Shedding Light on the Sticky, Rigid, and Persistent Inflation

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Persistent inflation in focus

The latest report on the U.S. Consumer Price Index (CPI) showed that core inflation rose 0.4% month-over-month, surpassing consensus expectations. This pushed annual inflation to 3% in January 2025, up from 2.9% in December 2024. Additionally, the report detailed price spikes in categories that typically increase at the start of the year, including auto insurance, internet/TV subscriptions, and prescription drugs.

According to analysts at Banca March, the data presented a mixed picture: “The increase was mainly due to energy prices contributing to inflation (+0.06%) for the first time since last July, as well as a weaker downward drag from goods prices, which fell -0.13% year-over-year in January, marking their smallest decline since December 2023.”

They note that this shift in goods prices was driven largely by two components—used cars and prescription drugs—which together contributed +0.3% to January’s inflation, whereas in December, they had subtracted three-tenths from the CPI.

On a more positive note, service prices continued their gradual moderation trend, though not enough to prevent the inflation uptick. Service inflation rose at a 4.3% annual rate—one-tenth lower than in December—marking the slowest increase in service prices since January 2022. “Notably, the largest component, imputed rents, moderated to +4.4% year-over-year, down from +6% a year ago, supporting the gradual ‘normalization’ of inflation. However, upward pressure came from transportation services such as insurance and vehicle maintenance,” explain Banca March experts.

What Does This Mean?

According to Tiffany Wilding, U.S. economist at PIMCO, these figures do not change the broader narrative that the U.S. economy remained strong at the turn of the year while inflation progress stalled. “If anything, this reinforces the Federal Reserve’s (Fed) stance of keeping rates steady for some time. We believe inflation is likely to remain uncomfortably high through 2025 (with core CPI at 3%), despite growing risks of a more pronounced slowdown in the labor market and real GDP growth, stemming from Trump’s recent immigration policy announcements and broader political uncertainty,” explains Wilding.

She adds that Trump’s policies put the Fed in a difficult position: “Sticky inflation raises questions about whether the Fed will ultimately deliver the two 25-basis-point rate cuts implied in its December Summary of Economic Projections (SEP). At the same time, a more significant slowdown in real GDP growth and labor markets—both of which have been buoyed by strong immigration trends—could increase downside risks to the economy,” she says.

Uncertainty for Central Banks

Experts agree that this situation puts the spotlight on the Fed and other monetary institutions. “Central banks are no longer a source of stability, as they are caught between the need to control inflation and the desire to avoid an economic slowdown that may be necessary to bring inflation sustainably back in line with targets. This dilemma could worsen if the U.S. tariff threat materializes, as governments may have no choice but to loosen fiscal policies. Monetary policy decisions could take investors by surprise, as central banks may take very different paths,” note Marco Giordano, Chief Investment Officer at Wellington Management, and Martin Harvey, fixed income portfolio manager at Wellington Management.

Trump and Inflation

Benjamin Melman, Global CIO at Edmond de Rothschild AM, warns that global inflation no longer seems to be retreating, especially in the U.S. services sector, while rising oil, gas, commodity, and agricultural prices have added further inflationary pressures in recent months. In this context, he argues that Trump’s administration has introduced an additional layer of uncertainty regarding future inflation trends with its tariff and deportation policies.

“While it may be tempting to downplay these concerns by suggesting that tariffs are merely a negotiation tool to extract concessions from affected countries, and that large-scale deportations are technically difficult to implement, it would be a mistake to draw conclusions just one week into Trump’s second term,” Melman points out.

However, he clarifies that even if Trump does not fully implement these inflationary measures, or does so on a limited scale, the unleashing of so-called ‘animal spirits’ in the U.S.—driven by expectations of deregulation and tax cuts—cannot be ruled out. “This is likely to stimulate the economy and inflation through more traditional channels, particularly given that the output gap is already positive,” he concludes.

Rising Costs Continue to Make Renting Cheaper than Buying in the U.S.

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Rising rental costs in the U.S.
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Renting remains the more affordable option in nearly all of the nation’s largest metropolitan areas, according to the latest Realtor.com January Rent Report.

While rent and homeownership costs have declined slightly over the past year, elevated mortgages continue to keep the cost of buying higher than renting in 48 of the 50 largest U.S. metros. This marks a shift from January 2024, when six metros were more affordable for buyers. Now, only Detroit and Pittsburgh offer lower homeownership costs compared to renting. 

