Market resilience amid inflation jitters: A week of mixed signals
The past week delivered a fresh reminder that inflation remains persistently above the Federal Reserve’s 2% target. On Wednesday, Feb. 12, the Bureau of Labor Statistics reported a hotter-than-expected Consumer Price Index (CPI) reading. January’s CPI rose by 0.5% month-over-month, pushing the year-over-year increase past 3% for the first time since mid-2024. Bond markets reacted swiftly, driving yields higher and effectively removing any expectation of a Federal Reserve rate cut in 2025. Chairman Jerome Powell reinforced this stance in his congressional testimony, highlighting a “strong overall economy, a solid labor market, but inflation stubbornly above our target,” signaling no urgency to ease monetary policy.
Here’s what else is on our radar…
Chief Investment Officer Thierry Hasse
Equity Markets Inch Higher Despite Headwinds
Despite the inflation surprise and shifting monetary policy expectations, all three major U.S. equity indices managed to close the week in positive territory. However, investor sentiment remains fragile. Uncertainty surrounding potential tariff measures continues to cast a shadow over the market. Additionally, while the broader indices remain near all-time highs, economically sensitive sectors of the S&P 500 lagged. The narrative is evolving, and we’re seeing that optimism surrounding the incoming administration’s pro-growth policies is beginning to give way to concerns that cracks may be forming in the U.S. economy, especially as developed economies elsewhere show increasing signs of weakness.
Consumer Spending Takes an Unexpected Hit
Friday’s retail sales report from the Commerce Department revealed a 0.9% decline in January—the largest drop in two years. Harsh winter weather and California’s devastating wildfires likely contributed to the pullback, but underlying economic concerns are also playing a role. Elevated inflation and job security fears appear to be weighing on consumers. However, there was a silver lining: the weaker retail sales data helped bring some relief to the bond market. The 10-year Treasury yield dipped below the psychologically significant 4.5% level, partially reversing the surge in yields that followed the inflation report earlier in the week.
What We’re Watching This Week
The Federal Reserve will take center stage with no fewer than 10 regional presidents or governors scheduled to speak on the economy. Expect a unified message emphasizing that monetary policy remains well-calibrated and that the Fed can afford to be patient as it monitors incoming data. However, for a more direct read on consumer sentiment, Thursday’s earnings call from Walmart—one of Elevage Partners’ core equity holdings—will be particularly telling. With over 255 million customer visits per week, Walmart’s insights could offer valuable clues into the financial health of the U.S. consumer.
We’ll be watching closely—stay tuned.
The information contained herein represents the views of Elevage Partners at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Any statement non-factual in nature constitutes only current opinion which is subject to change. These materials are provided for informational purposes only and do not constitute investment advice. Any reference to a security listed herein does not constitute a recommendation to buy, sell, or hold such security. Past performance is no guarantee of future results. The historical returns of any securities and/or sectors mentioned in this commentary are not necessarily indicative of their future performance.