Monthly Market Update

Growth Slowing, Inflation Not So Much

• Gross Domestic Product ⁽¹⁾⁽²⁾ (4Q24): The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2024 is 2.4% on January 3, 2025, down from 2.6% on January 2. For 3Q24, GDP growth was 3.1%.
• Inflation ⁽⁴⁾ (November): The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% on a seasonally adjusted basis in November, after rising 0.2% in each of the previous four months, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index increased 2.7% before seasonal adjustment. The index for all-items less food and energy rose 0.3% in November, as it did in each of the previous three months. The all-items less food and energy index rose 3.3% over the last twelve months.
• The Producer Price Index (PPI) (November): The Producer Price Index for final demand rose 0.4% in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. On an unadjusted basis, the index for final demand advanced 3.0% for the twelve months ended in November, the largest rise since moving up 4.7% for the twelve months ended February 2023.
• Retail and Food Services Sales ⁽⁶⁾ (November): Advance estimates of U.S. retail and food services sales for November 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $724.6 billion, an increase of 0.7% (±0.5%) from the previous month, and up 3.8% (±0.5%) from November 2023.
• Personal Income and PCE ⁽⁹⁾ (November): Personal income increased $71.1 billion (0.3% at a monthly rate) in November, according to estimates released today by the U.S. Bureau of Economic Analysis. From the preceding month, the PCE price index for November increased 0.1%.  Excluding food and energy, the PCE price index increased 0.1%. From the same month one year ago, the PCE price index for November increased 2.4%. Food prices increased 1.4% and energy prices decreased 4.0 %. Excluding food and energy, the PCE price index increased 2.8 % from one year ago.

Fed Cut in December, Now on Hold

The last FOMC meeting took place on December 18^th, 2024. The Committee decided to cut federal funds to the target range of 4.25% to 4.50%. As of this writing, markets are pricing an 89% chance of a hold 25-bps cut at the January 29^th, 2025, with only an 11% chance of lowering rates by another -25 bps. ⁽⁷⁾⁽⁸⁾

Highlights of Press Conference:

• High Prices, Falling Inflation: “We understand very well that prices went up by a great deal, and people really feel that. And it’s prices of food and transportation and heating your home and things like that. So there’s tremendous pain in, in that burst of inflation that was very global. This was everywhere in all the advanced economies at the same time. So now we have—inflation itself is way down, but people are still feeling high prices, and that is—that is really what people are feeling”.
• Uncertain Path for Future Cuts: “We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook, and the balance of risks”.
• Guided by the Data: “In the labor market, conditions remain solid. Payroll job gains have slowed from earlier in the year, averaging 173,000 per month over the past three months. The unemployment rate is higher than it was a year ago, but, at 4.2 % in November, it has remained low. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market are now less tight than in 2019.”

Monthly and YTD returns

Source: Morningstar asset class screening total return 1 month USD and total return YTD as of January 2nd, 2025¹⁰

This content is being published by Amerant Investments, Inc (Amerant Investments) a dually registered broker-dealer and investment adviser registered with the Securities and Exchange Commission and member of FINRA/SIPC. Registration does not imply a certain level of skill, endorsement, or approval. Amerant Investments is an affiliate of Amerant Bank

Definitions:

• ⁽¹⁾ Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
• ⁽²⁾ GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
• ⁽³⁾ The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earningsof workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
• Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
• ⁽⁴⁾ The Consumer Price Index (CPI):Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
• ⁽⁵⁾ The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a %age of the labor force. Source: Bureau of Labor Statistics (BLS).
• The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. Source: Bureau of Labor Statistics (BLS).
• ⁽⁶⁾ Advance Monthly Sales for Retail and Food Services:Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
• ⁽⁷⁾ Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
• ⁽⁸⁾ The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
• ⁽⁹⁾ The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO).

⁽¹⁰⁾ Financial Markets – Monthly and YTD returns (Table): Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (JPM EMBI Global), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond), and Developed Markets Sovereign (excl. US) (JPM GBI Global Ex US). Source: Morningstar.

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