Hope you are all doing well. The S&P 500 and the NASDAQ fell 1.0% to 1.6%, respectively, and the Dow recorded a fractional gain in a week that got off to a shaky start. The major U.S. stock indexes recorded positive results in January. It regained upward momentum after the S&P 500 and the Dow posted negative results in the final month of 2024. In January, the Dow climbed more than 4%, the S&P 500 added nearly 3%, and the NASDAQ finished almost 2% higher. Employees returning to the office dominated the headlines this week. Therefore, I have broken down this week’s update using quotes from the movie, Office Space. Hopefully it adds a bit of levity for those of you going through a stressful transition at work.

“Nuh-Uh. Not Really. Uhhh, I’m Just Gonna’ Stop Going.” – Peter
On Tuesday evening, many federal employees received an email from the Office of Personnel Management (OPM) giving a choice. The letter offered deferred resignations in exchange for what is essentially 8 months of paid severance. Like Peter in the movie, the government is going to pay you for not going to work. It is an effort by the new administration to quickly (and voluntarily) thin the workforce. The email outlined a February 6th deadline for federal employees to decide if they wish to submit a “delayed resignation” to be effective no later than September 30th. I have fielded and will continue to field many of your calls between now and February 6th. Here is my opinion in brief. Anyone who is 62 or older with more than 20 years of service the offer makes sense to consider especially if you were planning to retire this year anyhow. If you have already submitted paperwork to retire. It could make sense to pull it, accept the offer then resubmit the paperwork with a date just before the September 30 resignation date, like September 29th. If that sounds like you then please schedule with me prior to the 6th. I have opened extra hours.
“Sounds Like Somebody’s Got A Case Of The Mondays!” -Brian Chotchkie’s Waiter
On Monday, we had a swift and dramatic downturn in technology stocks. It pulled the broader market down amid news of a competitive threat that a Chinese startup company poses to U.S. tech companies’ AI initiatives. Later in the week the stocks rebounded as this is by no means a defeat for the U.S. AI industry. China did NOT create something new. What they were able to do with DeepSeek is replicate existing models at a lower cost. The groundwork has been laid by U.S. innovation and will continue to be pushed forward by the big U.S. tech firms. DeepSeek relied on Nvidia’s technology. The U.S. retains critical leverage in the AI ecosystem. The model’s training relied on older but powerful Nvidia chips, optimized to increase their capacity. There is no reason for fear at this point. The chips were acquired before the stricter U.S. controls in 2024. More importantly, longer term cheaper AI is better for almost all companies.
“The Ratio of People to Cake Is Too Big.” – Milton
Like the birthday cake never quite making it to Milton in the movie, inflation has not been able to make it to the Fed’s 2% target. It remains slightly above the long-term target. The Fed’s preferred inflation gauge, the PCE, rose at an annual rate of 2.6% in December, up from 2.4% the previous month. Looking at the numbers from a glass half-full perspective the core PCE (excluding food and energy) rose 2.8%, that is unchanged from the previous month. Inflation will be monitored closely as everyday there seems to be new tariff threats. Expect this to cause market volatility in the short run. However, it does not change the fundamentally positive outlook for stocks.
“I Did Absolutely Nothing, And It Was Everything I Thought It Could Be!” – Peter
As expected, the U.S. Federal Reserve did nothing. Keeping its benchmark interest rate unchanged as it wrapped up a two-day meeting on Wednesday. Don’t expect a rate cut from the Fed until the core inflation is trending down closer to their 2% goal.
If you’d like to speak about your investments or your plan, or if it has been a while since our last review, please schedule some time. As I mentioned I opened up my calendar with additional time slots between now and February 6th for those of you considering the government’s offer. I would kindly ask that if you have a matter you’d like to discuss that is not time sensitive in nature then please schedule after the 6th. That way those spots remain open for those who are considering the government offer. My calendar link below can be used to schedule a phone or zoom appointment.