Key Events: New highs amidst a flurry of news flow
The S&P 500, the Mid-Cap 400 and the Russell 2000 all closed at new highs last Friday as the rotation away from large cap technology stocks to value and smaller cap equities continues.
The market showed progress even with significant international news flow related to Venezuela and Greenland, a torrent of new policy proposals and mixed economic data releases. For now, the January effect appears to be alive and well.
Market Review: Payrolls weaker, but jobless rate better
Economic data was decidedly mixed for the week. Job growth was below expectations with only 50k new jobs reported and two-month revisions were negative 76k, yet the unemployment rate declined to 4.4% from 4.6%.
Equities advanced strongly with small and mid-caps leading the charge, up 4.7% and 3.3%, respectively. Bonds participated as yields fell modestly.
Outlook: Healthy earnings projections for 2026
President Trump made a series of policy pronouncements during the past week. First, he proposed a ban on home purchases by institutional investors and followed up with a statement that Fannie Mae and Freddie Mac would buy $200 billion in mortgage bonds, part of his effort to address affordable housing1. He then announced a desire to restrict defense companies’ flexibility with dividends and buybacks and made a call to increase the defense budget up to $1.5 trillion (an increase of more than 50%).2
At the beginning of 2025, there were bold tariff pronouncements that seemed far more consequential than they turned out to be. Earnings projections for the S&P 500 advanced throughout the second half of 2025 despite tariff fears as shown in chart below. Perhaps the market has started to ignore the noise and focus more on current fundamentals.
In 4Q 2025 earnings expectations showed their strongest quarterly advance since the pandemic recovery period. The fourth quarter increase in forward earnings was even stronger for the Russell 2000 (up 10.7% vs 5.7% for the S&P 500).3 That has provided solid fundamental support for the current rotation in the market, and it underscores the importance of remaining diversified. We have expected the market to broaden away from large cap growth into other areas across the capitalization spectrum and we believe that the trend should continue.
S&P 500 Earnings Growth Expectations Now Exceed 15%4
OneAscent Navigator Outlook: January 2025
This material is intended to be educational in nature , and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.[6]
[1] Source: Multiple and various press reports cited across Bloomberg and other electronic media.
[2] Source: Multiple and various press reports cited across Bloomberg and other electronic media.
[3] Source: Bloomberg data.
[4] Source: Bloomberg.
[5] Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggregate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
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