Stocks closed higher across the board this past week with most of the gains coming Friday after the U.S. Supreme court ruled against the legality of the Trump Administration’s tariff policies. During the press conference and posts on social media immediately following the 6-3 decision by the court, the President called the judges who voted against him “fools and lap dogs,” “very unpatriotic,” a “disgrace to the nation” and accused them of being “swayed by Foreign Interests.” The President afterward signed an executive order imposing a new 10% global tariff under Section 122 of the Trade Act of 1974. However, any tariffs enacted by using this statute can last only 150 days, with any extension requiring congressional approval.
We believe that the decision by the U.S. Supreme court accurately reflects the intentions of the constitution (Article 1, Section 8), which is to vest these powers in the legislative and not the executive branch. It is most likely for this reason that the markets rallied. That said, we do believe that the U.S. Economy remains on solid ground, growing modestly, albeit with sticky inflation.
- If the minutes from the January meeting of the Open Market Committee of the Federal Reserve reflects the current mindset of the Federal Reserve, they are split on the direction of interest rates nothing that “in considering the outlook for monetary policy, several participants commented that further downward adjustments to the target rate for the federal funds rate would likely be appropriate if inflation were to decline in line with their expectations” while also noting that “some participants commented that it would likely be appropriate to hold the policy rate steady for some time s the Committee carefully assesses the incoming data.” Exactly why economists have two hands!
- According to Bloomberg, “last quarter, Alphabet Inc., Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. spent the least on combined share repurchases than in any quarter since 2019 as those as well as other technology companies are choosing to spend otherwise, developing their Artificial Intelligence (AI) capabilities. Generally, share buybacks are a tailwind, as the reduction in the number of outstanding shares boost earnings per share.
- Issues accompany a stagnant society as is evidenced by the fact that fewer than 670,000 babies were born in Japan in 2025, the lowest since records began being kept in 1899. Moreover, their total population continues to age and decline, shrinking by approximately 5 million to 122 million since the turn of the century. The result is that there now exists a labor shortage as well as that approximately one-third of the country’s annual budget now consist of Social Security, Medical Care and Pensions.
- According to GSE Freddie Mac, “mortgage rates dropped again this week, now down to their lowest level since September 2022. This lower rate environment is not only improving affordability for prospective homebuyers, it’s also strengthening the financial position of homeowners.”
It’s The Economy…”
- Fourth Quarter Gross Domestic Product (initial estimate), as reported by the Commerce Department, a tally of the output of all goods and services in the United States, rose at an annualized rate of 4.4% (2.2% y/y), a sharp drop from the 4.4% recorded during Q3. A large part of the decline can be attributed to the government shutdown during Q4. Final Sales to Domestic Purchasers rose at an annual rate of 1.1% (1.9% y/y), below the pace of 2.8% during the prior quarter. Government Spending (Government Consumption Expenditures and Gross Investment) fell 5.1% (-1.0% y/y) after rising 2.2% Q3. The GDP Chain Price Indexrose at an annual rate of 3.6% (SAAR) during Q4, after rising 3.8% during Q3. The PCE Price Index rose to an unrevised annual rate of 2.9% after climbing 2.8% during Q3. ThePCE Price Index Excluding Food and Energyrose at an SAAR of 2.7% during Q4, a slight improvement from 2.9% during the prior quarter. (Source, U.S. Bureau of Economic Analysis)
- The Bureau of Economic Analysis reported that Personal Incomerose 0.4% during December (4.3% y/y), after climbing 0.3% during November. Disposable Personal Income(personal income minus taxes) rose 0.3% (3.8% y/y), after rising 0.3% during November. Adjusted for inflation, disposable personal income remained unchanged in December (1.0% y/y) after rising 0.1% during November. The Wage & Salary Componentrose 0.2% in December (3.7% y/y), after rising 0.4% in November. Personal Consumption Expenditures (PCE), representingapproximately 70% of economic activity, rose 0.4% during December (4.7% y/y) after rising 0.2% during November. Personal Savings(Disposable Personal Income Less Outlays) fell to an annualized rate of 3.6% during December from 3.7% in November. The Fed’s favorite gauge of inflation, the PCE Chain Price Indexrose 0.4% in December, (2.9% y/y), up from 0.2% in November. Excluding food and energy, the Core PCEalso rose by 0.4% during December and by 0.2% during the prior month (3.0% y/y).(Source, Bureau of Economic Analysis)
- The U.S. Census Bureau reported that New Single-Family HomeSales slipped 13,000 during December to a Seasonally Adjusted Annualized Rate of 745,000 from 758,000 during November (3.8% y/y). Sales of New Homes have fallen by 27.7% from their peak of 1.031 million in October 2020 and 41.7% from the peak in July 2005 of 1,279,000 units. The median sales price of a new homerose 4.2% (-2.0% y/y) to $414,400 as the average sales price of a new homerose 0.5% (4.7% y/y) to $532,600. The average price is 1.6% below the high of $541,200 in July 2022. The number of unsold new homes on the marketfell 2.7% to 472,000 (-3.5% y/y) from 485,000 in November, marking the sixth decline over the past seven months. (Source, U.S. Census Bureau)
- The University of Michigan reported that its Final February Reading of Consumer Sentimentfell to 56.6 (-12.5% y/y) from a preliminary February level of to 57.3 but edged up slightly from a final January 56.4. The final February expectations componentheld at 56.6 (-11.6% y/y) as compared to the preliminary February report, but slipped from a final January 57.0. Lastly, the final February current conditions componentfell to 56.6 (+2.2% y/y) from a mid-February 58.3 as well as from a final January 55.4. Of note within the survey, according to the Survey of Consumers Director, Joanne Hsu, “year-ahead inflation expectations fell from 4.0% last month to 3.4% this month, the lowest reading since January 2025.” (Source, Univ of Michigan)
- Housing Startsrose 6.2% or by 82,000 to a seasonally adjusted annualized rate (SAAR) of 1,404,000 during December as compared to 1,322,000 in November (-7.3% y/y). A study completed by Freddie Mac in 2018 estimates that there must be 1.6 million units build annually to account for household growth and to replace existing stock. During December, Single-family housing starts rose 4.1% or 39,000 to 981,000 from 942,000 (-9.0% y/y). Meanwhile, Multifamilyhousing starts surged 11.3% to 423,000 in December (-3.0% y/y) from 378,000 during November. Building Permits, a key barometer for future starts, fell 60,000 to 1,448,000 in December as compared to November (-2.2% y/y). (Source, U.S. Census Bureau)
Economic Reportsscheduled to be released this week, include the following – on Monday, December Orders for Durable Goods and December Factory Orders; on Tuesday, February Consumer Confidence from the (Conference Board); on Thursday, Initial Claims for Unemployment Benefits; and, on Friday, January Wholesale Inflation as Measured by the Producer Price Index (PPI).
Several potentially market moving companies are scheduled to report earnings, to includeHome Depot (HD), Constellation Energy (CEG), Mercado Libre (MELI), Synopsys (SNPS), Nvidia (NVDA), TJX Companies (TJX), Lowe’s (LOW), Intuit (INTU), Salesforce (CRM), Schneider Electric (SBGSY) and Canadian Natural Resources (CNQ).