Reading the Compass - Data Points, Diplomatic Moves & Market Momentum

During the week, US economic data confirmed solid performance, albeit with signs of moderation towards 2026. The highlight was the upward revision of third-quarter GDP, which reached an annualized growth rate of 4.4%, the strongest since 2023 and higher than the initial estimate. This progress was supported by robust private consumption, higher exports, and increased public spending, while the negative effect of inventories was less than expected. At the same time, inflation returned to center stage: the PCE index, preferred by the Federal Reserve, rose 0.2% monthly in both its overall and core versions. In year-on-year terms, it showed a slight acceleration and remains above the 2% target, reinforcing the idea of a slow and data-dependent disinflationary process, consistent with a cautious Fed. Leading indicators offered a mixed picture. January PMIs reflected moderate expansion: the services sector remained at levels consistent with growth, while manufacturing barely managed to stay above the expansion threshold, suggesting a marginal improvement after months of weakness. The composite index advanced modestly, showing more subdued economic momentum than in the second half of 2025. The labor market continued to show resilience. Weekly jobless claims hovered around 200,000, with no signs of deterioration. In contrast, the real estate sector showed fragility, with a sharp drop in pending home sales, despite a slight recovery in construction spending.

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