We’re posting a little later this week, but there’s still plenty to cover! January is behind us, and the markets are kicking off February with plenty of movement. From slowing GDP growth to AI shake-ups in the tech sector, here’s what you need to know about the latest economic trends.
Key Takeaways This Week
- GDP growth slowed to 2.3% in Q4 2024, partly due to lower inventory levels.
- AI competition from China led to a sell-off in U.S. semiconductor stocks.
- The Fed held rates steady, as expected.
- Consumer confidence dipped, but personal spending beat expectations.
- Upcoming economic data will focus on business confidence, employment, and consumer sentiment.
Economic Reports Recap
Consumer Confidence Takes a Hit
The Conference Board’s Consumer Confidence Index dropped more than expected in January, signaling some hesitation from consumers as 2025 begins.
- Prior confidence: 109.5 | Expected: 105.7 | Actual: 104.1
Federal Reserve Keeps Rates Steady
No surprises here—the Federal Reserve held the federal funds rate at 4.50%, keeping an eye on inflation and economic conditions before making any moves.
GDP Growth Slows But Stays Solid
The U.S. economy grew at 2.3% in the fourth quarter, slightly below expectations but still showing resilience in a historical context.
- Prior GDP growth: 3.1% | Expected: 2.6% | Actual: 2.3%
Consumer Spending on the Rise
Despite lower confidence, people kept spending. Personal income met expectations, but spending outpaced projections.
- Personal income: +0.4% (expected: +0.4%)
- Personal spending: +0.7% (expected: +0.5%)
Financial Markets Update
Tech Stocks Take a Hit from AI Competition
China’s DeepSeek AI made waves after launching on the Apple App Store, reportedly built at a fraction of OpenAI’s costs. This rattled U.S. semiconductor firms, leading to a market dip.
Bonds Move Slightly Lower
Treasury yields fell modestly, with intermediate- and long-term yields seeing the biggest impact. The 10-year Treasury dropped 5.6 basis points to close at 4.57%.
What to Watch This Week
- Monday (February 3): The ISM Manufacturing Index—Are manufacturers feeling more optimistic?
- Wednesday (February 5): The ISM Services Index—Will service sector confidence keep climbing?
- Friday (February 7): The Employment Report—Economists expect 158,000 new jobs added in December, signaling steady labor demand.
- Friday (February 7): University of Michigan Consumer Sentiment Report—Will consumer attitudes rebound?
The Bottom Line
Markets are adjusting to global AI competition, interest rate stability, and mixed economic signals. This week’s data will provide more clarity on business sentiment and job growth. Stay tuned!
Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. He works with individuals and families on financial planning, retirement strategies, and investment management. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Connect with Tom
Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent. One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.