US Consumer Spending Barely Rises in January

The core is up by 4/10... move up to 3.1% as forecast by economists. So that makes it much harder for the Fed to consider. Certainly rate cuts. Sticky core inflation prevents the Federal Reserve from lowering the federal funds rate. In a higher-for-longer interest rate environment, yields on long-dated government debt remain elevated or rise further, which directly depresses the price of long-duration Treasury bonds. SHORT long-duration Treasuries as persistent inflation forces the market to price out near-term rate cuts. A sudden systemic shock or severe recession could force the Fed into emergency rate cuts regardless of inflation, causing long-duration bonds to rally sharply.

GDP cut in half for the fourth quarter, personal consumption fell to 2% from 2.4%. A sharp downward revision in both GDP and personal consumption signals a weakening consumer and slowing macroeconomic growth. When combined with sticky inflation that prevents the Fed from cutting rates, consumer discretionary companies and debt-heavy small caps face a toxic macroeconomic mix of decelerating revenue growth and sustained high borrowing costs. SHORT consumer discretionary and small-cap equities due to deteriorating economic growth metrics colliding with restrictive monetary policy. Consumer spending could unexpectedly rebound in subsequent months, or companies might maintain profit margins through aggressive cost-cutting, sparking a rally in cyclical and small-cap stocks.