Shutdowns, Slowdowns, and a Market Shrug
- David Halseth
- 12 hours ago
- 2 min read
For the week ended 2/21/26.
Ouch!
Fourth-quarter GDP came in at 1.4%, a noticeable deceleration from Q3’s eye-popping 4.4% and well below the 2.5% economists had penciled in. For the full year, growth cooled to 2.2%, down from 2.4% in 2024 – the slowest pace since 2022. Not disastrous. Not dazzling. Just… slower.
But before we light the recession candles, let’s apply a little math. Federal government spending declined at a 16.6% annual rate during the shutdown, shaving nearly 1.2 percentage points off headline GDP. Add that back and Q4 growth looks more like 2.6%. No, that’s not 4.4%. But it’s perfectly respectable in a mature economy.
Consumer spending – the real engine here at over two-thirds of GDP – rose 2.4%. Americans pulled back on big-ticket items like autos (tariffs and expiring EV credits will do that), but services spending held up. Translation: we’re still traveling, dining, and streaming… just maybe not upgrading the driveway.
Now to inflation – because it refuses to leave the party.
The Fed’s preferred gauge, PCE, rose 0.4% in December, pushing the 12-month rate to 2.9%, with core at 3.0%. That’s sticky enough to explain why the FOMC had zero interest in cutting rates at the last meeting. Political noise aside, the math doesn’t justify easier policy yet. The Fed may enjoy a good headline, but it prefers a better spreadsheet.
Markets? Mostly a shoulder shrug.
Commodities and foreign stocks led the way higher. U.S. stocks and global real estate held steady. Bonds slipped, again, though only by 0.1%. And crypto? Down another 1.7%. Quietly, it’s now off 25% in 2026. “Digital gold” continues to behave more like digital Vegas.
Looking ahead, it’s a lighter economic week with Consumer Confidence on Tuesday and Chicago PMI on Friday. Nothing earth-shattering – unless sentiment suddenly falls off a cliff. So where does that leave us?
Growth slowing but not collapsing. Inflation cooling but not conquered. Markets adjusting but not panicking. In other words: welcome to adulthood.
May your Olympic hangover be mild and your Monday productive. Time to get back to work.
Interesting data point of the week.
