There was a plethora of economic data releases this week with most indicating the resilient economic backdrop remains in place. Arguably the only negative surprise was this morning’s advance report of 4Q GDP, which came in at 1.4% compared to the consensus estimate of 2.8%, with the Bureau of Economic Analysis citing the government shutdown for almost half of the fourth quarter (43 days) detracting an estimated 1% from the GDP figure. The ‘low hire low fire’ employment backdrop remains, with the ADP Weekly employment report higher than the prior week at 10.25k and jobless claims moving down to only 206k. Notably, this week is survey week for the March 6th employment report, which should be supportive of a continuation of the moderately positive narrative on the employment backdrop considering the level of jobless claims. Industrial production also surprised to the upside, coming in at 0.7%, the highest reading since the 1.0% number in February 2025. Although this morning’s Personal Consumption Expenditures (PCE) inflation data was dated due to the government shut down, the December 2025 figures were firm. Both headline and core PCE inflation printed at 0.4 for the month, 0.1 higher than expectations, and the year-over-year numbers were 2.9% and 3.0%, respectively, 0.1 and 0.2 higher than the annualized numbers in November 2025. Personal spending outpaced personal income by 0.1%, with the former coming in at 0.4 and the latter at 0.3, which contributed to keeping the personal savings rate low at 3.6% and an indication of constructive consumer sentiment.
Correlated with the more constructive economic data Treasury yields moved higher over the course of the week but remain within recent ranges. We also heard from multiple Fed Governors with most telegraphing a patient Federal Reserve on future adjustments to monetary policy. In a surprise to most market participants, the minutes of the most recent Federal Reserve Open Market Committee (FOMC) meeting indicated several participants, but by no means a majority, would have supported ‘two-sided’ language on the go forward rate path, implying some possibility the next move by the FOMC could be an increase in the Fed Funds rate. Geopolitical tensions are also elevated with the United States deploying massive military resources to the Middle East as pressure is increasing on Iran to reach an agreement regarding their nuclear ambitions. The Supreme Court was also in the news this morning, releasing their long awaited ruling on the administration’s global tariff policy, striking down the legality in a 6-3 vote. The Court did not address how refunds will be administered, punting that down to the lower courts to sort out, which helped to mitigate the immediate impact of the decision on market pricing.
The Chandler team’s outlook continues to call for further normalization of the Fed Funds rate over our six month forecast horizon, with one twenty-five basis point cut likely between now and the end of July to bring the target range down to 3.25% to 3.50%. Although the spread between two year and ten year treasury notes move flatter over the course of the week, we continue to forecast further curve steepening linked to coming fiscal stimulus, the overall deficit outlook, and the uncertainty regarding tariff policy going forward. With the elevated geopolitical risk, we do expect markets to be volatile in the short-term, but the coming fiscal stimulus for consumers will serve to keep the overall economy growing at a slightly above trend pace in the first half of 2026.
© 2026 Chandler Asset Management, Inc. An SEC Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and ADP. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.