Hope you are all doing well. The major U.S. stock indexes fell around 1% to 2%. Technology stocks continued to drive the broader market lower. For the S&P 500, it was the fourth negative week out of the past five, although the previous declines were all less than 1%. There is nothing fundamentally wrong with the tech sector, their earnings continue to be exceptional. If you have money on the sidelines, you have been looking to deploy it might be a good time to pick up some shares of the tech companies. Using an index fund like VGT (Vanguard Information Technology) or VUG (Vanguard Growth) is a better way to do that rather than buying individual companies. Tomorrow is President’s day, so I have broken down this week’s update using quotes from some of our lesser celebrated Presidents.
“I do not believe that words ever convince a discouraged person in these situations. The thing that brings him back is courage and the natural sight of other industries and other men going ahead with their programs and business” – President Hoover
A softening labor market and the massive job cuts by the federal government have been weighing on the labor market and impacting consumer confidence for much of the past year. We are now showing signs of improvement. U.S. jobs growth exceeded expectations. The gain of 130,000 jobs in January was more than double the number that most economists had forecast and up from 48,000 in December. January’s unemployment rate slipped to 4.3% from 4.4% the previous month. More importantly, if we take out the cuts to federal employment, the numbers are even better. The increase in private payrolls stands at 172,000 at the start of 2026. A marked improvement from the nearly stagnant hiring in 2025, where private payrolls rose on average by just 30,000 each month.
“Whoever controls the volume of money in our country is the absolute master of all industry and commerce.” – President Garfield
Soon enough, that control will pass from Chair Powell to Kevin Warsh. The markets are already beginning to look at the data for clues on what his first moves will be. Friday’s Consumer Price Index (CPI) report extended a recent trend of slightly cooler-than-expected inflation. CPI rose at an annual rate of 2.4% in January, down from 2.7% the previous month. It’s the lowest figure since May 2025. It is only one month’s worth of data, so it is not a trend. However, if it continues through May, it will create a path for lower interest rates as Warsh begins his term. The inflation number is encouraging, though still higher than it needs to be. Lower energy prices were a driver. While that helps consumers but is not something the Fed watches as closely. The Fed targets the personal consumption expenditures (PCE) measure of inflation, which captures consumer spending across a broader range of goods and services. The December core PCE reading is forecasted to remain elevated at 2.9%
“There is no dignity quite so impressive, and no independence quite so important, as living within your means.” – President Coolidge
For most of 2025, U.S. consumers had been living above their means. A belt-tightening trend may be developing. Spending has been in excess of income growth for U.S. households which tells you consumers were saving less each month to finance this spending. The wallet gives you a better read than any sentiment survey. The above means spending is reflective of people feeling positive about their personal finances. This week we found out that December sales at U.S. retailers were essentially unchanged relative to the previous month. The flat result from what should be the peak month of the holiday shopping season is disappointing. It was well below the expectations of most economists, who had projected a month-to-month sales increase of around 0.4%. It bears watching to see if a trend of weaker consumer spending develops. I don’t think it will because there are a couple of things on the horizon that should help the consumers income wise and lead to more spending. First will be the effect of tax cuts. The Big, Beautiful Bill will impact personal finances in 2026 through tax refunds and adjusted tax withholdings. Second, the tariff fears that led to a hiring freeze last year seem to have thawed as companies can properly gauge the impact of the tariffs. As a result, I expect to see more private sector jobs become available in 2026.
You can use my calendar link below and schedule a phone or Zoom appointment at any time. The calendar link allows you to schedule a call as early as tomorrow. If you have a time-sensitive issue and have difficulty reaching me on the phone, it is generally best to use the calendar link to schedule a 15-minute appointment. If it has been a while since your last review and you aren’t currently on my calendar, please schedule. Happy Presidents Day!
