SoFi Blog

New Year, Same Focus

Even though the calendar pages have turned, the key themes driving financial markets in these early January days look to remain the same: Consumer strength, corporate earnings growth, and risks to the Federal Reserve’s dual mandate of price stability and maximum employment will likely continue to drive markets.

This week brings important updates to related data, including job openings and consumer sentiment. But the spotlight will be on Friday’s December jobs report, which continues to be one of the most closely watched economic releases each month. This jobs report feels especially important considering Fed officials revised their economic projections for 2025 to show lower unemployment and fewer interest rate cuts. Could the latest look at the labor market sway these forecasts again?

In addition, Fed Chair Jerome Powell said that while progress on lowering inflation has been bumpy, it’s still on the way down. But investors don’t seem convinced, with securities like inflation swaps and Treasury yields suggesting inflation concerns are picking up again. All that’s to say that an unemployment surprise this week could inject significant volatility into both stock and bond markets, as investors have to think about what the jobs data means for monetary policy, as well as coming inflation data. A strengthening labor market might suggest improving consumer demand, which could be a leading indicator of rising inflation, while a weakening labor market could point to the opposite.

Economic and Earnings Calendar

Monday

•   December S&P Global US PMIs: These indexes track how purchasing managers across different industries feel about the business environment.

•   November Factory and Durable Goods Orders: These metrics give insight into underlying trends for leading cyclical indicators.

•   Fedspeak: Fed Governor Lisa Cook will deliver a keynote speech at the University of Michigan Law School.

Tuesday

•   November Trade Balance: Trade, made up of exports and imports, is an important driver of economic activity.

•   November Job Openings: A key measure of business demand for labor is the number of job openings, since reducing openings is easier for companies and preferable to layoffs.

•   December ISM Services PMI: This index from the Institute for Supply Management tracks how purchasing managers across different services industries feel about the business environment.

•   Fedspeak: Richmond Fed President Thomas Barkin will give a speech to the Greater Raleigh Chamber on the economy.

Wednesday

•   December ADP Employment Report: This survey, usually released a day or two before the official government jobs report, offers insight into private sector employment trends.

•   FOMC Meeting Minutes: The Federal Reserve releases detailed notes of every FOMC meeting three weeks after their conclusion. Investors often look for more information on Fed officials’ views for hints on the outlook for interest rates and the economy.

•   November Consumer Credit: Borrowing activity gives insight into broader economic activity.

Thursday

•   December Challenger Job Cuts: The firm Challenger, Gray & Christmas tracks the number of layoff announcements each month by sector.

•   November Wholesale Inventories and Sales: Wholesalers often operate as an intermediary between manufacturers and retailers, serving as a key part of the goods supply chain.

•   Fedspeak: Philadelphia Fed President Patrick Harker will discuss the economic outlook. Richmond Fed President Barkin will speak to the Virginia Bankers Association and the Virginia Chamber of Commerce about the economy. Kansas City Fed President Jeff Schmid will speak to the Economic Club of Kansas City.

•   Earnings: Constellation Brands

Friday

•   December Employment Situation Summary: This monthly blockbuster release from the Labor Department gives a comprehensive look at employment, wages, and hours worked in the previous month.

•   January University of Michigan Consumer Sentiment: How consumers feel about economic conditions affect their spending habits. This survey places a particular focus on inflation and its trajectory.

•   Earnings: Delta Air Lines, Walgreens Boots Alliance

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

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Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

OTM2025010602

Dear SoFi, I’m 41 years old. Where do I start at my age?!

(submitted by Tina L. via SoFi’s Ambition Club on Facebook)

Dear Tina,

This is a broad question, but it sounds like you’re feeling late to the party. And you should know that plenty of people get overwhelmed by their financial situation and worry that they aren’t doing what they “should” be doing at a certain stage in life.

Thankfully, it’s never too late to take charge of your finances, and there are several good places to start.

Now, we don’t know your circumstances, but being in your 40s may mean you’re adapting to — or anticipating — some new responsibilities, like owning a house, having children or earning a more established income. Maybe you’re feeling behind because you have debt, lost a job, haven’t been building a savings, or just hadn’t thought much about managing your money before now.

No matter your situation and why you’re asking, don’t beat yourself up. Nearly half of Americans surveyed by Bankrate last year said their finances were negatively affecting their mental health. And as a country, we’re not where we need to be with financial literacy: On average, U.S. adults can only correctly answer basic financial knowledge questions about half the time.

Let’s begin with some simple steps that can give you (or anyone) more direction.

