By: W. Kirk Taylor, CFP®
The stock market has been going through a rough patch lately as investors worry about several things: interest rates, whether stocks are too expensive, and how well the economy is doing. Since December 6 last year, the main stock market index (S&P 500) has fallen 4.3%, while the interest rate on 10-year government bonds has gone up from 4.15% to 4.76%.
This drop in stock prices makes sense as investors process new information about the economy. A recent report showed more jobs were created than expected in December. This suggests the economy is doing well and might not need help from the Federal Reserve (“the Fed”) in the form of lower interest rates. Right now, investors think the Fed might only lower rates once in 2025, possibly for the last time in this cycle. But these predictions can change quickly, just like they did throughout 2024.