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I am breaking down all of the top 10 economic indicators in a big picture look, while also continually looking at all 10 throughout the remainder of the year.

I have many explainer videos on each of these areas coming out shortly and hope to have 1 per week over the course of the first part of this year.

Hold on tight: It’s gonna be a fast ride.

• 00:00 - Intro to How Economic Indicators affect the stock market

• 04:12 - My Content with economic indicators and Stock Market Analysis

• 06:01 - The Federal Reserve Predicts an Economic Decline

• 07:20 - Interest Rates

• 11:02 - M2 Money Supply And the Stock Market

• 12:53 - Inflation With CPI & PCE Price index

• 14:01 - Personal Incomes & Personal Consumption

• 17:27 - Savings Rate 19:56 - Unemployment

• 23:28 - University of Michigan Consumer Sentiment Index

• 24:38 - Real Estate

• 28:02 - SPY ETF

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Bonds are likely to be the best investment in 2025. The economy will turn downward—stocks will follow. From there, the eventuality is that interest rates will go back down during any recovery phase and re-ramping up of the economy. During that period, starting about right now, bond prices will continually increase in value giving investors capital gains. Then, there are the interest dividends an investor would receive for holding bonds.

It used to be that bonds were the best investment across the board. However, over many years, if not decades, two things occurred:

• Hyper-rapid economic growth translated into huge gains in stock investing; and,

• Ultra-low yields in bonds underperformed stocks.

Things are changing now, and investors will likely be left behind if they do not add bonds into their portfolios.

Key points behind the paywall:

• Why Bonds Will Be The Best Investment in 2025

• Biggest Considerations For Bond Investing

• Corporate versus Government and Individual versus Bond Funds

• Where I am putting my funds… for now!

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Walmart started the year off with earnings that beat expectations. However, the trail giant is guiding for lower-than-anticipated revenue and profits through 2025. From this, the broad stock market took a hit. This is a wake-up call. Interest rates will remain higher, especially since the latest CPI data pushed above the 3.00% level. This will tie the hands of the Federal Reserve, who would rather see interest rates move lower. Next, the consumer has to deal with tariffs, which are going to drive prices higher, which, again, will keep the Fed’s hands tied. The combination means lower revenue growth for discretionary expenditures.

While discretionary stocks are modestly lower today, it is the retail sector, more specifically, that is likely to see an outsized move lower from these economic constraints.

In this video, I outline my plan of attack on XRT ETF.

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The stock market is readying for a drop of some 35% in house prices with valuations for big landlords. Certain stocks are undervalued relative to what they could get for their holdings at this point.

At the same time, outside of book value for these stocks, the earnings potential for some of these stocks state they are overpriced by some 100%.

What looks set is that savvy traders have already sold off certain holdings for valuations in front of potential stagflation, and the remedy for that.

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The core CPI indicator just printed a hot 0.570% month-over-month increase for January. The annual core CPI rate crossed into 3.286% on a year-over-year basis. Interest rates spiked upward on the news, and stocks fell—albeit, they are fighting back.

I have been saying since the fall of 2023, that the economy was too robust for the Federal Reserve to lower interest rates in 2024. Simultaneously, with the 2024 presidential election, the Fed had zero business moving interest rates. They did anyway. Today’s print above the 3.000% level reiterates that the Fed missed by lowering rates too early: there will be a price to pay for this.

At the same time, we now have an enormous balancing act to contend with regarding tariffs & tax cuts. This will take a steady hand to reign in price increases while balancing economic output and employment.

For now, my TLT ETF strategy has paid off once again by going long TBT ETF ahead of the CPI data, then buying TLT with the profits.

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There have been freezes in federal funding for many programs. This is disruptive and one of the main outcomes from this will be spikes higher in unemployment. The economic data that will show these unemployment spikes will be initial claims, the Department of Labor’s weekly employment release. While the unemployment number is low for now, the disruptions to Federal programs will be widespread and unemployment will spike.

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Jobs data came in with 143K new jobs created in the past month. But, the previous two months saw upward revisions totaling 100K. At the same time, the unemployment rate has been slipping lower.

The combination of this has sent interest rates higher, and the stock market has slipped downward. With CPI data due on this coming Wednesday, and if the data continues to show increasing upward prices, look for further selling in the stock market as bond rates climb right back upwards again.

