Monthly Market Update

Holding Steady

• Gross Domestic Product ⁽¹⁾⁽²⁾ (4Q25): GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 is 4.2% on February 2, unchanged from January 29.
• Employment (December): The January employment report will be delayed due to a partial government shutdown. For December, Total nonfarm payroll employment rose by 50,000 in November, and the unemployment rate changed little at 4.4%, the U.S. Bureau of Labor Statistics reported. Employment continued to trend up in food services and drinking places, health care, and social assistance. Retail trade lost jobs. The change in total nonfarm payroll employment for October was revised down by 68,000, from -105,000 to -173,000, and the change for November was revised down by 8,000, from 64,000 to 56,000.
• Inflation ⁽⁴⁾ (December): The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% on a seasonally adjusted basis in December, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 2.7% before seasonal adjustment. The index for all items less food and energy rose 0.2% in December, unchanged from the preceding month. The all items less food and energy index rose 2.6% for the 12 months ending in December.
• The Producer Price Index (PPI) (December): The Producer Price Index for final demand, seasonally adjusted, increased 0.5% in December, after rising 0.2% in November and 0.1% in October, the U.S. Bureau of Labor Statistics reported. On an unadjusted basis, the index for final demand rose 3.0% in 2025 after moving up 3.5% in 2024.
• Retail and Food Services Sales ⁽⁶⁾ (November): The December 2025 release for Advance Monthly Sales for Retail and Food Services, originally scheduled for January 15, 2026, has been rescheduled for release on February 10, 2026. Advance estimates of U.S. retail and food services sales for November 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $735.9.0 billion, up 0.6% (±0.4%) from the previous month, and up 3.3% (±0.5%) from November 2024.
• Personal Income and PCE ⁽⁹⁾ (October & November): Due to the federal government shutdown, December Personal Income and PCE report was delayed until February 20, 2026. Separately, Personal incomeincreased $30.6 billion (0.1% at a monthly rate) in October, followed by an increase of $80.0 billion (0.3%) in November, according to estimates released by the U.S. Bureau of Economic Analysis. From the preceding month, the PCE price index increased 0.2% in both October and November. Excluding food and energy, the PCE price index also increased 0.2% in both months. From the same month one year ago, the PCE price index increased 2.7% in October, followed by an increase of 2.8% in November. Excluding food and energy, the PCE price index increased 2.7% followed by an increase of 2.8% from the same months one year ago.

IMF Upgrades Outlook Amid Resilient Growth

Key takeaways: Global growth is projected at 3.3 percent for 2026 and 3.2 percent for 2027, revised slightly up since the October 2025 World Economic Outlook. Technology investment, fiscal and monetary support, accommodative financial conditions, and private sector adaptability offset trade policy shifts. Global inflation is expected to fall, but US inflation will return to target more gradually. Key downside risks are reevaluation of technology expectations and escalation of geopolitical tensions.

Policymakers should restore fiscal buffers, preserve price and financial stability, reduce uncertainty, and implement structural reforms.

International Monetary Fund (IMF) 2026 and 2026 World Economic Outlook Growth Projections (Jan. 2026): 

Balancing Risks

The most recent Fed meeting took place on January 28, 2026. The FOMC decided to keep federal funds rate unchanged to the target range of 3.50% to 3.75%. As of this writing, markets are pricing a 90% chance of holding rates steady, and a 10% chance of lowering rates by another -25 bps at the March 18, 2026 meeting. ⁽⁷⁾⁽⁸⁾

Highlights of Chair Powell’s Press Conference:

• Resilient Growth Amid Soft Labor Conditions: “The U.S. economy expanded at a solid pace last year… While job gains have remained low, the unemployment rate has shown some signs of stabilization, and inflation remains somewhat elevated.”
• Majority Holds, Two Dissents: “Broad support on the FOMC for holding rates today”; As Miran and Waller dissented, voting to lower the target range for the federal funds rate by -25 bps
• Policy Nears Neutral, with an Emphasis on Data Dependent Adjustments “Since last September, we have lowered our policy rate 75 basis points… bringing it within a range of plausible estimates of neutral… We are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks.”

Monthly and YTD returns

Source: Morningstar asset class screening total return 1 month USD and total return YTD as of January 31^st 2025 ⁽¹¹⁾

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Definitions:

• ⁽¹⁾ Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).
• ⁽²⁾ GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
• ⁽³⁾ The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earningsof workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
• Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
• ⁽⁴⁾ The Consumer Price Index (CPI):Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
• ⁽⁵⁾ The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a %age of the labor force. Source: Bureau of Labor Statistics (BLS).
• The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. Source: Bureau of Labor Statistics (BLS).
• ⁽⁶⁾ Advance Monthly Sales for Retail and Food Services:Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
• ⁽⁷⁾ Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
• ⁽⁸⁾ The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
• ⁽⁹⁾ The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), ADP Research Institute, U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO). The White House, Tariff FactSheet.

⁽¹¹⁾ Financial Markets – Monthly and YTD returns (Table): Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (JPM EMBI Global), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond), and Developed Markets Sovereign (excl. US) (JPM GBI Global Ex US). Source: Morningstar.