1.    Start by taking a financial inventory. This should include what you have (any savings or investments) and what you owe (through credit-card debt, auto or student loans, a mortgage, etc.) Also check your bank statements to figure out what your total expenses are, on average, each month.

2.    Use your inventory to set and then prioritize goals for yourself. Defining the things you want will help you to stay motivated. Maybe you’re tired of that relentlessly high credit card balance or worried about being unprepared for retirement. Maybe you want to take a vacation, renovate your bathroom, or make sure another major car repair doesn’t set you back like the last one. Whatever your goals, keep these two general rules of thumb in mind. If you don’t have a safety net — savings equal to one month’s worth of expenses — tackle that first. And if you have what we call “bad” debt (like a balance on a high-interest credit card,) work on paying that down second.

3.    Set up an emergency fund. Now that you’ve got that safety net, start building a bigger emergency fund. Generally we suggest setting aside enough to cover your living costs for three to six months, but there are emergency savings calculators to help you determine the ideal amount. (Here’s ours.) This should be established before you look into saving for long-term goals like retirement or your kids’ college education because the last thing you want is to be forced to put a large one-off expense on a high-interest credit card.

4.    Track your spending so you can create a budget. Mark what is a need versus a want. Ask yourself how much income you can free up by cutting back on your wants. This will help you determine whether you have wiggle room for saving or paying down debt faster. If there aren’t many wants, and you’re in the red most months, you’ll want to consider bigger, harder changes such as moving or trading in your car for a lower-cost model. But if you do have non-essential expenses, maybe you decide to eat out less frequently, make coffee at home, or take on some DIY house projects. (You might even discover that you’ve got streaming services or subscriptions you don’t use.) It all adds up.

5.    Start thinking about the rest. Once you’ve got your arms around these first four steps, start thinking about things like saving for retirement, choosing life insurance, and using a financial planner. But don’t feel pressure to tackle these immediately. The first priority is establishing good financial hygiene in your day-to-day spending and saving. Then build on that success.

6.    Stick with it (and whenever possible, make things automatic). Just like losing weight or learning a new language, being proactive about your finances requires repetition. One way to ensure consistency is to leave as little to willpower and memory as possible. Schedule regular deposits into a savings account, set up text alerts or recurring payments to get bills paid on time, or use a budget planning app (like SoFi’s Relay) to track your spending.

Lastly, don’t let yourself be discouraged by comparisons with others your age. People get their arms around their money at different stages of life, and having more life experience can give you a leg up. And, don’t be hard on yourself if you have a misstep. That will only derail your progress further. Just get back on the horse, as they say, and give yourself credit for taking this on. You’re on your way to a solid financial footing, and from there, anything is possible.

In financial health,

Kendall Meade,
CERTIFIED FINANCIAL PLANNER®

image credit: Bernie Pesko

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

For many Americans, January is a time to regroup — on your health and fitness, relationships, work, or finances.

But having the urge to make a change doesn’t always mean you know where to start, and that’s especially true with a topic as thorny as money. Most people don’t learn about interest rates, IRAs, or inflation in school, and chances are your parents didn’t talk much about those things either.

Even when you’re actively seeking to forge a more proactive financial path, it’s tough: News articles don’t always explain why you should care and educational pieces are often written in a vacuum. We started On the Money to help fill that void, offering news-driven insights and practical guidance.

In our first two months, we’ve covered why consumer prices will probably never go back to normal, how Donald Trump’s plan for tariffs could affect your finances, and why you might be stuck in that starter home for longer than you thought. We’ve outlined what you can do if your kid’s college plans change and if you’re struggling to cope with a fickle stock market. And we’re bringing some of these stories to Instagram, Tiktok and other social media to provide you with more ways to experience and respond to our work.

We know that managing your money can feel overwhelming, particularly right now — jobs are alarmingly scarce in some sectors, buying a house can cost a fortune, and many people with federal student loans are in yet another limbo. And then there are the sweeping shakeups Trump has promised when he returns to the White House later this month. There’s a lot of uncertainty.

But it’s our day job — and our privilege — to make sense of it all, and we want to engage you in a financial conversation that makes you feel empowered, not daunted. Our goal is to be a trusted resource in your financial life, and we’d love to hear how we’re doing so far, and what you’d like to see from us this year. We hope you’ll tell us by taking the survey that comes at the bottom of each of our newsletters.

Here’s to 2025 and a bright financial future.