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Over the past few years—since the financial crisis in 2008, the percentage of OPEC & Saudi oil being consumed within the United States has increasingly declined.

The winner? Cheap Canadian Oil.

The Fix? Artificially raise the price of Canadian Oil thereby making Saudi oil more competitive within the United States.

They payoff? Jared Kushner, Trump’s son-in-law, has already received $3B of Saudi & OPEC oil with a direct private equity investment, and there is likely a bigger payoff later. Effectively, Trump has found a way to earn money via artificially increasing the price of Canadian oil and is using border security, trade deficits, and drug imports to justify tariffs.

So, these are the parameters over the following four years, that cheaper Canadian oil is going to have its price pushed higher. Ultimately, all oil prices will drift higher.

Here, I break down two ETFs to trade as both UUP ETF, the US dollar index ETF, and USO ETF, the oil ETF, will both move higher.

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Why Canada? Ask yourself that question a million times and it does not make sense on the surface. Trade deficit? Canada is #6 on the list—Vietnam is higher. Vietnam! Is it border security? There are no walls and there are towns that straddle the border that you can merely walk into Canada without a checkpoint. Is it fentanyl? Less than 1% comes from the north. Still, that is not zero, and even further, it is not worthy of a 25% tariff on goods.

Why Canada? Keep asking that question. You may be mesmerized by all of the backlash, and the insanity of what is going on, and that is exactly the state they want you in so you overlook the real reason. And it is dirty. And, Canada will pay the price along with US consumers. While this is occurring, the Trump’s will be enriching themselves to the tune of billions alone the way.

Why Canada? Cheap Canadian oil and its dominance of imports, with Mexico being a distant second, but well above the real profit potential: Saudi Arabian oil via Jared Kushner.

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One of the campaign promises we would expect on “Day 1” was across the board tariffs on trade partners. The market actually prepared for that and softened on the expectations of how the tariffs would affect trade & the US economy. We did not get tariffs. Instead, President Trump singed an executive order to various departments of the government to look into unfair trade practices.

This tells me that we will not be seeing across-the-board tariffs, but may see a far muted tariff scheme. The potential ‘damage’ to economic growth with, therefore, be far muted.

What is next?

Mostly, we circle back to the current economic outlook and start to analyze economic growth along with jobs & price pressures.

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There are three key moments coming next week:

• Money Supply Released on Tuesday;

• Federal Reserve meeting on Tuesday & Wednesday with announcements on Wednesday; and,

• Personal Incomes, Expenditures, & PCE Index on Friday.

The entire market will be glued to Wednesday’s release with not much concern about the other two. That’s too bad for them, but if you want to stay ahead of the curve, this is where the separation begins.

The chart above is the rate of growth in inflation from PCE. We already got inflation growth rates out of CPI last week, and mostly these numbers were soft. For now.

But, it isn’t so much the inflation data we already know is not going to show up immediately. There is a small amount of ‘fear’ in the stock market. Leading up to the Federal Reserve meeting, that fear may seem unfounded and because of that, this will shift the markets.

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Inflation data hit on Wednesday. The numbers were mostly flat for the month, but on an annualized basis, inflation is heating up still. As I have said countless times, the economy is robust with solid job growth and low unemployment. Notwithstanding the Federal Reserve reducing its balance sheet in an effort to remove extreme policy accommodation in reaction to COVID and the subsequent shutdowns worldwide, commercial banks are lending out at a rate that is creating money within the system that is systematically outpacing what the Fed is removing. Keep in mind: The framework of our economy is fractional banking. Eventually, this will push inflation upward.

But, we also have another variable that needs to be brought into the equation: Trump with tariffs & tax cuts.

Given where the economy is currently, and the potential effects of Trump’s policies, I am buying the dips on TMF ETF—a 2x ETF, then dropping more and more into my TLT position. I will continue to do so over the course of the next couple of years. There are risks to this trade: Namely, too much debt will keep long term rates elevated. However, even that has a bit of containment.

Long term, I expect to make profits, of course. But, from this point forward, I am playing a long game… a very, very long game.