Economists attribute this trend to persistent affordability challenges in the housing market. Although home prices have softened in some areas, mortgage rates remain high, making monthly payments unaffordable for many prospective buyers. 

“This relative cost advantage is one of the reasons we expect an increase in renter households and declines in the homeownership rate in 2025,” said Danielle Hale, chief economist, at Realtor.com. 

Detroit and Pittsburgh remain the exceptions, with homeownership costs lower than renting. Both cities have some of the lowest median home prices in the country – $239,950 in Detroit and $229,700 in Pittsburgh. In these metros, steady or rising rents have tipped the balance in favor of buying. However nationwide, rents remain historically high.

Despite a slight dip over the past year, the median rent remains 16.1% higher than pre-pandemic levels in January 2020, now at $1,703. Renters in cities such as New York and Miami continue to spend a significant portion of their income on housing. New Yorkers allocate 37.6% of their earnings to rent, compared to 35.9% in Los Angeles and 26.8% in Orlando. 

While affordability remains a challenge across the board, some metros are shifting toward becoming more renter-friendly. In New York, San Jose, and Detroit, both renting and buying now consume a larger share of household income. Meanwhile, Kansas City is becoming more favorable for buyers, with declining home costs relative to income. At the same time, 18 metros – including Baltimore, Boston, Chicago, Los Angeles, and Minneapolis – are becoming more renter-friendly, as the income required to purchase a home has increased. 

Even as the housing market cools, homeownership remains out of reach for many Americans. With mortgage rates expected to stay elevated in 2025, renting is likely to remain the more practical financial choice in most major U.S. cities. 

UMH Adoption Rises, but Integration Challenges Persist

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UMH adoption challenges
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The push for a Unified Managed Household (UHM) continues to gain traction among managed account sponsors, with 52% citing it as a top priority in 2024, up from in 2022. While platform providers have made strides in enabling UMH solutions, sponsors still face resistance from advisors and significant technology integration hurdles, according to the Cerulli Edge – Americas Asset and Wealth Management Edition

“Things become more complicated when considering how a UMH platform will optimize retirement income and whether Social Security and annuity options should be a part of the core capabilities,” said Scott Smith, director. 

To drive adoption, platform sponsors aim to offer a more efficient and cost-effective approach to holistic portfolio management. However, evolving UMH programs present challenges, with 89% of sponsors citing concerns about integrating various technological enhancements and 42% struggling with legacy platform transitions

“However, sponsors must develop a cohesive strategy on two fronts: technology integration and rollout and advisor engagement and adoption,” added Smith. 

Beyond developing new features, ensuring seamless integration with existing systems remains a key hurdle. Some firms have found success by partnering with specialized technology providers rather than attempting to merge multiple proprietary systems. As the industry advances, firms must balance innovation with practical implementation to make UMH solutions viable for advisors and clients. 

Prudential Financial Appoints Patrick Hynes as President of Prudential Advisors

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Patrick Hynes new President of Prudential Advisors
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Prudential Financial, Inc. has named Patrick Hynes as president of Prudential Advisors, where he will oversee its retail and advice division. The division includes 2,800 financial advisors serving over 3.5 million American families. 

Hynes, currently head of sales for Prudential Advisors, brings over 25 years of leadership experience in financial services. Previously, he served as president of Pruco Securities, strengthening standards and controls while enhancing the advisor experience. 

Hynes’ appointment is effective March 31, reporting to Caroline Feeny, CEO of Prudential’s U.S. Businesses and incoming CEO of Prudential’s Global Retirement and Insurance businesses. 

“With his proven ability to care for talent and build high-performing teams, Pat is uniquely positioned to lead Prudential Advisors,” said Feeney. 

Additionally, Brad Hearn, the current president of Prudential Advisors, has been named president and COO-elect of Prudential Holdings of Japan, effective March 31. 

Jonathan Kaye Joins Rothschild & Co as Global Co-Head of Business Services

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Jonathan Kaye new Global Co-Head at Rothschild & Co
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Rothschild & Co’s Global Advisory business has announced that Jonathan Kaye will join as the Global Co-Head of Business Services for North America. In this new role, Kaye will be instrumental in growing the business Services team and expanding Rothschild & Co’s presence in North America. 

“I greatly look forward to working with the global team as well as leveraging my own experience and relationships for the continued growth of Rothschild & Co’s North America and Business Services teams,” said Kaye. 

