Closing Thoughts for the Week

Even though U.S. equities finished the week on the upswing, it was a decidedly risk-off week overall. Even though investors may search for green shoots in the current pullback, the macro data suggests that the U.S. economy is indeed slowing down. The tone out of Washington remains negative, at least as it pertains to the U.S. economic outlook.

Last week serves as a reminder of how the macro forces that have been building over the past several quarters, including inflation, interest rates and geopolitics, may finally be suggesting that an economic deceleration is upon us. On Friday, the markets reacted with a decidedly risk-off turn. The situation in Japan warrants continued monitoring with the country’s inflation rate hitting 4% in January.

There were two pieces of news this past week that I really think set a potentially negative tone for the weeks ahead. It looks like the inflation rate could hold steady around this level for the next few months before rising again starting around May. If retail sales start breaking down, the economy may not have much left holding it up. U.S. stocks have remained remarkably steady throughout what’s becoming a more volatile environment both politically and economically.