Key Takeaways:

• Softer real spending in January was a catalyst for traders to reset expectations for growth. Most notable moves were in bond markets as yields dipped on the 10-year Treasury.

• Investors will continue to focus on the uncertain growth trajectory. The odds are rising that the Federal Reserve (Fed) will cut rates three times this year.

• Tariffs stifle free and fair trade, but the impact may not be as bad as the scaremongers say. For example, roughly 75% of Mexican imports are industrial inputs, investment goods, and services. Only 25% are consumer goods. This is a key fact

Historical Challenges Revisited

Many observers note that large cap active managers have often struggled to outperform their benchmark indexes. This was one of many insights we discussed in our recent blog “Why Not Both? Blending Active and Passive Management” we specifically called out large growth managers as having some of the most severe challenges.

Could the Tide Be Turning?

The graph below highlights how the returns of mutual funds in the Lipper US Large Cap Growth category compare to the returns of the Russell 1000 Growth Index, a commonly used large growth benchmark. The blue triangles place

Fourth quarter earnings season is nearly complete, and it has been a good one. S&P 500 companies grew profits more than 18% year over year, according to FactSet data, with mega cap technology and financial companies doing most of the heavy lifting (about seven points of growth came from each). The Magnificent Seven grew earnings by an average of 37% and financials earnings jumped 50%. But the road ahead gets tougher. With new tariffs in place and more likely on the way, on top of mounting evidence that the U.S. economy is slowing, achieving double-digit earnings growth in 2025, as many expect, will be a tall task.

Big Numbers

The latest weekly sentiment survey data from the American Association of Individual Investors (AAII) released today shows significantly bearish sentiment from investors, marking the fourth consecutive week of predominantly bearish sentiment. 

Concerns of an economic slowdown brought on by potential tariffs, stickier inflation, and the possibility of higher-for-longer interest rates, coupled with a meaningful pullback in the technology sector, namely artificial intelligence (AI) related stocks, has dented sentiment in recent weeks. 

The percentage of individual investors who are bullish about short-term mark