In This Issue
This week’s newsletter is brought to you buy Masterworks
Last Time the Market Was This Expensive, Investors Waited 14 Years to Break Even
In 1999, the S&P 500 peaked. Then it took 14 years to gradually recover by 2013.
Today? Goldman Sachs sounds crazy forecasting 3% returns for 2024 to 2034.
But we’re currently seeing the highest price for the S&P 500 compared to earnings since the dot-com boom.
So, maybe that’s why they’re not alone; Vanguard projects about 5%.
In fact, now just about everything seems priced near all time highs. Equities, gold, crypto, etc.
But billionaires have long diversified a slice of their portfolios with one asset class that is poised to rebound.
It’s post war and contemporary art.
Sounds crazy, but over 70,000 investors have followed suit since 2019—with Masterworks.
You can invest in shares of artworks featuring Banksy, Basquiat, Picasso, and more.
24 exits later, results speak for themselves: net annualized returns like 14.6%, 17.6%, and 17.8%.*
My subscribers can skip the waitlist.
*Investing involves risk. Past performance is not indicative of future returns. Important Reg A disclosures: masterworks.com/cd.
1) Market Update & Analysis
Weekly % Moves (Fri vs Fri closing):
S&P 500: +1.6% (new record close)
Nasdaq Composite: +1.9%
Dow Jones Industrial Average: +2.3% (new record close)
Russell 2000 (small caps): ~+4.6%
Key Drivers of Sentiment:
Jobs Report Mixed: December payrolls showed slower-than‑expected growth (≈50K) but a lower unemployment rate (4.4%), reinforcing hopes that the Fed may pause on further tightening or cut later in the year.
Housing Policy Catalyst: President Trump’s directive for government‑sponsored entities to buy $200B in mortgage bonds boosted optimism in housing and related equities, dragging mortgage rates lower.
Breadth Lifts Small Caps: With tech leadership less dominant early in January, cyclicals and small‑cap equities outperformed, signaling broadening participation.
Top 3 performing S&P 500 stocks of the week
Lam Research $LRCX ( ▲ 0.93% ) : +27.6%
Intel $INTC ( ▼ 3.27% ): +23.4%
Micron $MU ( ▲ 0.23% ): +20.9%
What likely drove the moves:
There’s a global supply chain crunch for artificial-intelligence infrastructure. There’s not enough chips being made to meet the future demand of AI. Investors believe this not only is a signal to the long-term growth of these AI infrastructure firms but also near-term rapid growth. The risk is in the spending. With so much spending already committed to AI infrastructure ($500B) what will companies do to potentially increase the speed in building more infrastructure? It’s hard to imagine these firms taking out more debt to fund the infrastructure endeavors but that will need to happen if spending increases.
2) Finance News
1) Mixed Jobs Report & Market Reaction
U.S. employers added ~50,000 jobs in December, the smallest gain since the pandemic, even as the jobless rate improved, suggesting cooling labor demand without recession fears. Markets rallied on the implications for Fed policy.
Why it matters: The “low‑hire, low‑fire” environment keeps expectations of eventual rate cuts alive without alarming investors with outright weakness, supporting equities and lowering bond yields.
2) Trump’s $200 B Mortgage Bond Purchase Push
President Trump instructed Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds to lower mortgage rates and improve housing affordability.
Why it matters: This policy signaled housing affordability focus, pushing mortgage rates below 6% for the first time in years, lifting homebuilders and mortgage‑related stocks.
3) Start of Corporate Earnings Season + Forward Guidance
Major banks (e.g., JPMorgan, Bank of America, Goldman Sachs) will kick off Q4 earnings next week, with early reports expected to shape sentiment on credit health, loan demand, and market liquidity.
Why it matters: Financials are leading the rally, and their results can confirm or challenge the current optimism on the economic backdrop and credit trends.
3) Economic Update
What happened this week (and why it matters)
Labor demand cooled: Job openings fell to ~7.146M (Nov JOLTS), the lowest since Sept 2024 per Reuters, reinforcing “cooling not crashing.”
Services stayed resilient: ISM Services showed expansion momentum (Services PMI 54.4 in Dec).
Manufacturing remained in contraction: ISM Manufacturing PMI fell to 47.9 in Dec.
Consumers slightly less downbeat: Michigan sentiment ticked up to 54.0 (prelim), with inflation expectations still elevated.
Expected impact: Net-net, this mix supports a “growth okay, inflation watch” backdrop—good for equities broadly, but it puts extra emphasis on next week’s inflation read for rates and valuation-sensitive sectors.
What’s coming next week and why it matters)
Tuesday (Jan 13): U.S. CPI (Dec 2025) — the key macro test for rate-cut timing and equity multiples.
Earnings season begins (big banks): JPMorgan, Citi, Bank of America, Goldman (per Reuters) kick off results—watch credit quality, NII trends, and capital markets activity.
Also on radar: PPI/retail sales appear on many “week-ahead” calendars; if inflation is sticky while demand holds up, markets may re-price the 2026 easing path.
4) Policy Watch
Tariffs/legal risk in focus: Markets watched for a Supreme Court-related development tied to the legality of Trump-era tariffs; outcomes could affect corporate margins, supply chains, and deficit/tariff revenue assumptions.
Housing policy front-and-center: Beyond market moves, the administration’s MBS-buying push signals a willingness to use GSE balance sheets to influence consumer borrowing costs—supportive for housing activity, but controversial from a market-structure standpoint.
Geopolitical risk remains a tail factor: Reuters flagged Venezuela-related developments and other geopolitical tensions as potential volatility catalysts even as realized vol stays low.
5) Chart of The Week
The Buffett Indicator is a measure of market valuation made famous by Warren Buffett. He stated it as the “best single measure of where valuations stand at any given moment.” It compares the overall value of the stock market to quarterly GDP. The idea is, if quarterly GDP is equal to the market cap of the total stock market, the market is properly valued.
The chart indicates the market is significantly overvalued. At 224% of the GDP level, its clear that AI infrastructure spending has pushed the overall market value past levels of safety. For reference, the indicator would need to be at 139% to be in a “safe range”.
Should Investors be Cautious?
Absolutely! Notice the 2000 and 2007 levels in the chart above. We’ve had serious recessions with the market values were much lower. At this level, its inevitable. There are only a few unknown variables: when the market falls, how bad it will be, and how long it will last.
Latest Articles
Thanks for reading the Roadmap 2 Wealth Newsletter.
Sign up for future newsletters HERE! ⬅️