Kayes brings extensive experience, having previously founded and led the Business Services franchise at Moelis & Company, making it a market leader over a decade. He’s advised over a hundred transactions across various sectors and worked with large-cap and middle-market private equity. 

“His longstanding, trusted relationships and deep industry knowledge across many verticals and end markets will be key differentiators as we continue to build our Business Service team,” said Lee LeBrun, Partner and Head of Global Advisory, North America.

Arturo Karakowsky is Named Member of the Chairman’s Club of Morgan Stanley

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Arturo Karakowsky named Chairman’s Club member
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Morgan Stanley announced that Arturo Karakowsky, Managing Director of the Morgan Stanley Wealth Management office in Houston, has been named a member of the Chairman’s Club, an elite group composed of the firm’s top financial advisors.

“The appointment is a recognition of creativity and excellence in providing a wide variety of investment products and wealth management services to its clients,” the company said in a statement.

A native of Houston, Texas, Karakowsky joined Morgan Stanley in 2007. He holds a degree in Financial Management from the Instituto Tecnológico y de Estudios Superiores de Monterrey and has a CFP (Certified Financial Planner) certification from Rice University. He received the Forbes Best-In-State Wealth Advisors recognition in 2024 and was named to Forbes America’s Top Next-Gen Wealth Advisors in 2022.

“I am very proud to announce that I have been named a member of the prestigious Chairman’s Club of Morgan Stanley, an elite group of the firm’s financial advisors,” Karakowsky wrote on his personal LinkedIn profile. “Thank you for your continued trust in our team. It is a privilege to help you achieve your financial goals,” he added.

U.S. Equities as a Democratic and Liquid Option to Be State Street’s Presentation in Houston

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Renta variable de EE. UU. opción líquida y democrática
Photo courtesyKeith Medlock, Vice President Senior ETF Investment Strategist

State Street Global Advisors will present the first U.S.-listed ETF, SPY, at the V Funds Society Investment Summit in Houston to highlight its democratic, profitable, and liquid positioning.

During the event, which will take place on March 6 at the Hyatt Regency Houston Galleria, Keith Medlock, Vice President Senior ETF Investment Strategist will present the strategy that “offers a number of potential benefits for investors seeking core US equity exposure, including record liquidity” and more than 30 years of proven experience, according to the firm’s statement.

Backed by the S&P 500® Index, the strategy “opened the door to markets that were previously inaccessible to most investors before 1993.”

Keith Medlock

He is a Senior Strategist at State Street Global Advisors Global SPDR Business. He is an expert in ETFs, investment management and research, and portfolio construction. In his role, he conducts economic and market studies to generate strategic and tactical investment opportunities across different asset classes, with a particular focus on U.S. equities, sectors, and industries. He collaborates with SSGA’s distribution, research, and portfolio management teams.

Prior to joining SSGA in 2013, he was a Business Development Executive with Northern Trust’s FlexShares Exchange Traded Funds. He has worked as a Divisional Managed Accounts Consultant at UBS, a Trust Investment Officer at Bradford Trust Company, and an Economics instructor at the University of Arkansas

Medlock holds a degree in Mathematics and Economics from the University of Arkansas and has the CMT, CAIA®, CIMA®, and AIF® certifications. He also holds FINRA Series 7 and 66 licenses.

For four decades, State Street Global Advisors has served governments, institutions, and financial advisors worldwide, positioning itself as the fourth-largest asset manager in the world with $4.72 trillion1 (trillions in English), according to the firm’s statement.

1This figure is presented as of December 31, 2024 and includes ETF AUM of $1,577.74 billion USD of which approximately $82.19 billion USD in gold assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited.

From Skepticism to Active Support: U.S. Creates the Strategic Cryptocurrency Reserve

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U.S. creates strategic cryptocurrency reserve
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The Trump administration is once again boosting the crypto market with a new initiative. Over the weekend, the U.S. president announced the creation of a “Strategic Cryptocurrency Reserve,” which will include digital assets such as Bitcoin, Ethereum, Ripple, Solana, and Cardano. These new steps align with Donald Trump’s goal of making the U.S. the “crypto capital of the world.”

As a result of this announcement, the price of some cryptocurrencies surged: Bitcoin reached $93,000, while Ripple and Cardano saw significant gains, and Ethereum rose by 11%.

