Wealth Weekly 2/14: Market Trends, Housing Outlook & Smart Investing Strategies

Welcome to KPA Wealth Weekly, your source for the latest in financial and mortgage markets. Each week, we share economic updates, rate trends, and tips to build a strong financial foundation.

Let’s dive into this week’s highlights!

• Mortgage Interest Rates

• Stock Market Update and Trends

• Financial Numbers This Week

• Real Estate: Buy or Sell?

• This Week’s Wealth Strategy - 50, 30, 20 Rule

Mortgage Interest Rates

Stock Market Update and Trends

The market is BULLISH. It really seems like since 2008 the Fed has cancelled every recession or obstacle that we have run into doesn’t it. That’s probably because they did exactly that. Through printing more money to fuel our GDP growth, whether its by funding our wars or other country’s wars with our military equipment or direct funding, or passing junk bills disguised as “infrastructure”, the Federal Reserve’s continued intervention—through monetary easing, stimulus, and deficit spending—has prolonged the bull market, raising questions about long-term sustainability.

(Disclosure: I am long Google, Nvidia, and many more stocks and am no where near a bear in this market).

Today the S&P hit another all time high, in the midst of a debt-ridden and inflation-burdened middle and lower class in the United States.

The million dollar question is… Is it time to accumulate more cash or more stocks?

Key Takeaway: Buy High Sell Higher??

Notable Earnings This Week:

This week’s earnings reports brought a mix of wins and challenges across industries. Here's a quick summary:

Cisco Systems (CSCO): Reported fiscal Q2 earnings of $0.94 per share, surpassing analyst expectations of $0.91. Revenue increased by 9% to $14.0 billion, driven by substantial AI infrastructure orders totaling $700 million in the first half. The company provided an optimistic outlook for the upcoming quarter.

Airbnb (ABNB): Achieved Q4 earnings of $0.58 per share, exceeding forecasts. The company highlighted a 12% revenue growth to $2.248 billion, attributing the success to increased bookings and a strong travel demand. Despite slightly conservative guidance for Q1, the stock surged 15.6% post-announcement.

Coinbase Global (COIN): Delivered Q4 earnings of $1.62 per share, significantly beating market expectations. The cryptocurrency exchange benefited from heightened trading volumes amid increased market volatility. However, the stock experienced a 7.24% decline, reflecting ongoing regulatory uncertainties in the crypto space.

The Trade Desk (TTD): Reported Q4 earnings of $0.56 per share, aligning with projections. Despite this, the company missed revenue estimates and issued a cautious outlook for Q1, leading to a 33% drop in share price. Investors expressed concerns over the competitive landscape in digital advertising.

Robinhood Markets (HOOD): Announced its first-ever yearly profit, with Q4 earnings of $0.41 per share, driven by a 3,200% increase in transaction-based revenue, particularly from cryptocurrency trading. The positive results led to a 14% rise in the stock price.

Investors closely monitored these earnings for insights into future guidance, as companies navigated evolving market dynamics and economic conditions.

Financial News This Week

Trade Policy and Market Impact:

Tariff Announcements:

On February 13, President Donald Trump signed a Presidential Memorandum directing federal agencies to study the implementation of reciprocal tariffs, aiming to match U.S. import duties to those imposed by other countries. While no immediate tariffs were introduced, this move signals a potential shift in trade policy, raising concerns about future global trade dynamics.

Inflation Data:

Consumer Price Index (CPI):

The CPI report for January showed a 0.5% increase, bringing annual inflation to 3%, slightly higher than the previous 2.9%. This rise was largely driven by higher costs in food and energy. However, the core CPI, which excludes volatile food and energy prices, rose only 0.3%, suggesting inflationary pressures may be moderating.

Producer Price Index (PPI):

The PPI increased by 0.3% in January, aligning with market expectations. This data provided some relief, as it suggested producer-level inflation remains moderate, easing concerns that price pressures would intensify in the coming months.

Consumer Sentiment:

Retail Sales Weakness:

Retail sales in January saw a sharp 0.9% decline, much worse than the expected 0.1% dip. Core Retail Sales, which exclude volatile components like auto and gas sales, fell 0.8%, the worst reading in two years. This decline suggests consumers may be reaching their credit limit, with outstanding credit card debt hitting a record $1.2 trillion. Rising interest rates, which now exceed mid-20% levels for many consumers, have further constrained spending.