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What will happen with the stock market though 2025 and what is my stock market strategy for 2025? We have witnessed the stock market moving through an incredible bull market since 2022. This bull market is entering its 3rd year. And, if history repeats itself, according to MarketWatch, there will be a 5% decline in the current bull market, while also a potential bear market—a drop of 20%, or more. Not good news.

However, the above uses basic math and states if-then assumptions. The working assumption on this is that since we are entering the 3rd year, that alone, means there will be decline. And, although history tends to repeat itself, the truth is that this economy is showing signs of exhaustion–we likely will get that move lower in the stock market.

Simultaneously, the Federal Reserve is likely to put an end to this run. But, there is also an additional factor that any analysis needs to factor into the equation: A new Trump presidency.

Let’s look at where we are, then see where we could be by the end of 2025:

• The M2 money supply continues to grow sharply suggesting there will be future growth coming from business and consumer consumption;

• Employment remains firm and likely to continue so as long as there are no new catalysts for change; and,

• Inflation is starting to move back upward.

The above three factors are what to watch during 2025. This is my stock market strategy for 2025.

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The New York Branch of the Federal Reserve prints a Probability of A Recession every month. This is derived from the difference between the 10-year US Treasury Yield versus the 3-Month yield. The 3 month shows us what is happening in the present. The 10 year yield is more o a prediction based upon longer-term factors. When the 3-month yield pushes up based upon inflationary issues, relative to the 10 year yield, this could signal a potential of a recession ahead in the US economy. If you look at the chart above, the probability has exceeded 71% of a recession ahead based upon this signal.

I have stated repeatedly that the economy is quit robust and that the Federal Reserve should not be, at this point in its cycle, lowering interest rates. Today, the Federal Reserve lowered interest rates again, down an additional 25 basis points, off a full 100 basis points from its previous highs, down to 4.25% - 4.50%. I believe this is premature and the Fed will regret this.

But, there is an X-factor ahead: Trump tariffs. The potential of the Trump tariffs would remove money out of the system. This would stymie inflationary pressures as consumers would have to pay a higher price for goods they purchase coming from abroad. This will lower overall growth. Although the Trump tariffs would raise cash for the US government, consumers paying more for goods purchased would eventually bring aggregate demand down. Revenue growth for businesses would wane, and job losses would increase. This will alleviate any future inflationary pressures. The economy would eventually move into a recession.

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Inflation data was released during the Thanksgiving week. Both the Headline PCE inflation rate and the Core PCE rate increased on an annualized basis–headline inflation was 2.310% up from 2.096% whereas the core rate, the more closely-watched rate moved upward to 2.796% from 2. 678%. The Federal Reserve had been banking on inflation growth easing downward to the 2.00% target rate. The latest increase in the core rate may be halting to the Fed’s next few meetings as they wait and see what happens next with inflation.

This is a bigger look at Core inflation and its rate of growth on an annualized basis. Inflation had surged significantly higher from the break in the supply chain due to COVID. Then, companies raised prices and effectively kept them there as record profits on Wall Street attest. The move higher in the core rate is subtle, but it may be enough to push the Fed to pause for a period of time until more certainty is gained.

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The above chart is the M2 Money Supply—the total aggregate money in the US financial system. There is an obvious point starting in March of 2020 when the Federal Reserve began to increase the money supply in response to the COVID-19 Pandemic. Since then, the Fed has shifted to a stance of downsize the money supply in order to contain inflation. The money supply now is on a more trend-line basis of its longterm trajectory.

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In January, 2017, the S&P 500 was at 2,275. When Trump left office in January, 2021, the S&P 500 was at 3,839: A difference of 1,564 for a 68.7% increase. Since then, the S&P 500 has climbed to its most recent highs of 6,015—at the time of this writing. This is a difference of 2,176 for an increase of 56.6% increase. Both of these numbers are extraordinary.

While the S&P 500 is a fairly solid report card on the overall health of the US economy, there are also other measures that should be considered. The pandemic, of course, transitioned the US economy. Employment is far greater now with the Biden administration than at any period of time during the first Trump administration. But, prices had catapulted upward owed to both breaks in the supply chain as well as companies having basically gouged consumers to the gills simply because they could—just look at the continual record profits companies have produced, which of course is the driving factor in the stock market’s all-time record highs.

