“Like snowflakes, the human pattern is never cast twice.”
-Alice Childress
Here’s what you need to know this week:
- Stocks post a slight loss as world leaders turn down the temperature at Davos
- Markets flirt with all-time highs on strong earnings
Calmer Heads
Stocks sold off to start last week on continuing fear that President Trump’s plan to annex Greenland would add to more trade disruption and possibly even worse outcomes. However, President Trump and other world leaders flocked to the annual World Economic Forum in Davos, Switzerland, and quickly moved to alleviate tensions. Trump was the keynote speaker on Wednesday and he vowed not to use force to seize Greenland while hinting that he would table his retaliatory tariffs while negotiations take place[1]. This was enough to restore confidence to investors who promptly bought back in, causing markets to rebound and close the week at a minor loss.
In other news, we received the Personal Consumption Expenditures (PCE)report for the month of November on Thursday. The PCE report is the Federal Reserve’s preferred measure of inflation and the monthly reports were substantially set back by the prolonged government shutdown late last year, although the data has begun to catch up. November’s report showed monthly inflation at 0.2% and annualized inflation at 2.8%:
Both of these numbers were in line with Wall Street’s expectations, although still higher than the Fed’s long-term target of 2% flat. This print all but ensures the Fed will hold rates steady this month, setting the stage for more tension between the Fed Chairman and President Trump.
Earnings Season
Publicly traded companies are required to report earnings every quarter and right now we are in the thick of the Q4 2025 earnings season. More than 300 companies are set to report this week, including major names such as Microsoft, Meta, Tesla and Apple. Stocks have posted consistently strong earnings over the past three years and analysts expect Q4 to continue this trend.
Stock prices are determined by two factors: earnings and multiples. Earnings are obvious, it’s simply the money a company brings in after subtracting expenses. Multiples are how investors value a company’s earnings; for example, if a company brings in $1 million in annual revenue and is valued at $10 million, then the company is trading at a multiple of 10. When people say that stocks are overvalued, what they are typically describing is multiple expansion, meaning a company’s stock price is rising faster than its earnings.
Looking back at 2025, we can see that nearly all the growth of the S&P 500 is attributable to earnings while a small sliver is due to multiple expansion:
Like I wrote in our Bull Market vs. Bubble piece a few weeks ago, the majority of growth coming from earnings suggests that markets are not (yet) in a bubble. Historically speaking, markets stay healthy when growth comes from earnings as opposed to multiple expansion:
As you can see above, positive earnings growth usually portends stock price growth. This chart also shows how markets have far more up years than down years, which is why we always emphasize to stay focused on the long-term and resist the urge to make bad decisions during short-term drops.
What Else
- The price of gold passed $5,000/oz for the first time while silver passed $100/oz for the first time, signaling investor anxiety surrounding geopolitical order
- Israel confirmed that Hamas has now returned the remains of every slain hostage as part of the ceasefire agreement
- Ukrainian, Russian and American negotiators met in Abu Dhabi for the first trilateral peace talks since the start of the war in Ukraine
- US warships reached the coast of Iran as part of President Trump’s plan to negotiate a deal between Iranian leaders and the growing number of protestors
- A new snow storm is heading for the East Coast this weekend, leaving little respite to the millions of citizens still dealing with last week’s barrage
- The New England Patriots battle the Seattle Seahawks next Sunday in Super Bowl LX
What We’re Reading
Alex Honnold captivated the world on Sunday by climbing the 1,667-foot-tall skyscraper known as Taipei 101. If you’re like me, your palms begin to sweat just seeing pictures and footage of the harrowing climb; however, to a small group of world-class climbers, Honnold lived their dream. Click below to read what expert climbers thought of Honnold’s feat as well as descriptions of what it’s like to scale a skyscraper with no safety net:
What’s Happening Downtown
Last call for the Devon Ice Rink in the Myriad Gardens! The rink is open every day through this Sunday and then closes until next winter; now may be the best time to visit with all the snow in the park! Click below for hours and pricing:
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Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, CFP®, Brandon Ingerson, Bill Daniel, Sam Postich, Jenni Hess
Sources: [1] Yahoo! Finance