Weekly Economic Update: February 24th, 2026

Markets shrug off low GDP report

Normally, bad news is, well, bad. But a weak fourth-quarter gross domestic product (GDP) number didn’t seem to faze markets. We haven’t closed above 7,000 on the S&P 500 in 2026, but have come tantalizingly close.¹ We did close above 50,000 on the Dow, but have since come off those highs.² And the Nasdaq continues to tread water because the index is dominated by tech stocks, and those travails have been well documented in these commentaries.³

So, that’s where we stood as we came into the first reading of Q4 GDP. The number was anticipated to be a little slower than Q3 due to the government shutdown last October/November — but expectations were that it would take about 1% off the top line to take us to about 3.7%, according to the Atlanta Fed GDPNow indicator.⁴

The actual number? 1.4%.⁵ There is the possibility of revisions, and we’re sure the number will likely change, but 2.3% lower than expected is a big difference. If it sticks, we will come in with a 2.2% annual growth rate for 2025, with two strong quarters (Q2 and Q3) sandwiched between two weak ones. First quarter results were due to new tariff policies from the Trump administration (more below), while the last quarter was tanked by a government shutdown.

Consensus was calling for 2.8% GDP growth for the fourth quarter, double the actual result. The underlying data was solid: Consumer spending grew at a 2.4% rate, which was great, especially in light of all the dire predictions of a weak holiday season and comments that the consumer was exhausted. And business fixed investment — including equipment, commercial construction and intellectual property — grew at a solid 3.7% annual rate.

Another encouraging note was that wages went up at a 4.3% rate in 2025, outpacing inflation by over a percentage point. Then why such a low GDP number in Q4? Well, overall government purchases dropped by 16.6%, thanks to the shutdown. It’s a warning that big government can cause big problems.

If this is where things finally shake out, the overall 2.2% for the year is a far cry from the 3+% needed to jumpstart this “golden age” economy. It looks like we’re in wait-and-see mode as far as the markets go; they were up and down on the news as they try to assess what might come next and what the Federal Reserve will do. Inflation seems to be simmering around 2.5% if you look at the consumer price index (CPI), while the employment picture is still cloudy.⁶ This also puts the Fed back in the spotlight as they decide whether to fight inflation or focus on weak economic growth. Despite all the fog, markets still managed to advance last week after the disappointing top-line GDP number.

Supreme Court weighs in on Trump tariffs

The long-awaited Supreme Court decision on President Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) finally came down — and it wasn’t the outcome the White House wanted.⁷ The court ruled six to three that “The law that undergirds those import duties does not authorize the president to impose tariffs.”

Simply put, the law Trump was relying on for much of his tariff policy was being misused, according to the court. The administration said it had been anticipating this possibility and has other options to continue levying tariffs. The situation hasn’t become less complicated; the Supreme Court did not order the administration to repay the tariffs that have been collected and companies are lining up to sue for repayment.⁸

The situation brings up several questions. What will happen if the Treasury has to “reimburse” companies? Will the taxpayer be on the hook? Will all these companies lower their prices, which they said they had to raise to make up for higher tariffs? What happens to all the “trade deals” Trump said he has made? What does that mean for markets?

Less certainty means more volatility, so that’s not good. Then there’s the impact to earnings. If tariffs are returned, profits will increase, which will be good for companies’ bottom lines. Could it lead to the opposite of the sell-off we saw last March and April, a frantic melt-up? Probably not.

Prices will likely remain where they are because companies have gotten used to them, the same way airlines keep charging extra for bags to offset jet fuel prices, even though that crisis has long come and gone. Companies like the government because they love to raise costs or taxes, but they seldom lower them because they get used to the revenue. And what about all the “tariff-driven inflation” the media harped on about? Just when things were beginning to settle down on the tariff front, the Supreme Court blew things up again. We’ll have to watch this all play out and see what the new fallout will be. If you thought 2025 was a one-and-done year for tariffs, welcome to the sequel: 2026 Tariff Tantrum, the Terrible Twos!

Coming this week

• The State of the Union address on Tuesday will be interesting now that the Supreme Court has ruled Trump doesn’t have the sweeping tariff powers he thought he had.
• The rest of the week will feature a bunch of fed speakers. There may be some interesting tidbits now that the minutes from the last Fed meeting have been released and we’ve had the initial reading of fourth-quarter GDP.
• For data, we’ll get factory orders on Monday and wholesale inventories and consumer confidence on Tuesday. Wednesday will feature MBA mortgage applications, while weekly unemployment claims will be the only meaningful data point on Thursday.
• Finally, on Friday, we’ll get something meaty in the form of the delayed producer price index (PPI). The last reading was 3.5%.⁹ CPI was lower last week, and a lower PPI generally leads to a lower CPI since lower costs for people who make goods result in lower prices for consumers.

Sources:

¹ Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Feb. 22, 2026.

² Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed Feb. 22, 2026.

³ Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed Feb. 22, 2026.

⁴ Federal Reserve Bank of Atlanta. “Current and Past GDPNow Commentaries.” https://www.atlantafed.org/research-and-data/data/gdpnow/current-and-past-gdpnow-commentaries. Accessed Feb. 22, 2026.

⁵ Bureau of Economic Analysis. Feb. 20, 2026. “GDP (Advance Estimate), 4^th Quarter and Year 2025.” https://www.bea.gov/news/2026/gdp-advance-estimate-4th-quarter-and-year-2025. Accessed Feb. 22, 2026.

⁶ Trading Economics. “United States Inflation Rate.” https://tradingeconomics.com/united-states/inflation-cpi. Accessed Feb. 22, 2026.

⁷ Adam Feldman. SCOTUSblog. Feb. 20, 2026. “A breakdown of the court’s tariff decision.” https://www.scotusblog.com/2026/02/a-breakdown-of-the-courts-tariff-decision/. Accessed Feb. 22, 2026.

⁸ Mike Scarcella and David Thomas. Reuters. Feb. 20, 2026. “Law firms gird for tariff refund fight after Supreme Court ruling.” https://www.reuters.com/legal/government/law-firms-gird-tariff-refund-fight-after-supreme-court-ruling-2026-02-20/. Accessed Feb. 22, 2026.

⁹ U.S. Bureau of Labor Statistics. Jan. 30, 2026. “Producer Price Index News Release summary.” https://www.bls.gov/news.release/ppi.nr0.htm. Accessed Feb. 22, 2026.

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