GDP Miss, Hot PCE, Tariff Risk

Last week delivered mixed signals for the bond market — and this week could raise the stakes even higher. In this episode of Master the Markets, host and expert Bill Bodnar breaks down a surprisingly weak Q4 GDP report, which came in at roughly half of expectations. Some of that softness may be tied to the government shutdown’s impact on spending and data collection, and markets appear to be looking past it for now.
More concerning for the Fed was the final Core PCE reading of the year. The Fed’s preferred inflation gauge rose 0.4% for the month, running at a 5% annualized pace and finishing the year at 3% — a touch hotter than expected. Still, the bond market largely absorbed the data without major disruption.
Now comes a pivotal stretch. This week features the State of the Union, multiple Fed speakers, and a potentially market-moving Supreme Court ruling on tariffs. If tariffs are struck down and refunds must be financed, that could mean additional bond issuance — something the bond market may not welcome.