the U.S. consumer, Goldman remains confident that they’ll continue to spend.
Consumer spending has remained solid despite concerns about a potential recession and high inflation over recent years. Notably, consumers have shifted from splashing out on goods during the Covid-19 pandemic to services and experiences they missed out on as lockdowns were lifted.
In 2025, the firm expects consumer discretionary cash flow to rise to 5.2% from 4.4% seen in the prior year.
“The end of the US consumer is always just around the corner, but either we keep turning a different corner or we never reach that corner that the end is just around,” Kron said.
Kron has several ideas for this one, ranging from retailers to travel names to real estate stocks focused on shopping centers. Here are some related picks: Burlington Stores, Norwegian Cruise Line and Uber, among others.
HI Financial Services Mid-Week 06-24-2014