Uriel Loredo

Core inflation shows signs of deceleration, while shelter costs register their lowest growth rate since 2022. 

The Consumer Price Index (CPI) rose by 0.4% in December, aligning with market expectations. Over the past 12 months, headline inflation increased by 2.9%. The Core CPI, which excludes food and energy, showed signs of deceleration with a 0.2% monthly rise, the lowest in four months. On an annual basis, it dropped to 3.2%.  

Key components include: 

1. Energy: Contributed 2.6% to the monthly increase, driven by a 4.4% rise in gasoline prices. 

2. Food: Prices rose by 0.3% in December, with annual variations of 1.8% for food at home and 3.6% for food away from home. 

3. Shelter: Increased by 0.3%, marking its smallest annual variation (4.6%) since January 2022. 

These figures provide some relief for the Fed, reflecting a slowdown in core prices, which could pave the way for further rate cuts in 2025. For now, the rate is expected to remain between 4.25% and 4.50% at the upcoming January meeting. 
 

Annual Variation (%) of the Consumer Price Index (CPI): General and Core CPI 

Source: US Bureau of Labor Statistics 

The rise of AI presents transformative opportunities and challenges that investors need to consider.

Artificial intelligence (AI) continues to be a central topic in the global tech landscape. Major companies such as Amazon, Alphabet, Meta, and Microsoft have announced investments of up to US$500 billion over the next three years, a move reminiscent of the internet boom of the 90’s. 

While short-term expectations tend to be optimistic, analysts agree that the true potential of AI will unfold over the long term. With applications ranging from semiconductors and cloud services to language models and end-user tools, AI’s impact could be described as “immeasurable.” 

However, this technological revolution is not without its challenges. Increasing demand for energy and materials like copper could create bottlenecks, while the risk of overcapacity and signs of false demand could impact return-on-investment projections. 

AI is expected to evolve in two phases: an initial phase driven by consumer adoption, and a longer phase focused on enterprise integration. This highlights the importance of distinguishing between current enthusiasm and sustainable long-term opportunities. 

Technological development tends to be overestimated in the short term, while its long-term potential is often underestimated. 

Source: Capital Group  

Expectations for the S&P 500 in 2024 and 2025 reflect strong growth, with significant gains projected across multiple sectors. 

S&P 500 Outlook for Q4 2024 

As is customary, JP Morgan will kick off the corporate earnings season in mid-January. However, it is notable that estimated earnings for the S&P 500 in the fourth quarter remain below initial expectations. Despite this decline, the index could still achieve its highest year-over-year (YoY) earnings growth rate in three years, currently estimated at 11.9%. This growth would bring the full-year 2024 earnings increase to 9.4% YoY. 

If confirmed, this figure would represent the strongest YoY earnings growth since Q4 2021. Additionally, seven out of the eleven sectors in the index are projected to report YoY growth, with Finance, Communication Services, Technology, Consumer Discretionary, Utilities, and Health Care leading the way. Conversely, four sectors are expected to see a YoY decline in earnings, with Energy being the only one forecasted to post a double-digit drop. 

What About 2025? 

Looking ahead, analysts anticipate robust earnings growth for the S&P 500 in 2025, projecting nearly 15% YoY growth, well above the 10-year historical average of 8%. Interestingly, companies outside the “Magnificent 7” group (Google, Amazon, Microsoft, Apple, Tesla, Meta, and Nvidia) are expected to show significant improvement, with earnings growth estimated at 13% for 2025. 

Key Takeaways 

The evolution of the Q4 earnings season and the start of Q1 2025 will be crucial. Investors have displayed considerable optimism in recent months, betting on the persistence of a favorable environment for the corporate sector. 

Expected annual earnings growth for the S&P 500 in Q4 2024 

Source: Facset – Earnings Insight 

The November inflation report could confirm a new interest rate cut.

The Consumer Price Index (CPI) for November showed a 0.3% increase, marking a slight acceleration after four consecutive months of 0.2% rises. On an annual basis, overall inflation stood at 2.7%, while core inflation (excluding food and energy) advanced by 3.3%, both figures in line with expectations. 

Among the main factors driving this result was the increase in the housing component (shelter), which contributed nearly 40% of the monthly rise. Additionally, food prices rose by 0.4%, and the energy sector recorded a modest 0.2% increase. 

Excluding food and energy, other components such as housing, used cars, furniture, and healthcare showed significant increases, while the communication index was one of the few to register a decrease. 

In this context, market consensus predicts that the Federal Reserve will implement a 25 basis point rate cut during its next meeting. This move reaffirms the Fed’s commitment to economic stability in an environment of moderate inflation and a strong labor market. 

Expectations for the benchmark interest rate 

Fuente: CME 

Annual change in inflation and core inflation   

Fuente: US Bureau of Labor Statistics 

Essential steps to understand the challenges, benefits, and strategies of a well-planned retirement. 

In a world where life expectancy continues to rise and traditional pension systems are evolving, planning for retirement has become a crucial priority to ensure financial stability and maintain the desired lifestyle in later years. 

Retirement is not just a common financial goal—it’s a universal necessity. Whether you dream of traveling, dedicating time to your passions, or simply enjoying time with your family, having a solid financial plan is essential. Here are some key points to consider: 

• Increased Longevity: Growing life expectancy means planning for decades of retirement. 
   

• Shift from Pensions to Personal Savings: As traditional pensions decline, personal savings and investments have become more important than ever. 
   

• Key Strategies: Diversifying investments, maximizing contributions to plans like a 401(k), and maintaining an emergency fund are critical steps to ensure financial stability. 

Facing challenges such as market volatility or rising healthcare costs requires a disciplined and consistent approach. The good news is that it’s never too late to start. Every step toward structured planning can make a meaningful difference. 

Retirement is widely considered the top financial goal. 

Source: JP Morgan – Apollo