2025 Banished Word List
The major indexes continued to drift lower this week despite good economic news. I chalk this up to investors’ concern for the future given the considerable uncertainty with a new administration about to take the reins. It is not uncommon for volatility to increase during periods like this, but we expect in the coming months markets will settle down as new policies are more clearly defined. For the time being, we will likely continue to see large swings driven by headline news, analysts’ predictions, and shifts in investor sentiment. Aside from the incoming administration, we also have to contend with Q4 earnings which we will begin to see soon.
What spooked markets today was a better-than-expected jobs report. Yes, you read that correctly. Too many jobs were created in the month of December. Remember, for the Federal Reserve to cut interest rates, it must believe the economy is slowing. Clearly, adding more jobs than expected is not the kind of deceleration they’re looking for. Total nonfarm payrolls grew by 256,000 in December, the strongest since March of last year, and well above the estimates for 153,000 (and the average monthly gain of 186,000 in 2024). The cherry on top was that the unemployment rate fell from 4.2% to 4.1%. If you’re wondering where those jobs are being created, it is primarily in healthcare, retail sales, and leisure and hospitality.
Because of today’s jobs report, bond yields ticked higher. The benchmark 10-year U.S. Treasury yield is at 4.75%, its highest since 2023. Bond markets have dialed back expectations for cuts to the fed funds rate, as inflation has slowed, and the labor market has stabilized. Today's data make the case for a longer pause in rate cuts, with markets now pricing in the next cut to be delivered in September from March which was expected previously. Investment grade corporate bonds with durations between 5-7 years have yield-to-maturities once again pushing past 5% and coupons of 5% or more which is a boon to those looking for income.
Additionally, the ISM services PMI for December came in above expectations signaling ongoing strength in the services sector (see the jobs report above). Further bolstering this news, the JOLTS job openings report also exceeded expectations, with job openings for November rising to 8.1 million versus expectations for 7.7 million, signaling that demand for labor remains strong. While well below the peak of 12 million job openings in March of 2022, 8.1 million is still above pre-pandemic levels. Additionally, U.S. job openings exceed the number of unemployed (7.1 million), which suggests that while labor-market conditions have moderated from historically strong levels, they remain healthy. Healthy labor-market conditions have been a source of strength for the U.S. economy over the past two years. I believe labor market conditions will remain largely supportive in 2025, helping extend the economic expansion.
In company news, I believe I mentioned the rising cost of chocolate a year or two ago. Before that, it was the cost of coffee beans. It seems both cocoa and coffee farmers are experiencing more volatile weather that is impacting their crops. This week we learned that Hershey has asked the Commodity Futures Trading Commission (CFTC) for permission to take a position in the futures market that would enable the company to buy a “substantial” amount of cocoa. By substantial, it is looking to acquire more than 90,000 metric tons of cocoa on the Intercontinental Exchange by buying futures contracts that currently exceed CFTC limits (presumably put in place to prevent any one entity from cornering the market, i.e. the Hunt Brothers). With cocoa prices up 400% over the past two years, Hershey has been able to pass on only a small portion of the increased cost, while taking a 5% hit to its profit margin in just the last year. I mention this because as with coffee prices over the past few years, you will likely see chocolate prices expand in similar fashion.
In closing, I want to turn to words that should no longer be used. Apparently, Lake Superior State University began a tradition in 1976 with its first “List of Words Banished from the Queen’s English for Misuse, Overuse, and General Uselessness.” It seems I’ve been living under a rock for some time now. While not enforceable, the words banished in 2025 include cringe, game changer, era, dropped, IYKYK (if you know you know), sorry not sorry, skibidi, 100%, utilize, and period. In truth, I don’t know what to make of the trends in modern language and grammar (or lack thereof). In a sense, I guess I’m just getting old. I mean, really. What does skibidi even mean? Now you know.
Bruce J. Mason, MBA