WEEKLY MARKET SUMMARY
Global Equities: It was a holiday-shortened yet eventful week for stocks as investors dealt with fresh data on GDP, inflation, and a long-awaited Supreme Court ruling on tariffs. US stocks gained during the weekly session, with the S&P 500 tacking on 1.1%, the Nasdaq Composite up 1.5%, and the Dow Jones Industrial Average lagging but still positive at 0.3%. US small caps also rose during the week, gaining 0.6%. Foreign developed market stocks gained 0.6% while emerging markets outperformed with a 2.0% weekly advance.
Fixed Income: The 10-Year Treasury Yield fell to under 4.02% early in the week, but ended higher at 4.09% after higher inflation data decreased the likelihood of interest rate cuts. Market jitters arose in the $1.8 trillion private credit sector after Blue Owl Capital restructured redemptions in its OBDC II fund but seemed to be mostly contained by week’s end, as Blue Owl management stated the change was intended to provide equitable treatment to all existing shareholders during the planned wind-down of the fund.
Commodities: US West Texas Intermediate Crude prices rose on Iran tensions, ending the week at $66.50 per barrel. Gold prices rose steadily during the week, reclaiming the $5,000/oz mark and settling at $5,100.
WEEKLY ECONOMIC SUMMARY
Economic Data: The Core Personal Consumption Expenditures Index, which is the official Fed benchmark for inflation, was hotter than expected in December, rising 0.4% to an annual rate of 3.0%. The headline reading (which includes food and energy) was also up 0.4% for the month at an annual rate of 2.8%. Inflation has trended at an annualized rate of 3.2% for the last three months, accelerating and giving the Fed little justification to cut interest rates. Also released during the week was fourth quarter GDP, which came in sharply below expectations at just 1.4%. The consensus forecast was for 2.8%, but an estimated 1-1.3% of the miss was attributed to the government shutdown and should be made up in Q1 of 2026. While a weakening economy could give validation for the Fed doves looking to cut interest rates, inflation has been the bigger concern for most of the Fed committee members recently, thus interest rate cut expectations shifted lower for both March and June.
Tariff Ruling: After many months of speculation, the Supreme Court issued its ruling on the legality of President Trump’s tariffs under the International Emergency Economic Powers Act (IEEPA). A 6-3 ruling from the SCOTUS struck down the tariffs under the argument that President Trump overstepped his authority in bypassing Congress but did not offer an opinion on whether the $160 billion collected from US importers would have to be refunded. President Trump lashed out against the decision while imposing a new global 10% tariff on all imports under Section 122 of the Trade act of 1974, which allows the president to use tariffs in response to large balance-of-payments deficits for 150 days without Congressional approval. Over the weekend, Trump raised this new global tariff rate to 15%, which is the maximum permitted under the statute.
Earnings Update: It was a relatively light week for earnings news, with the highlights being Walmart (WMT) and Deere (DE) as investors eagerly await Nvidia (NVDA) results on February 25th. Walmart shares slipped roughly 3% despite a beat and a 53rd consecutive annual dividend hike, as the retail giant offered an underwhelming outlook. Deere results were heavily impacted by tariffs, but still impressed investors. Shares were up over 6% in response to the strong quarter and higher guidance.
CHART OF THE DAY
The Chart of the Day shows the breakdown between tariff costs borne by foreign exporters and US importers in 2025 (through November). In 2025, American companies were on the hook for roughly 90% of the total tariffs collected by the US government. These companies will now likely seek reimbursement for those surcharges. While domestic importers and foreign exporters could ultimately receive compensation for duties paid, US consumers may end up as the biggest losers in the tariff saga because some of the tariffs were passed along in the form of higher goods prices and ultimately paid for by the consumer.
Source: NY Fed, Bloomberg. Commentary by VestGen Investment Management.