The Setup & Where to Focus

The macro skies have been clouded by early-year seasonal tweaks and January’s unusual weather events. Last month’s jobs report, CPI update, and Retail Sales figures may have been distorted by annual adjustments and one-off events, making it harder for macro investors to decipher signal from noise. We’ll help you parse through all the data points.

It’s a lighter data deck this week with the focus on the minutes from the December FOMC meeting, flash February PMIs from S&P Global, and a second look at the University of Michigan Surveys of Consumers. PCE inflation, the Fed’s preferred gauge, won’t be released until the 28th. Key housing market data arrives along with the Leading Economic Index from the Conference Board. Let’s check it all out.

Weekly Calendar Look Ahead

Markets are closed for Presidents’ Day on Monday, but that won’t stop a trio of Fed members from hitting the speaking circuit; Harker, Bowman, and Waller all have public engagements. Harker is not a voting member, but Bowman is, and she is among the most hawkish on the Committee. Given recent inflation trends—the headline CPI rate rising annually for four straight months—we expect the Fed to reiterate a “wait and see” approach to monetary policy. While January’s CPI rate of 0.5%, matching the highest since January of 2023, was altered by calendar effects, it's clear that US inflation has at best settled in a range between 2.5%-3%.

Tuesday’s data slate isn’t too exciting. A slight sequential drop in the NY Empire State Manufacturing Index is projected—we'll find out in the premarket. The week’s slew of housing market data gets underway with the February NAHB Housing Market Index update at 10 a.m. ET. The consensus calls for a 10th consecutive print under 50, but the survey’s results are off recent lows from the middle of last year. Mortgage rates are stubborn near 7% and there has been a dearth of selling activity heading into the spring season. Mary Daly, a dove, from the San Francisco Fed, talks in the morning before a pair of Treasury bill auctions. Barr speaks later in the day, but the Federal Reserve Board Vice Chair for Supervision is stepping down from his role later this month.

More data on the health of the real estate market hits on Wednesday. We expect the weekly MBA Mortgage update to show steady borrowing rates, just under 7%, along with a small rise in mortgage applications. Building Permits and Housing Starts data for January come before the bell; we see small monthly declines in those leading indicators. Also keep an eye on the weekly Johnson Redbook Retail Sales report that’s due out later in the premarket; given the soft January Retail Sales report published by the Census Bureau, this one may offer more real-time color on the health of the consumer. On that note, we expect generally upbeat earnings from a host of major US retailers this week and next. Treasury auctions are held before the 2 p.m. ET release of the FOMC minutes: It wasn’t a “live” meeting, but it’s clear that monetary policy is uncertain as uncertainty around President Trump’s policies grows by the week. We expect the Fed to be in a holding pattern through at least mid-year.

Jobless Claims and the Philly Fed Manufacturing Index are the notable macro-movers early on Thursday. No surprises are expected with Initial Claims—we continue to see few firings across the economy. Continuing Claims, however, are near their highest level since November of 2021. Philly Fed will be interesting after the January spike to above 44, the biggest sequential increase ever outside of the craziness of COVID. Like other survey and sentiment barometers, a decline is anticipated. As always with regional reports like this, paying attention to the internals is key (New Orders, Employment, Prices Paid). Right after the opening bell, the Chicago Fed’s Goolsbee speaks; usually a reliable dove, earlier this month, he voiced caution on cutting rates until more clarity is seen on the fiscal front. Then at the top of the hour, The Conference Board releases its January Leading Economic Index (LEI). We urge investors not to put much weight on this one as it has been a poor actual macro indicator in the last few years. Musalem, Barr, and Kugler speak in the afternoon.

The holiday-shortened week wraps up with February PMI surveys from S&P Global in the morning, and expansion in both Manufacturing and Services is expected, continuing the January theme. Next up, Existing Home Sales are seen falling month-on-month—we'll find out at 10 a.m. ET. Concurrent with that release, the final read on the February UMich Consumer Sentiment survey crosses the wires; this politically driven survey should be taken with a hefty grain of salt.

Fiscal Policy Framework

President Trump announced 25% tariffs on steel and aluminum imports, effective March 12, with no country-specific exemptions. Including Canada and Mexico, the import duties take aim at unfair trade practices. Our neighbors to the north and south also face a 25% tariff beginning on March 4 (after they were delayed initially), so we could hear updates on trade negotiations on that front.

The major fiscal fight last week had to do with “reciprocal” tariffs to be potentially levied on the rest of the world. Trump tasked his trade team with investigating the policy move. Ironically, if enacted, this could ultimately cause other nations to reduce their import tax rate, thereby resulting in a lower overall global tariff rate. That’s the bullish take. The bears say that the rest of the world may force Trump into putting in place higher US tariffs, and the stock market would surely not like that. With global equities closing at all-time highs last week, it seems the former narrative is winning out so far. That’s also how we see it—Trump is an expert negotiator, and he has wielded the tariff weapon effectively through his first four weeks in office.

Finally, we are less than a month away from a possible government shutdown. House and Senate Republicans are working on their own budget resolutions centering on tax policy. Recall that the 2017 Tax Cuts and Jobs Act is set to expire at the end of the year.

Risks and Opportunities

While global stocks have fared well so far in 2025, the back half of February is notoriously weak. There’s clear upside momentum in Europe and China, but it’s possible that the mood has turned too bullish on tariffs. We expect more volatility around Trump headlines given the light data economic deck. Financials remain a favored sector as they are largely immune from duties and import taxes, so sticking with industries working in that space may be wise in the weeks ahead.

Elsewhere, Consumer stocks will be in play for the balance of the month. We’ll get earnings from Walmart (WMT) and Alibaba (BABA) this week, with more retailers reporting next week.

Apple (AAPL) is expected to announce a new product at noon ET on Wednesday, so that will have the Information Technology sector’s attention. Communication Services has been the best sector year to date, thanks to Meta Platforms (META) which comes into the week up 20 straight sessions. The momentum factor is powerful, but if there’s a market retreat in the second half of the month, we could see quick profit-taking in that area.

Europe, an area we highlighted for potential gains last week, outperformed the US stock market. The German DAX is now up 13% already in 2025.

Quick Hits

• China’s stock market has been strong, led by BABA which is +55% in the past month, its best 23-day return on record

• Gold is up seven weeks in a row, its longest winning streak since 2020

• WTI Oil remains near $70 with oil volatility sinking; President Trump may meet with Putin to craft an official end to the war in Ukraine

• The US Dollar Index closed at its lowest level of the year last Friday

• S&P 500 earnings are now expected to have grown 17% in Q4, the best growth rate in three years