From the desks of Stanley Katz & Lauren Madera
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Markets sent mixed signals this week as the S&P 500 edged up while the DJIA and Nasdaq declined (DJIA: -0.70%, S&P 500: +0.42%, Nasdaq: -0.12%)—an unusual divergence driven by another news-filled week. The Trump administration’s proposal for nearly flat Medicare Advantage (MA) rates in 2027 (a 0.09% increase versus analyst expectations of 4-6%) triggered a bloodbath for managed care stocks. Insurers with large MA exposure bore the brunt. Big names like UnitedHealth and Humana each dropped over 20%, while less exposed players declined less. These drawdowns reflect the impact of stagnant government reimbursement amid rising medical costs, forcing insurers to choose between benefit cuts and margin compression. The S&P 500 withstood healthcare’s overall decline because of strong performance from other sectors.
Adding to the policy uncertainty, the Federal Reserve held rates steady on January 28 at 3.5%-3.75%, marking the fifth consecutive meeting with dissenting votes. In addition, President Trump nominated Kevin Warsh this week to succeed Jerome Powell as Fed chair when Powell’s term expires in May. Warsh previously served as a Fed governor during the 2008 financial crisis and earned respect from financial markets for his independent judgment. However, his recent call for “regime change” at the Fed and more aggressive rate cuts signals that policy under his leadership may become more accommodative—a prospect that markets are still digesting.
Argus Research and Capital Group offer balanced perspectives on why cautious optimism persists beneath this week’s volatility. Both firms forecast economic growth at 2+% with unemployment remaining in the mid-4% range and corporate earnings advancing. Argus projects the S&P 500 to rise another 5-10% this year within a “broader and more balanced market.” Capital Group adds specificity to the growth narrative, highlighting three powerful tailwinds: federal tax refunds, AI infrastructure spending, and regulatory relief. Critically, Capital Group notes that AI productivity gains may be underestimated—the firm has revised its U.S. productivity estimate upward as a result.
Both research houses acknowledge risks. Argus notes the second-year presidential cycle has historically been the weakest stock-market year, while the Misery Index (i.e., inflation plus unemployment) stands at 7.1%, well below the post-1949 average of 9.2%. Yet Capital Group’s framework intimates that this week’s mild pullback may represent healthy consolidation rather than a warning of broader deterioration ahead.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Argus:
Capital Group:
American Century:
J.P. Morgan Asset Management:
Columbia Threadneedle:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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