Without a doubt, the initiative announced by Trump has revitalized the entire industry, as crypto market sentiment had hit rock bottom. “The Crypto Fear and Greed Index had dropped from 55 (neutral) to 21 (extreme fear) in less than a week. Last Friday’s Bybit hack shook investor confidence, compounded by growing uncertainty over tariffs on Mexico and Canada, which will indeed take effect, adding to market anxiety,” acknowledged Simon Peters, an analyst at eToro, just three days ago.

This negative sentiment was also evident in Bitcoin’s price, which was holding at the $92,000 support level. The cryptocurrency has fallen 20% from its all-time high of $109,300. According to experts, a 35% correction could bring it down to around $70,000.

The SEC Clearly Shifts Its Stance on Cryptocurrencies

Crypto industry experts highlight that these initiatives reflect a shift in Trump‘s stance on cryptocurrencies, from initial skepticism in 2019 to active support today, with the declared goal of making the U.S. the “crypto capital of the world.” A clear example of this shift is that Trump is set to host the first Cryptocurrency Summit at the White House next Friday—the first such event organized by a U.S. president.

Another example of this change in approach involves Coinbase. Last week, the SEC announced that it had agreed to dismiss its enforcement case against the company. “If incoming SEC Chairman Paul Atkins approves the decision, the dismissal will mark the end of the ‘regulation by enforcement’ approach led by former SEC Chairman Gary Gensler,” explains Frank Dowing, Director of Analysis for Next Generation Internet at ARK.

According to Dowing, during Gensler’s tenure—from April 2021 to January 2025—the SEC filed numerous cases against Coinbase and its competitors, alleging that digital asset exchanges and staking businesses violated U.S. securities laws. “Despite good-faith efforts to comply with ambiguous securities regulations applied to digital assets, cases against these companies continued. Now, a crypto-friendly administration has taken the lead. Several bills on stablecoins and digital asset market structure are expected to move quickly through the Republican-controlled Congress, providing regulatory clarity for companies in the sector. In our view, the shift toward common-sense legislation and regulation will accelerate the adoption of public blockchains, benefiting investment strategies with significant exposure to digital assets,” Dowing notes.

Crypto ETFs: An Unstoppable Success

A clear sign of the favorable environment for crypto assets is the surge in passive investment vehicles. According to State Street projections, growing demand for crypto ETFs will soon surpass assets in precious metal ETFs in North America, making them the third-largest asset class in the ETF industry—behind only stocks and bonds.

Bitcoin and Ethereum ETFs were launched in the U.S. just last year, yet they have already accumulated $136 billion in assets, despite the recent market correction. State Street also forecasts that the SEC will approve more crypto-specific ETFs this year, with Litecoin, XRP, and Solana being the most likely to receive spot ETF approval, given that multiple U.S. ETF providers have already filed applications for these products.

Asset Managers Turn to Greater Diversification to Navigate a More Multipolar World

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Asset managers embrace diversification for a multipolar world
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This week has made it clear that we are in a new multipolar world, marked by a geopolitical and multilateral relations realignment. In this scenario, populism and politics generate increasing noise, which the market, for its part, strives to ignore. According to investment firms, this context calls for investors to rethink their roadmaps. What are they proposing?

For Michael Strobaek, Global CIO, and Nannette Hechler-Fayd’herbe, Head of Investment Strategy, Sustainability, and Research, and EMEA CIO at Lombard Odier, “a geopolitical realignment could significantly reshape the global economy and financial markets, leading to more balanced risk-adjusted returns across all asset classes and highlighting the benefits of broad diversification for asset allocators.”

According to these experts, investors are navigating a new post-Cold War multipolar era, where risk-adjusted returns are converging across major asset classes. “The global liberal democratic order seems to be taking a back seat to short-term national and economic interests, led by the new U.S. administration. Asset allocators must manage risk diligently and diversify broadly, leveraging alternative assets whenever possible,” stress experts at Lombard Odier.

For Gianluca Ungari, Head of Hybrid Portfolio Management at Quantitative Investments (Vontobel), and Sven Schubert, Head of Macro Research at Quantitative Investments (Vontobel), markets are moving quickly in response to this new environment. “Despite the initial impact of the tariff announcement on Canada, Mexico, and China—followed by a 25% increase on steel and aluminum imports starting March 12—the markets have absorbed the news relatively well. The direction of market movements in early February reflects the economic effects of the U.S. tariff hikes,” they note.

