Weekly Market Commentary January 20th to January 23rd 2026

The third and final estimate of third quarter GDP was revised to 4.4%, accelerating from 3.8% in the prior quarter. The pickup in economic activity was driven primarily by stronger exports and increased investment. Consumer spending remained resilient and also contributed to growth, indicating that economic momentum strengthened in the second half of 2025. However, consumption growth outpaced income gains, pushing the personal saving rate to its lowest level in three years. With household balance sheets appearing increasingly stretched, risks to consumer spending are skewed to the downside, particularly if policy measures, such as a proposed 10% cap on credit card interest rates, constrain the availability of consumer credit.

Personal Consumption Expenditures inflation, or PCE, increased 2.8% on the year and 0.2% on the month. PCE has been consistently near 3% since early 2024, reflecting stubborn services inflation.

The S&P Global survey showed U.S. business activity, both manufacturing and services, saw a slight improvement to start the year. However, hiring remains weak as businesses appear hesitant to take on staff in an environment of uncertainty, weak demand, and high costs.

The U.S. equity markets were volatile on the week after the President threatened to impose tariffs on NATO nations should they not allow the U.S. purchase of Greenland. This led to a sharp sell-off to start the week, only for it to be reversed after the President walked back the threats a day later. The S&P 500 closed 0.3% lower to 6,915, the Dow Jones Industrials 0.5% lower to 49,099, and the Nasdaq 0.1% lower to 23,501.

Next week the FOMC will decide on interest rates. As of this writing, the market is pricing in a 97% chance of rates remaining unchanged. We will also get a reading of the Producer Price Index.