The big mover for the stock market was two-fold with the lack of turbulence from the election as well as the continued tax breaks for businesses.

For now, inflation has been tackled and mostly tamed by the Federal Reserve—the driver of the money supply and the costs of money. Unemployment is off of its record lows, but still very low at ~4.1%.

There is a lot of noise going about with the possibilities of Trump’s future tariffs, and what that would mean for the economy. To be sure, if Trump does enact his sweeping tariffs, the American consumer will pay the price. In fact, in a study by CNBC on the previous tariffs, Steve Liesman found that the Trump tariffs acted like the biggest tax hike on US consumers in decades.

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Last week, economic data came in for employment. Non-farm payrolls printed a softer-than-expected number. Revisions were the big stand out for the print this month, however, with the previous months’ data being revised downward. This actually made this month’s number look more impressive than thought.

So, what does a softer-than-expected non-farm payrolls for the overall economy and the stock market? As it turns out, the real driver of economic growth, personal incomes, moved higher for the month. This says that although new jobs are not necessarily being created at a fast pace, there is still resiliency in the economy. If the income growth trend continues, this will eventually support the overall economy, resulting in a miss on the stock market’s fears that we could see a recession in the future.

In the meantime, however, jobs data is lagging. The next few months of prints could send shudders through the stock market. This could be a solid buying opportunity.

Employment: The Big Picture

There is no real growth in employment, as the above chart shows. The Civilian Labor Force is trending higher and higher as more and more individuals are considered actively involved in the labor force. But, there has not been any meaningful moves higher in those employed. Looking at non-farm payrolls, this is corroborated with a continued move sideways to the lower side of gains with non-farm payrolls.

Those not employed are considered unemployed. The math on this is that if those considered within the civilian labor force are not employed, on a percentage basis, they show up as unemployed, and that is why we continue to see this trend moving higher:

While the unemployment rate has moved somewhat higher over the past 4-6 months, the move upward has started from a near-record low. Unemployment is only printing 4.2% for the month of August. This is historically strong with regard to employment–the economy is a long way away from being in a downward spiral.

Personal Income Versus Personal Expenditures

For me, the main driver of the demand curve is personal incomes. Government expenditures can certainly play a part in expanding and contracting economic growth. But, government expenditures tends to be fairly consistent and growth rates relatively flat simply because of the entire bureaucratic process to make changes. At the same time, businesses also contribute to economic growth, but decisions to expand or contract enterprises is in direct response to supply and demand from consumers.

Therefore, keeping a sharp eye peeled toward the year-over-year growth rate of personal incomes would show what these consumers will do within the economy. The two overall drivers of personal incomes on a year-over-year basis is both the total number of employed within an economy as well as the income earned by those within the economy. And, the correlation between income growth, increasing or decreasing, is strong with expenditures as can be seen in the chart above.

Personal incomes and personal expenditures both increased for the month and are maintaining a relative upward bias at this point. This is important because if the Federal Reserve were to begin to lower interest rates, this will affect expenditures by freeing up finite income that would have gone toward interest income to being able to spend funds on other expenditures.

The upward move came as a bit of a surprise and this may help drive further economic growth in the near-term. Couple that with lower interest rates, and the Federal Reserve may have pulled off an easy landing.

The Market Reaction

The stock market was worried on Friday, but I believe that will be short lived. This week, inflation data will print with both CPI and PPI. Neither of these will likely be worrisome but, more than likely, reiterate that the Federal Reserve will probably lower interest rates. The only question will be by how much: 25 basis points or 50 basis points.

Bond yields are trending lower, and this is a result of the continued economic data showing that there is room for easing policy constraints by the Federal Reserve. But, I do not believe this will be a massive move quickly by the Federal Reserve, and therefore I also do not believe that interest rates are going to race back downward. The other variable in all of this, the warning flag, if you will, is mortgage rates. If the Federal Reserve were to loosen policy too rapidly, mortgage rates would fall quickly. This will merely reignite the housing market, which 70% of the inflation gains from the previous spike upward in inflation was driven by housing. This is now the balancing act the Federal Reserve must maintain.

