February 2025 Market Update

Dear Valued Partners and Clients,

As we close out a volatile January, the market is reminding us that all good things do not last forever. Recent events have significantly impacted the financial landscape, and it’s important to understand the opportunities presented in today’s market.

Market Update

Recently, the Chinese startup DeepSeek, an AI assistant that uses materially less data with similar performance, caused a significant market shake-up. This led to a sharp decline in stocks and yields. Notably, previously untouchable names like Palantir, AMD, and Nvidia saw drops of 5%, 17%, and 6.6% respectively, while the diversified Nasdaq fell by 3.18% near the close. While we saw winners and losers in the AI shake-up, we saw that a diversified portfolio proved its resiliency, as high-quality bonds rallied and higher-quality dividend stocks remained relatively unshaken. We remind everyone that “participation, not concentration” is a prudent method to gain exposure to some of the higher-risk, higherreward themes in the market today.

Interest Rates and Economic Outlook

Current market conditions suggest that rates may remain elevated, and uncertainty around inflation and tariffs could keep them steady. Federal Reserve Chairman Jerome Powell eased fears of a potential rake hike, which calmed market jitters during his commentary. According to economists at FactSet, the Fed is now expected to hold steady at their March 19th meeting and potentially cut during their May 7th meeting. The Fed is closely monitoring signs of weakness in the labor market described as “solid,” keeping their options open in case we begin seeing any weakness. The Fed’s favored inflation gauge, the Core PCE, rose .2% in November,2.8% from a year earlier, and 2.2% on the trailing 3 months. Real income, according to Bloomberg, “barely rose for the second month,” causing the savings rate to fall to just 3.8%, far below the pre-pandemic average. These numbers may lean the Fed in the direction of cut in the next few meetings.

Tariffs and Trade Wars

Not to forget the most recent market shakeup, recent tariffs by the US saw healthy tariffs on China, Mexico, and Canada go into effect on February 3rd. President Trump quickly announced a delay in the Mexican and Canadian tariffs until next month after leaders of Canada and Mexico announced that they would ramp up security at their borders. While the tariffs come under the pretense of national security, they will undoubtedly have marked impacts on the markets and, perhaps more importantly, GDP and relationships with some of our largest trading partners. This is quickly developing and changing, so we will be watching this closely. Regardless of direction, we anticipate an increase in volatility, with as we saw the VIX closing up 13.33% on February 2nd.

Cash Management Strategy

Given these developments, we want to emphasize the importance of our cash alternative model. Now is an opportune time to take advantage of this strategy, which focuses on flexible ETFs in fixed-income sectors that are still considered attractive. This is a great alternative to high yield savings accounts, and may be a strong opportunity for our corporate clientele. For longer-term investors, our more traditional bond portfolio is positioned for opportunities we see across the yield curve. We are here to support you through potentially turbulent times. If you have any questions or need personalized advice, please do not hesitate to reach out. Thank you for your continued trust and confidence.

Best Regards, 

Todd Todd Scorzafava, 
CFP®, AIF®
WealthScorz Financial Group Partner, 
Portfolio Manager Certified Financial Planner® 
Accredited Investment Fiduciary®
P: 908.208.5378 
F: 640.333.5886 
E: tscorz@wealthscorz.com 
391 Springfield Ave, STE 1E 
Berkeley Heights, NJ, 07922