MARKET COMMENTARY

Solid growth but sticky inflation keeps the Federal Reserve in •higher for longer• mode, dashing hopes for rate cuts. Beneath calm index moves, money rotated aggressively between sectors as investors recalibrated who benefits from this environment and who's exposed.

AI disruption has spread well beyond mega-cap tech, forcing investors to rethink earnings power across nearly every industry. The market may look orderly from a distance, but leadership is shifting quickly • and the gap between winners and losers is widening.

Below is the weekly scorecard.

Stock Index Performance 

• The S&P 500 gained 1.07%.
• The Nasdaq 100 climbed 1.13%.
• The Dow Jones Industrial Average added 0.25%.

The Macro Snapshot

• The Economy Is Still Growing, But Losing Steam. The economy grew at a 1.4% annual rate in the fourth quarter of 2025, down from 4.4% the prior quarter. Consumer spending kept growth positive, but softer inventories and exports were a drag. The Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, ended 2025 above its 2% target, with both headline and core PCE re-accelerating in December.
• Inflation Is Sticky, But Households Expect It to Improve. December PCE confirmed inflation ended the year above expectations. But the University of Michigan's February survey showed one-year inflation expectations among consumers falling to 3.4% from 4.0%, a •sticky but not spiraling• picture that keeps the Fed cautious but not alarmed.
• The Fed Is In No Hurry to Cut Rates. Minutes from the Fed's late-January Federal Open Market Committee (FOMC) meeting revealed a more divided committee than many expected, with some officials raising the possibility of rate hikes if inflation doesn't cooperate. After three consecutive cuts late in 2025, the Fed has paused at 3.5%•3.75% and wants clear evidence that inflation is returning to its 2% target before easing further.
• Tariff Decision and Reaction. Last Friday, policy risk intensified as the Supreme Court invalidated President Trump's emergency-law tariffs • but markets rallied after Trump quickly announced a new 10% global tariff (then upped to 15% on Saturday). Analysts warn that overall tariff levels are unlikely to fall, since other statutes allow the president to reimpose duties under different legal frameworks.

The Week Ahead 

• Several key releases this week will show whether the economy is cooling just enough for the Fed. The calendar includes factory orders (Monday, Feb. 23), consumer confidence (Tuesday, Feb. 24), new home sales (Wednesday, Feb. 25), and durable goods orders (Thursday, Feb. 26). Together, they'll shape whether markets hold to gradual rate-cut expectations for 2026 or start pricing a faster easing path if demand clearly softens.
• Nvidia and Salesforce headline a heavy slate of AI-linked earnings reports Tuesday through Thursday. With expectations already high, results could reinforce the AI theme or spark fresh volatility.

For long-term investors, fundamentals still win: strong balance sheets, steady cash flows, and companies with a clear AI advantage over their competitors.