Markets have remained very resilient in the new year while facing a multitude of potential distractions, both domestically and abroad. Stock indices are hovering near their all-time highs, focusing on AI, earnings, and the economy.
While we won’t have any 4th quarter economic growth (GDP) reports until February 20, the US economy appears to be growing at a stronger pace than expected.
Atlanta Fed estimate: 5.3%
https://www.atlantafed.org/cqer/research/gdpnow
New York Fed estimate: 2.6% https://www.newyorkfed.org/research/policy/nowcast/#nowcast/2025:Q4
The Atlanta Fed’s estimate of 5.3% would be the strongest quarter of economic growth since the sharp rebound after covid, but we’ll have to see how their estimates evolve between now and February 20.
December inflation was 2.7%, tame and in line with expectations.
https://www.morningstar.com/economy/inflation-moderated-december-latest-cpi-report-shows
The unemployment rate fell from 4.5% to 4.4% in December with both job creation and layoffs lower than expected. Additionally, labor market changes related to AI and immigration are likely offsetting each other to some degree. Average hourly wages were up 3.8% in the past year, which was a little higher than expected.
Weekly jobless claims are a near real-time indicator of the health of the job market. Claims fell by 9,000 from the previous week to 198,000 on the week ending January 10th, contrasting with market expectations of an increase to 215,000. This is the second-lowest reading in two years.
Given all this positive economic data – solid estimated GDP growth, tame inflation, and a stabilizing labor market – the odds of another interest rate cut from the Fed when they meet later this month have fallen to just 5%.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
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