My Take

I believe that the Federal Reserve has room to move interest rates lower. But, I do not believe that the Fed can do so at a rapid pace that would push interest rates downward by big numbers. The balancing that the Fed has to encompass will not be a direct pathway forward. At the same time, the Federal deficit is massive despite having employment at the level that it is. Moving interest rates lower would push the needle for growth and that could keep the Fed restrained. Mortgage rates moving lower too fast would be a problem for the Fed. The overall supply of federal debt via Treasury bond issuances is high and that supply will weigh on the market.

For now, I think employment numbers are going to continue to show weakness, but the increases in personal incomes and expenditures could help to propel the economy forward, along with lower interest rates. I still believe that we see some additional selling through the remainder of the year and into next year. I do not believe the market will get big moves lower in interest rates from the Federal Reserve that could perpetuate the stock market upward. I think the Fed has a lot of work ahead of itself, and this is going to be tricky to balance.

The past week saw a tremendous swing in the stock market. First, on Sunday evening, the Bank of Japan raised interest rates in surprise, sending the Japanese yen upward versus its trade counterparts. This jolted the world’s stock markets. However, at the same time, economic indicators printed the week prior showed continued slowing in employment, making for big jitters going into the week.

But, employment data from the Department of Labor arrived again on Thursday printing initial jobless claims and continuing jobless claims. The print was not nearly as dire as market participants had anticipated. This drove the stock market higher.

The question is: what is the economic outlook and will we continue to see a jittery market, or was Friday’s move consistent and will buyers continue to show up?

Jobless Claims

Over the past couple of years, both initial jobless claims and continuing jobless claims have edged higher. But, what is important to always point out is that the move higher is coming from all-time lows. So, if someone was merely looking at the charts above they could surmise that the economy is contracting rapidly and we are entering a recession with all of the job losses.

A Bigger Look at Jobless Claims

When you step back and look at a far bigger picture, the economy is nowhere near a recession from the perspective of jobs. However, jobs are a lagging indicator. For now, I do not see negative growth—the ingredient for a recession. What I do see is a moderation in the pace of growth. The US economy continues to expand. There is still job growth as we witnessed the previous Friday with non-farm payrolls printing 6-figure job growth. But, the unemployment rate is still climbing, albeit at a slow pace.

Regardless, a recession is far from imminent. I have not called for one just yet as we continue to see growth in the economy. Looking at the main driving factor for the economy allows for the ability to see what the economic potential is.

Income & Expenditure Growth

The US economy is primarily a consumer-led economy accounting for well over 70% of economic activity. The growth in incomes, whether increasing or decreasing, drives expenditures. Those expenditures turn into revenues for companies, which drives stock prices. Following this trail enables a stock trader to continually understand what is next in the stock market.

For now, income growth is middle-ground, and expenditures are tightly correlated with incomes. The current growth rate is coming off of big swings driven by income acceleration from stimulus checks from COVID. The US economy reached record employment levels. Now, that is moderating.

If the economy slows somewhat to a GDP growth rate of about 2.5%, this is a normalization of economic growth. But, this would not get to the measuring stick of a recession—there would still be positive economic growth.

Gross Domestic Product

This chart above, Gross Domestic Product versus Personal Expenditures, sums everything up. GDP is the measurement of economic activity within a country. And, personal expenditures is the driver. Other factors account for economic activity within a country such as government expenditures and business expenditures. However, government expenditures are more flatline in growth rates because government expenditures tend to be fairly consistent. Business growth is a response to the demand curve which is driven by the consumer. Because of this, I focus heavily on the consumer and their respective state.

With a decline in employment, expenditures will slow overall. But, this does not mean expenditure growth will go to negative. I do think, however, that expenditure growth will drop and get close to zero.

The Stock Market

The stock market reacted badly from deleveraging via the FX market on the heels of employment data that was softer than expected. But, the economy is a long way away from proof of a recession. During this, interest rates re likely to remain a bit lofty, but continue to move lower in the eyes of softer inflation. The Consumer Price Index arrives on Wednesday and likely will continue to show a decline in price pressures.

My belief remains that US Treasury yields will continue to soften, but do so a slow pace. During this, stocks may be volatile as revaluations occur. I am not sure we see the highs again, but the stock market has a very short-term memory. Instead, it is possible that we see continued volatility. Eventually, however, I do expect that the stock market will wobble. But, that is many months from now.