Market Snapshot
By the Numbers
- The S&P 500 gained 2.7% in January, the Nasdaq 1.6%, and the Dow Jones Industrial Average 4.7%.
- The 10-year Treasury yield ended the month at 4.5% but reached as high as 4.8% mid-month.
- The Federal Reserve held its key policy rate at 4.25 to 4.50% following three consecutive rate cuts.
- U.S. GDP grew 2.3% in Q4, or 2.8% across 2024.
- Inflation remained stubborn with the Consumer Price Index rising 2.9% year-over-year and the Personal Consumption Expenditures Index climbing 2.6%.
AI, Tariffs, and the Fed Pause
January marked a positive but volatile start to the year for investors amid market shifts and policy concerns. President Trump returned to the White House and signed dozens of executive orders, the Chinese artificial intelligence company DeepSeek shook the tech industry, and the Fed hit pause on rate cuts. Looking forward, investors are focused on the latest round of tariffs and the impact on the global economy and inflation.
Information Technology stocks were impacted by recent AI news
In January, financial markets were driven by technological disruption and policy transitions. A reported AI breakthrough by the Chinese company DeepSeek led to declines in some technology stocks, notably Nvidia. DeepSeek has purportedly built cutting-edge models that require 95-97% fewer resources to train than those created by OpenAI and other leading companies. While this is still being validated the possibility that the industry requires far fewer computing resources and energy has rippled across financial markets.
New tariffs impact our closest trading partners
Tariffs, both initiated and retaliatory, have created uncertainty around global trade relationships, inflation, and economic growth.
On the last day of January the Trump administration partially implemented new tariffs, including a 10% tariff on China and threatened, but deferred for 30 days, 25% tariffs on Mexico and Canada.
The stated purpose of these tariffs is to generate additional government revenue, to negotiate on border security, and to protect domestic industries. It’s important to keep in mind that markets also feared escalating trade wars from 2017 to 2019. Despite many uncertainties, markets generally performed well over that period and businesses adapted by diversifying their supply chains. Ultimately, tariffs were a means of negotiating new trade deals such as the United States-Mexico-Canada Agreement (USMCA) and the Phase 1 trade deal with China.
Despite the market’s immediate reaction, this will take time to play out.
The Fed
The Federal Reserve decided to keep rates steady at 4.25 to 4.50% at its January meeting. This represents a pause in rate cuts after it lowered rates at the previous three meetings. Current market-based measures suggest that the Fed may cut rates only twice in 2025, although these expectations can change quickly.
The Fed made this decision because the economy is growing steadily, the job market is strong, and inflation remains stubborn. Recent data shows that inflation accelerated slightly on a year-over-year basis due to factors such as energy costs. Long-term interest rates have remained elevated as well, which suggests that investors also believe that monetary policy will need to remain restrictive for an extended period to ensure price stability.
This chart shows the Federal Open Market Committee (FOMC) participant’s assessment of the appropriate path for the Federal Funds Rate. Each dot represents a member of the FOMC and their assessment of appropriate Federal Funds Rate at each time period. The solid line shows the median projection.
© 2025 Clearnomics, Inc.
Staying disciplined will only grow in importance with investor attention focused on the implementation of new administration policies, Federal Reserve decisions, and ongoing technological developments. With these factors continuing to influence markets, those who can maintain a broader perspective should be better positioned to achieve their financial goals.
The views expressed represent the opinions of Tiller Private Wealth as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website www.adviserinfo.sec.gov. Past performance is not a guarantee of future results.
The market indices discussed are unmanaged. Investors cannot directly invest in unmanaged indices.
The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The market index is unmanaged.
The NASDAQ Composite Index is an unmanaged, market-weighted index of all over the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
Data sources: Clearnomics, YCharts, The Wall Street Journal, Treasury Department, & US Federal Reserve.