February Economic Update

Market Summary

January saw U.S. equities rebound modestly despite bouts of volatility tied to economic data delays, policy expectations, and geopolitical headlines. Markets were choppy mid-month after tariff-related headlines triggered selling in technology stocks, but sentiment recovered late as rate expectations stabilized. On a full-month basis, the S&P 500 gained 1.34%, the Nasdaq 1.19%, and the Russell 200 5.36%. Investors rotated away from mega-cap tech and toward cyclicals, energy, and materials. (1)

Economic Releases & Data

December’s Consumer Price Index — released in mid-January — showed inflation moderating modestly but still elevated relative to the Fed’s 2% objective. Core CPI edged lower than forecasts, easing some pressure on markets but underscoring persistent stickiness in services and shelter costs. (2)

Other sentiment indicators offered mixed signals. Business activity surveys showed the overall private sector continuing to expand modestly, even as new orders growth slowed marginally and export demand softened. Consumer spending softened following a strong holiday season, with real retail sales showing a modest pullback as households appeared more selective in discretionary purchases. At the same time, consumer expectations around inflation and job prospects shifted lower in Federal Reserve regional surveys, suggesting that inflation expectations may be becoming more anchored even as consumer confidence remained well below historical averages.

Finally, housing data remained mixed. Mortgage rates drifted slightly lower during the month, providing marginal relief for affordability, yet existing home sales stayed subdued and new construction activity showed limited momentum. Home prices continued to rise modestly in many regions, keeping housing inflation elevated even as broader price pressures cooled. Housing remains a key variable for both inflation and growth in 2026, and a clearer recovery may depend on further easing in financial conditions.

Federal Reserve Announcement

In late January, the Federal Reserve held interest rates unchanged at 3.50–3.75%, reflecting a “data-dependent” stance as inflation slowly moderates and labor dynamics evolve. Policymakers signaled that future cuts are possible but not imminent, emphasizing uncertainty and the need for clearer inflation progress. (3)

Fed officials underscored that achieving a sustained decline in inflation remains the priority, but that the timing and magnitude of any additional easing will depend heavily on incoming data — especially jobs and CPI figures slated for release in February.

Looking Forward…

Investors enter February weighing mixed signals: Inflation data and postponed jobs figures will heavily influence expectations for the Fed’s next move, while tariff policy and geopolitical developments continue to shape risk sentiment. Although the broad-based US indices have been trading mostly sideways lately, volatility with both moves up and down has increased on an intraday and overnight-basis. Headline risk is ever persistent as earnings, geopolitical, and tariff news swing the markets rapidly. We expect more of the same for February with some key technical levels and indicators being tested at the moment.

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Monthly Financial Tip:

Consider consolidating old retirement accounts when it makes sense. Rolling former employer plans into a single IRA can simplify management, improve investment oversight, and reduce the risk of losing track of accounts over time.

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Citations:

1. Schwab, Jan 30, 2026

2. Investopedia, Feb 09, 2026

3. Federal Reserve Jan 28, 2026

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.