The Pulse on the Economy and Capital Markets: February 2025

To Summarize: The markets are sending mixed signals as global stocks are outperforming and U.S. small caps struggle. The Federal Reserve’s interest rate cut expectations are fading as inflation remains persistent. While corporate margins are improving and supporting earnings growth, consumers are becoming more cautious with discretionary spending. We unpack this and more in the February edition of The Pulse.

In the Markets: Stock and bond markets show a mixed picture for the year as expectations fade that the Federal Reserve will cut interest rates more than once. International markets have posted gains, signaling a potential shift in investor preference. S&P 500 margins have rebounded above 21%, a sign of resilience that companies are managing costs and staying profitable.

The Tariff Affect: International stocks, especially developed markets, have outperformed the S&P 500 and Nasdaq by nearly 7 percentage points. Could this be an early sign of a shift in market leadership? While tariffs and trade tensions could be a factor, this trend also reflects expectations of rising growth rates and lower valuations abroad.

Complex Consumers: While spending has leveled out from seasonal peaks, overall activity remains steady with key strengths in areas, such as food, retail, and gas. However, an increasing concern is the weakened demand for consumer spending at both full-service and limited-service restaurants. This could signal consumers growing more cautious when it comes to how they allocate their discretionary spending.

Top Headlines: We’re reading about Warren Buffet’s lessons on investing in his annual letter to Berkshire Hathaway shareholders, what history tells us about tariff strategies, the impact on jobs due to the government employee reductions, and Palantir CEO discusses his new book with legendary investor Stanley Druckenmiller.

Related resources:

• Warren Buffet Offers Lessons on Investing in His Annual Berkshire Hathaway Letter
• The Good, The Bad and the Ugly: What History Tells Us About Tariff Strategies
• Potential Impact on Jobs from Government Employee Reductions
• Palantir CEO, Alex Karp, Discusses His Book with Legendary Investor Stanley Druckenmiller

Disclosure: 

Investment advisory services are offered by Aprio Wealth Management, LLC, a Securities and Exchange Commission Registered Investment Advisor. Opinions expressed are as of the publication date and subject to change without notice. Aprio Wealth Management, LLC shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions contained herein or their use, which do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. This commentary is for informational purposes only and has not been tailored to suit any individual. References to specific securities or investment options should not be considered an offer to purchase or sell that specific investment.  

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