A Softer Economy, a Smarter Market

👋 ICYMI

U.S. markets navigated a holiday-shortened week with mixed results as tech and AI sentiment remained fragile while macro data delivered a nuanced backdrop. Major indexes finished modestly higher on the week, led by strength in industrials, financials and cyclicals, even as AI-linked risk assets faced periodic selling pressure. New GDP data revealed that the U.S. economy slowed sharply at the end of 2025, as real gross domestic product grew just 1.4% annualized in the fourth quarter — well below expectations and a marked deceleration from the 4.4% pace in Q3, with a record-length government shutdown cited as a significant drag on activity.

🔁 Market Movers

• 📈 U.S. Stocks Rebound After AI-Led Selloff

  U.S. equities closed the week higher as dip buyers stepped in and sentiment improved following earlier tech weakness. The S&P 500, Dow Jones Industrial Average, and Nasdaq all posted modest gains by Friday despite increased volatility tied to AI valuation concerns.

• 🏦 Cyclicals & Value Outperform Tech

  Industrial and financial stocks led performance among major S&P 500 sectors for the week, with materials and industrials showing particularly strong relative returns as investors favoured cash-flow-oriented sectors over high-valuation growth names.

• 📉 U.S. GDP Slows Further, Clouding Growth Narrative

  Economic data showed U.S. GDP growth slipping to an annualized 1.4% pace in Q4 2025, dampening confidence slightly but reinforcing the view that the economy is slowing toward a more sustainable, lower-growth trend — a backdrop that continues to influence market positioning.

👀 Signals I’m Watching

• 📊 GDP & Core Inflation Create Policy Tightrope

  New data showed U.S. Q4 GDP grew only ~1.4% annualized, significantly below expectations, while core inflation readings remain firm. The combination complicates the Fed’s path — slowing growth argues for cuts, but sticking price pressures argue against rapid easing — keeping markets in a policy “balanced-on-a-knife-edge” mode.

• 💼 Labour Market Nuance Still Matters

  Strong labour data — including better-than-expected payrolls and a lower unemployment rate — continue to give markets mixed signals. The labour market isn’t collapsing, but slower hiring combined with broader economic slog suggests a gradual cooling that could keep the Fed cautious about rate moves.

• 💰 Rotation Into Cyclicals & Value Continues

  Despite tech weakness, industrials, banks, and other value/cash-flow-oriented sectors remained supported this past week. Broadening participation outside growth tech suggests rotation over risk exit, often seen in markets that are transitioning phases rather than breaking down.

⚠️ Red Flag to Note

Good Earnings Aren’t Enough Anymore

Last week showed a clear shift: stocks are getting punished even after earnings beats if guidance, margins, or cash-flow visibility disappoint. Markets are no longer rewarding results alone — they’re demanding proof that growth can translate into durable profits. When good news stops being sufficient, volatility and rotation tend to rise.

🔍 Insider Transactions I’m Watching

🔔 Newly Listed

🛢️ ARKO Petroleum Corp. ($APC ( ▼ 0.1% )): ARKO Petroleum completed its IPO this week, raising approximately $183.2M on Nasdaq after pricing around $18/share. The fuel-distribution and retail fuel services operator attracted investor interest amid energy sector resilience.

☀️ SOLV Energy, Inc. ($MWH ( 0.0% )): SOLV Energy’s Nasdaq listing priced at about $25/share and raised roughly $589M, reflecting strong demand for renewable-energy infrastructure offerings despite broader market caution.

👁️ SharonAI Holdings Inc. ($SHAZ ( ▼ 0.74% )): SharonAI priced its IPO at $30/share, raising around $125 M on the Nasdaq. The software firm’s focus on AI-enabled solutions has drawn capital despite wider tech valuation pressures.

📬 Closing Note

Investors are becoming more selective—not more fearful. That’s usually how healthier market phases begin.

The edge will belong to those who stay disciplined, focus on cash-generating businesses, and resist the urge to chase narratives without proof. Volatility isn’t the enemy here—it’s the filter.

Stay patient. Stay selective. And let the market show you where conviction is truly forming.

Until next Sunday —

George ☕️

P.S. I also work selectively with a few investors on bespoke research and idea generation.

If the way I think about investments is helpful for your own decision-making, feel free to reply.