Growth Slows as Shutdown Hits, Inflation Stays Sticky
U.S. economic growth slowed to a 1.4% annualized pace in late 2025, well below expectations, as a record-length government shutdown weighed on spending and investment. The Commerce Department estimated the shutdown shaved about one percentage point off GDP, while consumer spending and exports also pulled back. For the full year, growth came in at 2.2%, down from 2.8% in 2024. Meanwhile, inflation remained elevated, with the core PCE index rising 3% in December, keeping price pressures above the Federal Reserve’s 2% target despite earlier rate cuts.
Supreme Court Tariff Ruling Brings Relief — but Uncertainty Lingers
The Supreme Court struck down a large portion of President Donald Trump’s tariffs, offering modest economic relief but leaving significant uncertainty about next steps. Economists expect limited near-term macro impact, though the decision could slightly boost growth and ease inflation pressures, which have remained elevated at 3% on the Fed’s preferred core measure. Markets rallied on the news, while investors trimmed expectations for immediate rate cuts, and analysts debated whether businesses will receive tariff refunds that could total anywhere from $85 billion to $175 billion. Despite the ruling, tariffs are unlikely to disappear entirely, as the administration signals it will pursue alternative legal avenues, potentially setting up further policy and market volatility in 2026.
Mortgage Rates Dip, Refi Demand Surges
Mortgage rates fell to 6.17% last week, the lowest level in a month, sparking a 7% jump in refinance applications and pushing total mortgage demand up 2.8%, according to the Mortgage Bankers Association. Refinance activity was 132% higher than a year ago, though that comparison reflects unusually weak levels last year when rates were significantly higher. In contrast, purchase applications dropped 3% for the week, as limited housing supply and economic uncertainty kept many buyers on the sidelines. Rates have largely hovered between 6% and 6.25% this year, with upcoming economic data likely to determine the next move.
As always, Base Wealth Management remains focused on aligning investment strategies with your long-term goals amid evolving market conditions.
