CWS Market Review – February 25, 2025

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Wall Street has had a case of the jitters recently, and I can’t blame it. On Tuesday, the S&P 500 fell for the fourth day in a row. The index has dipped below 6,000, and it’s fallen beneath its 50-day moving average.

Of course, we should put this in context. Yes, the market is down, but that’s measuring from its all-time high from last Wednesday. Also, markets are naturally very volatile. The stock market pulls back all the time, even in roaring bull markets. There’s nothing unusual about this latest move. The combined loss is a little over 3%.

Still, there are some areas of concern. The economy could be getting weaker. The last retail-sales report was a dud. The jobs report was less than expected. Also, the inflation report came in hot. I noticed that the wage gains for January were the exact same as the inflation figure for January. In other words, every penny in raises was eaten up by higher prices.

Consumer Confidence Plunges

We got more bad news today in the Consumer Confidence report. The Conference Board said that the consumer confidence index fell to 98.3 for February. That’s down seven points from January, and it came in below Wall Street’s estimate for 102.3. If shoppers aren’t happy, then the economy will not do well.

This was the biggest drop in consumer confidence in more than three years, and it was the lowest reading since last June. Inflation expectations increased to 6%. That’s three times the Fed’s target. This comes at the same time that tariffs appear ready to go into effect. We really have no idea yet what the impact could be. The CEO of Alcoa said that it could cost 100,000 jobs in the aluminum industry.

“Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income,” said Stephanie Guichard, the board’s senior economist for global indicators. “Pessimism about future employment prospects worsened and reached a ten-month high.”

There’s another consumer confidence report put out by the University of Michigan. Last week, it reported a larger-than-expected drop of nearly 10%.

We’re currently in a fairly quiet period for economic reports. The new-home sales report is out tomorrow. Later this week, the government will revise the Q4 GDP numbers. While that’s an important report, Q4 is already a bit dated for our purposes. Markets move quickly but econ reports move slowly. A lot of guessing is done in the middle.

One interesting aspect of the market’s recent downturn is that it’s been heavily tilted toward riskier stocks. I like to track the S&P 500 High Beta Index which is a group of high-volatility stocks within the S&P 500. Over the past week, the S&P 500 has lost 2.8%, but the S&P 500 High Beta Index has lost 7.6% while the S&P 500 Low Volatility Index has gained 2.2%.

That’s a big spread for just a few days. It’s further evidence that investors are shying away from risk and that they’re looking for safe havens. I’ll also note that our ETF has been performing well versus the rest of the market in recent days.

In no sense are riskier stocks better or worse than conservative stocks. Instead, there’s a cycle to both and it reflects investor outlook. Sometimes investors become more willing to shoulder risk, and in other times, they seek shelter from the storm. Riskier assets had been doing well, but they got some pushback this week.

It’s not just stocks; we can see the same effect playing out in other markets. For example, bitcoin got dinged hard yesterday and today.

At the end of next week, March 7 to be exact, we’ll get the jobs report for February and that will tell us more about the economy’s recent behavior. The expectation that there will be fewer jobs six months from now rose to its highest level in over a decade.

The simple story is that Wall Street is bracing for bad news, but we don’t know if the upcoming news will be bad just yet. The market prefers to move before the news is certain. For now, Wall Street is adjusting itself to the possibility of bad news.

Buffett Has $330 Billion in Cash

Over the weekend, Warren Buffett released his annual shareholder letter. These are always fun to read. The 94-year-old CEO has a great ability to make complicated topics easy to understand.

What’s caught people’s attention is that Buffett’s cash holding has soared to more than $330 billion. A lot of commenters think that the large cash position reflects a bearish outlook from Buffett.

He was quick to allay those fears. Buffett wrote, “Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance.”

For the ninth quarter in a row, Buffett has been a net seller of stocks. Last year, Buffett sold $134 billion worth of stock. Still, Buffett has not been buying back his own stock. Perhaps he simply doesn’t see any compelling buys right now.

By the way, if you like Wall Street history, then today is your day. Several important moments have come on February 25:

The first Bank of the United States was chartered on February 25, 1791. Twenty years later, Congress decided by one vote not to renew the charter.

The first cabinet meeting was held on February 25, 1793.

On February 25, 1817, the New York Stock and Exchange Board was organized. (Sorry, but the Buttonwood stuff wasn’t that important.)

On February 25, 1862, The U.S. formed the Bureau of Engraving & Printing.

On February 25, 1863, Congress created the National Currency Bureau.

On February 25, 1893, the Philadelphia & Reading Railroad bankruptcy launched a Panic.

On February 25, 1901: JP Morgan created the first billion-dollar company, US Steel.

On February 25, 1913: The 16th Amendment authorized the first federal income tax.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on February 25th, 2025 at 6:35 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.