Has been quite the holiday shortened week.
US economic data coming out this morning showing the first reading of growth for Q4 2025, rising at a 1.4% annualized rate.
Now the Fed Reserve's preferred PCE gauge coming in at 2.9%.
In the 12 months through December, as for oil prices, they spiked to a six-month high in the previous session as the US may be preparing to launch military strikes on Iran, and this does raise questions about the potential economic fallout from escalating tensions in the region.
And ahead of video earnings next week, concerns about a disruption continued weigh on the broader market.
The AI arms race and ongoing infrastructure build out have led some former cash flow leaders to take on new debt to fund investment.
Well joining me to weigh in on this Friday morning is so new.
VP and global macro strategist at Carson Group.
Well, good morning.
Happy Friday to you.
So, so we did get economic data out this morning with GDP as well as inflation data and also personal income and spending.
So what does that data point tell you?
Look, the economic growth eased in the 4th quarter of 2025, and that was mostly on the back of the shutdown, right?
Because of the shutdown, federal government spending slash investment was a 120 basis point drag on GDP growth.
And one way to avoid that, right, there are noisy parts of GDP, Remy, this is, you know, we have inventories and net exports.
Those tend to go up and down a lot quarter after quarter after quarter, which is why we look at something called real private final demand, right?
So that's just mostly how much our household's consuming, how much of our business is investing that came out about 2.4%.
Annualized pace in Q4, that's not too bad.
That's not far from trend, so the economy kind of did OK beneath the surface headline.
I think we see a rebound in Q1 to as the shutdown impact reverses.
Yes, and Sony, you bring up an important point because it's about the finer details of these economic data points.
So what does all of this data mean for the Federal Reserve and the central bank's outlook for 2026?
That's the other side of it, right?
So compare, you know.
Just sagging away from the GDP growth numbers.
The nominal GDP growth in 2025 was about 5.5% thereabouts.
Overall real GDP growth after adjusting was somewhere between 2 and 2.5%, let's say about 2.4%, which means inflation.
Was running above 3% and that's pretty much where the core personal expenditure core personal consumption expenditures index for 2025 came out as about right at 3%.
That is 100 basis points above the Fed's target.
They've already cut, you know, several times last year, you know, in September, November, and then December again.
I don't think they're going to cut anytime soon given where core PC is right now, so.
The outlook for inflation going forward.
Look, oil prices going up is not a pleasant thing.
I mean, but you know that may reverse depending on what happens in the Middle East.
It may be a temporary thing.
There's also sheltered disinflation coming along the pipeline, but at the same time we are seeing elevated inflation for services, several services beyond just, you know, tariff impacted goods, right?
You think about restaurant spending, for example.
Inflation's running pretty hot over there.
So these are some of the things that's probably going to keep the Fed on the sidelines.
And you bring up an important point, Sony, because Americans are keeping an eye on prices and the cost of everything.
So I do want to get your take on the K-shaped economy and the reality, especially at a time when the major US stock averages are close to or eyeing record highs.
So tell us about the disconnect that we're seeing right now between Wall Street and Main Street.
I think one part of it is if you think about spending, And you know one person's spending is another person's income and a business's income and profits, and expanding margins on the business side is good for the stock market, but at the same time, you know, that means prices are going up too, right?
And I think that's the other side of seeing higher prices.
We are seeing expanding margins.
We're seeing record margins for, you know, companies, and that's boosting the stock market, right?
So at the same time it gets back.
To, you know, what you just said, there are affordability concerns.
I think the biggest affordability concern right now is the housing market.
Housing, again, going back to the GDP data, has been a drag on GDP for several quarters now.
It was a drag on GDP growth once again in Q4, right?
And that's partly because homes are unaffordable because of where interest rates are.
But that gets back to the fact that look, interest rates are not going to come down unless inflation comes down.
Yes, and another area I do want to get your take on is the labor market as well as productivity, because although productivity is surging, hiring has been stagnant.
So at what point does this low hire, low fire just become a, say, traditional recession by textbook definitions?
The good news is so far it hasn't.
You would think, because payroll growth in 2025 averaged about 15,000 a month.
If you'd asked me and Revi, a year ago, if you told me that number, I've been, I would have been like, OK, maybe we are close to going into a recession or growth would have slowed down significantly, but it didn't, because As you know, part of that is a supply thing.
Labor supply dropped because of immigration.
So that's why hiring is sort of seemingly stalled.
But if you look at something called the prime age, 25 to 54 year olds, employment population ratio, that is at 80.9% right now, that is the highest it's ever been anytime between May of 2001 and July of 2024, right, which means more people in their prime working age years as a percent of the population.
Are employed right now than at any point over the last 2.5 decades.
That's incredible by itself.
That tells us that the labor market is not falling off the bed.
In fact, it's in a fairly reasonably good place right now.
Ideally hiring would pick up, but part of that is because we don't have a lot of supply of workers as well.
Yes, and so we have less than 60 seconds here, but of course we're paying attention to Nvidia earnings next week.
So what are you focusing on and what are your expectations?
You know, there's some, you know, there's a famous saying death and taxes, and then you expand that to death taxes and video earnings, always somehow surprising the market.
Look, from a big picture macro perspective, for example, looking at the GDP data, GDP in 2025 grew about 22.4%, about 80 basis points of that, a good chunk, which means a third of GDP growth was.
Came on the back of AI-related spending investment by all these companies, and again, as I said, one company's investment is another company's revenue and profits and in this case Nvidia is a likely beneficiary.
So, thank you so much for joining us and helping us dissect what we saw in the economic data releases.
So have a great day and have a great weekend.
Thank you for having me.