Housing Market Trends:

Recent reports indicate a rise in home listing de-listings, with many Realtors and sellers opting to remove listings due to weak demand. This pattern occurs seasonally, but inventory levels have increased 25%, potentially leading to a longer-term cooling of the housing market.

Labor Market:

Employment Data:

The latest labor market report showed 150,000 jobs added in January, slightly below the 160,000 expected. However, the unemployment rate remained steady at 4%, and average hourly earnings increased by 0.4%, continuing the trend of wage growth.

Technical Analysis:

Mortgage Bonds Performance:

• Mortgage Bonds have rebounded strongly, recovering losses from CPI inflation volatility. Bonds broke key technical resistance levels, including the 100.43 Fibonacci level, the 25-day Moving Average, and the 50-day Moving Average.

• The 10-year Treasury yield fell below its 50-day Moving Average, signaling potential improvements in mortgage rates. However, resistance at 4.40% remains a key ceiling for further declines in yields.

Market Expectations:

• Investors remain focused on upcoming Federal Reserve rate guidance and housing market data next week.

• If economic weakness continues, markets may price in a more dovish Fed stance, which could support bonds and mortgage rates in the near term.

Outlook:

Upcoming Data to Watch:

• Housing Starts & Existing Home Sales – Expected to provide insight into the strength of the housing market.

• Federal Reserve Meeting Minutes – Investors will analyze comments for any signs of a shift in rate policy.

• Retail Earnings – Walmart and other major retailers will report next week, offering a clearer picture of consumer spending trends.

Real Estate: Buy or Sell?

Declining Home Sales:

• Existing Home Sales: In December 2024, existing home sales decreased by 4.8% month-over-month, totaling 4.15 million units. This decline suggests a cooling demand in the housing market.

Rising Inventory Levels:

• Increased Listings: January 2025 saw a 12% year-over-year increase in new home listings, while pending sales dropped by 3.6%. This shift has provided buyers with more negotiating power, a dynamic not really seen in the past five years.

Price Reductions:

• Seller Adjustments: Over 20% of U.S. homeowners reduced their listing prices in January 2025, indicating that sellers are becoming more flexible to attract buyers amid high mortgage rates.

Regional Disparities:

• Sunbelt Cities: Markets in cities like Phoenix, Tampa, and Jacksonville have experienced significant price cuts, with about a third of listings seeing reductions. This trend reflects regional weaknesses within the broader housing market.

Conclusion:

The combination of declining sales, increasing inventory, widespread price reductions, and sustained high mortgage rates suggests that the real estate market is currently facing challenges. Potential buyers and investors should approach with caution, keeping a close eye on these evolving trends.

Note: The above analysis is based on data available up to February 14, 2025.

This Week’s Wealth Strategy: The 50/30/20 Investment Rule

For those looking to build long-term wealth beyond real estate, the 50/30/20 Investment Rule is a smart allocation strategy that balances growth, stability, and liquidity:

1. 50% - Long-Term Wealth Builders: Invest half of your available capital in appreciating assets like real estate, stocks, or index funds.

2. 30% - Income-Generating Investments: Allocate 30% toward assets that provide cash flow, such as dividend stocks, rental properties, or bonds.

3. 20% - Liquidity & Growth: Keep 20% in flexible investments like short-term stocks, ETFs, or high-yield savings accounts to ensure you have accessible capital for opportunities.

Example:

• If you have $10,000 to invest, you’d allocate $5,000 to long-term growth stocks or real estate, $3,000 to dividend stocks or rental properties, and $2,000 to flexible, liquid investments like ETFs or short-term bonds.

This strategy ensures diversified wealth growth while maintaining liquidity for future investments or unexpected expenses.

Thank you for reading! If you found this newsletter helpful, please share it with anyone who might benefit. Stay tuned for 1-2 posts every week with the latest market updates and insights.

Kyle Allgair
CEO of KPA Home Loans
📞 (279) 977-8149 | ✉️ [email protected]
🌐 KPAhomeloans.com

Kyle Allgair is the CEO of KPA Home Loans, with years of experience helping clients build wealth through real estate and strategic financial planning. Contact him for personalized advice on achieving your financial goals.