February now ends with the idea of reciprocal tariffs and ongoing negotiations between the U.S. and Russia to end the war in Ukraine. Because of this, Ungari and Schubert believe investors must stay vigilant. “While we maintain a constructive market outlook and a long position in equities, hedging strategies could be crucial for performance this year. So far, our tail hedges, such as the Japanese yen and gold, have performed well. Meanwhile, European equities have outperformed in recent weeks, driven by expectations of fiscal stimulus after the German elections and Trump’s decision to delay tariffs on Canada and Mexico,” they explain.

Enguerrand Artaz, strategist and fund manager at La Financière de l’Échiquier (LFDE), acknowledges that uncertainty has surged to levels even higher than during the trade tensions of 2019. In his view, equities should rotate towards more defensive sectors that are less exposed to global trade, such as utilities and real estate. “This scenario is not necessarily negative for European small caps, which are, on average, less exposed to international trade and more sensitive to falling interest rates,” he notes.

Additionally, Artaz believes that in a diversified allocation, it would be advisable to increase the proportion of fixed-income assets. “This is a logical move, as a tariff hike is both deflationary and recessionary for affected countries. An escalation could prompt the ECB to cut rates even further. While interest rates have shown resilience so far, if uncertainty persists, it could affect investor sentiment.” Artaz concludes that “for markets, an unpleasant but defined scenario—such as a fixed and final tariff increase—is often better than ambiguity fueled by political volatility.”

Market Behavior

According to Axel Botte, Head of Market Strategy at Ostrum AM (Natixis IM), financial markets appear isolated from the erratic communications coming from Donald Trump. “The flattening of the yield curve has led to a generalized tightening of spreads. Despite the Fed’s stance of maintaining the status quo and the restrictive policy of the Bank of Japan, monetary easing remains the predominant global trend. However, the sharp rise in gold prices sends a lone note of concern,” says Botte.

This global instability is also reflected in oil prices. In fact, the price of West Texas Intermediate (WTI) crude oil reached $72.80 per barrel on February 19, 2025, closing at $72.05 per barrel. “The increase in WTI crude prices is due to a combination of geopolitical, climatic, and supply-demand factors. Uncertainty surrounding production in Russia and the United States, along with the possibility of OPEC maintaining supply restrictions, has created a favorable environment for price escalation,” explains Antonio Di Giacomo, Senior Market Analyst at XS.com.

Additionally, in his view, investors have responded to these events with increased financial speculation in oil. “Market volatility has led to a higher volume of futures contract trading, contributing to price fluctuations. In this sense, traders are closely watching for any signs of changes in production policies from major exporting countries,” says Di Giacomo.

Another asset reflecting this context is gold. “Its price will remain high throughout 2025 amid increased central bank purchases, growing concerns over the harmful effects of U.S. tariffs, and demand for newly introduced gold ETFs. However, it could weaken if the interest rate differential between the U.S. and the rest of the world remains wide, which could keep the dollar strong, exerting downward pressure on gold. That said, this is not our base-case scenario,” adds Peter Smith, Senior International Equity Strategist at Federated Hermes.

BBVA Securities Adds Sarah Swammy as Managing Director in New York

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BBVA hires Sarah Swammy as Managing Director
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BBVA Corporate & Investment Banking (CIB) has added Sarah Swammy to its team as Managing Director of BBVA Securities Inc. (BSI) with the goal of further developing its broker-dealer infrastructure and strategically expanding its institutional business platform, the bank announced in a statement.

“We are very proud to have Sarah join us in expanding our business in the U.S.,” said Regina Gil Hernández, Head of BBVA CIB USA. “She will be key in expanding BSI’s broker-dealer infrastructure and product capabilities to better serve the business needs of our institutional clients,” she added.

Swammy has more than 20 years of experience in capital markets and risk management. She has held senior roles in operations management and business oversight, specializing in risk analysis, global markets, risk controls, and capital markets at leading international financial institutions such as Bank of America, Sumitomo Mitsui Banking Corporation, Wells Fargo, State Street, and BNY Mellon.

With her addition, BBVA CIB continues to enhance value for its institutional clients, including banks, insurance companies, and asset managers, both in the U.S. and internationally.

Swammy will report to Lucho Alarcón, Head of Global Markets USA at BBVA, and Peter Jensen, CEO of BSI.