The Factor Report

Market Wrap

For the week ended January 10, 2025, stocks finished lower again. It was a week of "good news is bad news" as investors continued to reconsider the extent of any interest rate cuts by the Federal Reserve. On Tuesday, a report showed that the US service sector expanded more rapidly than expected and that sent buyers to the exits. Wednesday started out calmly until President-elect Trump doubled down on his tariff commitments, which sent shares lower, but indexes ultimately recovered late in the session. After a day of mourning for former President Carter, all eyes were on Friday's jobs report. The hope was for a "Goldilocks" scenario where jobs were strong enough for a solid economy, but weak enough to keep rate cuts coming. Hopes were dashed. The US added about 100,000 more jobs than expected in December, unemployment fell to 4.1% and wage growth ticked up to 3.9%. All good, right? In the long run, yes. But in the near term, these numbers, combined with potential tariffs, are viewed as inflationary and a speed bump to any further action by the Federal Reserve - the bet is now for one rate cut in 2025, compared to the original three that were expected. Bonds headed sharply lower on all of the data, sending the 10-year US treasury higher to 4.77%.

Performance Summary

As shown in the chart, the US was this week's loser, followed by Emerging Markets. Non-US Developed held up relatively well despite tariff fears. Within the US, it was the Tech-heavy Nasdaq that dragged the broader S&P 500 lower, although the more traditional stocks of the Dow Jones Industrial Average didn't fare much better. From a factor perspective, Value, Size, and Quality outperformed the global All Country World Index (ACWI).

In The News

Why the Federal Reserve may be done with rate cuts for now.

https://finance.yahoo.com/news/feds-bowman-said-december-rate-cut-was-last-step-in-policy-recalibration-194158775.html

Buyer beware with some of the bigger firms - Edward Jones to pay $17 million over commission-based products.

https://www.thinkadvisor.com/2025/01/08/edward-jones-to-pay-17m-over-front-load-commissions/?kw=Edward%20Jones%20to%20Pay%20%2417M%20Over%20Front-Load%20Commissions&utm_source=email&utm_medium=enl&utm_campaign=newsroomupdate&utm_content=20250108&utm_term=ta&oly_enc_id=6911H2583589A7Z&user_id=3d158419d93f4751d4b3b79dd78d9abf446b89b61e92e7567cb4126b86cb53c5

How the Social Security Fairness Act affects claiming strategies.

https://www.thinkadvisor.com/2025/01/08/how-the-social-security-fairness-act-affects-claiming-strategies/?kw=How%20the%20Social%20Security%20Fairness%20Act%20Affects%20Claiming%20Strategies&utm_position=1&utm_source=email&utm_medium=enl&utm_campaign=dailywire&utm_content=20250108&utm_term=tadv&oly_enc_id=6911H2583589A7Z&user_id=3d158419d93f4751d4b3b79dd78d9abf446b89b61e92e7567cb4126b86cb53c5

Disclosures

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s). Moreover, you should not assume that any of the above content serves as the receipt of, or as a substitute for, personalized investment advice from Metric Financial.

All data and performance information sourced from Morningstar and MarketWatch, unless otherwise indicated.

USA is the MSCI USA index, Non-US Developed is the MSCI EAFE index, Emerging Markets is the MSCI Emerging Markets index, and All Country World is the MSCI ACWI index. One cannot invest in an index. Because the factor indexes have varying inception dates, some of the returns provided are back-tested and do not represent actual performance. Inception dates are as follows:

Momentum = MSCI ACWI Momentum NR USD Index (Inception: 11/30/95)

Value = MSCI ACWI Enhanced Value NR USD Index (Inception: 5/29/15)

Quality = MSCI ACWI Quality NR USD Index (Inception: 5/29/92)

Low Volatility = MSCI ACWI Minimum Volatility (USD) NR USD Index (Inception: 5/28/93)

Size = MSCI ACWI Risk Weighted NR USD Index (Inception: 4/6/11)

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