Most sincerely,

Helen Reis
Deputy Editor, On the Money

image credit: Bernie Pesko

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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The usual strong ending to the investing year didn’t materialize this holiday season, as the S&P 500 fell 3% in the final two weeks of the month, one of its worst end-of-year performances since 1928 when records began. Still, stocks had a total return 25% for all of 2024, the second year in a row of stellar performance. Strong consumer spending, a solid labor market, and stubborn inflation data pushed the Federal Reserve to signal fewer interest rate cuts next year than markets were expecting going into the central bank’s December meeting. That drove Treasury yields higher, with the rise in yields concentrated in longer-term maturities.

Macro

•   The Fed lowered the fed funds rate by 25 basis points to a target range of 4.25%-4.50%.

•   In their quarterly Summary of Economic Projections, Fed officials raised their inflation expectations and signaled fewer interest rate cuts.

•   The unemployment rate ticked up from 4.1% to 4.2% in November, above expectations.

•   Housing starts fell 1.8% versus expectations for an increase of 2.6% in November.

•   Q3 GDP growth was revised up from 2.8% to 3.1%, with both consumer spending and net exports contributing.

•   The Conference Board’s consumer confidence index surprised to the downside at 104.7 versus the estimate of 113.2, driven primarily by a decline in the future component.

•   The Japanese Yen finished the month at its weakest level since before the Bank of Japan hiked its interest rate target at the end of July.

Equities

•   Large-cap growth stocks were the only size & style category to end the month with positive returns.

•   The Magnificent Seven stocks finished the month up 6.3%, significantly outpacing the rest of the market.

•   Forward 12-month earnings expectations rose 1% in December, while the 12-month P/E ratio contracted by over 3%.

•   Emerging market stocks ended the month roughly flat despite U.S. dollar appreciation, buoyed in part by the increase in oil prices.

Fixed Income

•   The 2y10y Treasury yield spread rose to 32.5 basis points in December, the highest level since May 2022, signaling that long-term growth and inflation may be structurally higher.

•   After bottoming as low as 82.4 on December 11, the MOVE Index (i.e. interest rate volatility) rose to 98.8.

•   High yield spreads rose to 287 basis points, their widest levels since mid-October.

•   10-year Chinese bond yields fell 35 basis points to 1.67%, setting a new record low.

The Santa Claus Rally Skipped Town

And just like that, another volatile year in markets came to a close. It was a great one for stock investors, as the S&P 500 ended the year up more than 23%. And just like in 2023, outperformance was concentrated in companies that were either larger and/or rapidly growing: Large-cap growth stocks rose over 33%, while small-cap value stocks gained a comparatively low 8%.

Investors may be starting off the new year with a slightly sour taste in their mouth, however. While the final two weeks of December typically see some of the best returns of the year, the traditional “Santa Claus rally” was notably absent last year. Compared with the average return of +2%, stock indexes fell 3% during the final two-week period, which ranks in the 94th percentile of worst returns going back to 1928.

Exactly why markets struggled to maintain momentum from earlier in the year is not fully clear. While conventional wisdom suggests that the increased dominance of passive investing can push the market higher during periods of lower trading volumes (like the holiday season when many people are out of the office), that wasn’t the case this time. Portfolio rebalancing, end of year tax-driven moves, and other non-fundamental factors could have had an effect, but it’s hard to pin it on any one thing.

Cut, But Make It Hawkish

The Federal Reserve’s December meeting marked a pivotal shift in monetary policy, with the fallout possibly contributing to Santa not coming to town. While the decision to lower the benchmark rate wasn’t a surprise, the central bank’s quarterly projections certainly were. Against investor expectations for three rate cuts in 2025, 14 of 19 Fed officials expected only two rate cuts or less next year – fewer than what the market was pricing in.

Fewer rate cuts and higher inflation expectations might be enough to explain why stocks trended lower to finish the year, but a look at Treasury yields tells us something deeper. 2-year yields are basically where they were the day of the Fed meeting, yet 10-year yields are 15 basis points higher. This suggests investors are digesting structurally higher interest rates, which translate into higher discount rates and pressure stocks.

Remember: Stock prices can be thought of as the present value of future cash flows. If future cash flows remain the same while the interest rate you use to discount them rises, that usually means a lower stock price. The fact that S&P 500 earnings estimates were steady while valuations contracted is supportive of this argument, but as we’ve seen market dynamics can shift rapidly. Any further changes to interest rate expectations are likely to play a critical role in market direction from her.

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Performance data quoted represents past performance. Past performance does not guarantee future results. Market returns will fluctuate, and current performance may be lower or higher than the standardized performance data quoted.