Economic Events That Could Affect Your Portfolio This Week, February 24-28, 2025
Another eventful week saw major stock indexes close in the red.
- The Dow Jones Industrial Average (DJIA) dropped by 2.51%, and the S&P 500 (SPX) lost 1.66%.
- The Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) registered weekly declines of 2.51% and 2.26%, respectively, reflecting overall market weakness.
The first part of the holiday-shortened week saw the S&P 500 reach its second and third record highs this year.
- However, investor sentiment took a hit after Walmart’s (WMT) muted guidance raised concerns over the economic outlook.
- Worries were fueled by weaker-than-expected data, the potential for a trade war, and ongoing geopolitical uncertainties.
Several recent economic reports revealed cracks in the economy’s resilience.
- January’s housing market index fell to a five-month low, with housing starts declining and existing home sales dropping.
- Meanwhile, S&P Global reported that U.S. service-sector activity entered contraction territory, posting its lowest PMI reading in over two years.
- This overshadowed a continued rebound in manufacturing activity.
Analysts have also raised concerns about the effect of the Trump administration’s federal layoffs on the job market.
- These concerns, sparked by Target’s weak performance, were underscored by January’s consumer sentiment index, which hit its lowest level since November 2023.
- Household inflation expectations surged amid fears that tariffs would push prices higher.
President Trump announced plans to impose additional tariffs on automobiles, pharmaceuticals, and lumber products.
- These tariffs, set to be 25%, will take effect on April 2nd, with transportation and airline stocks being particularly hard-hit.
- Rising policy uncertainty combined with signs of economic weakness pressured the broader market.
The Federal Reserve‘s recent meeting minutes indicated that policymakers were prepared to hold rates steady.
- The Fed cited a “high degree of uncertainty” about the economic outlook, with concerns about inflationary pressures due to tariffs and strong consumer spending.
- However, soft economic data could force the central bank to act.
Despite warnings that one data point doesn’t capture the economy’s full health, stagflation—a condition of low growth and high inflation—is becoming more frequently discussed.
- Weaker-than-expected data could push the Fed to introduce further monetary support, as a slowdown in consumption might help curb inflation.
Three Economic Events to Watch This Week
Here are three key economic events that could affect your portfolio this week:
1. Q4 2024 GDP Growth Annualized (second estimate) – Thursday, 02/27
- This report provides an updated view of GDP growth for the last quarter.
- Economists expect a 2.3% annualized growth rate, which was signaled by the advance estimate.
- A higher-than-expected reading could reduce the likelihood of Fed rate cuts, while a lower-than-expected reading could support further rate reductions.
2. January’s Pending Home Sales – Thursday, 02/27
- This report reflects contract activity in the housing market and is a leading indicator for future home sales.
- With housing accounting for 85-90% of U.S. home sales annually, this data offers crucial insight into the health of the economy and consumer confidence.
3. January’s Core Personal Consumption Expenditures (Core PCE) – Friday, 02/28
- The Core PCE reflects the average amount consumers spend monthly, excluding volatile items like food and energy.
- The Core PCE Price Index is the Federal Open Market Committee’s (FOMC) primary gauge of inflation.
- This report will be closely watched by policymakers to assess the inflationary pressures in the economy.
