Consumers Feel Great, Their Savings Do Not | S3 E114 | 01-23-2026

Markets rarely move on one number, and this week offered a full mosaic. We break down a stronger third estimate for Q3 GDP, why equipment and intellectual property investment matter more than headlines suggest, and how net exports turned from a drag into a modest lift. Then we pivot to the Fed’s preferred inflation gauge—core PCE at 2.7 percent year over year—where progress is real but the finish line isn’t crossed. That sets the policy backdrop for a quarter that might still print above 5 percent growth, testing the market’s assumptions on timing and depth of rate cuts.

From the consumer’s seat, the signals are mixed but intriguing. Personal spending is rising faster than income, pushing the savings rate near 3.5 percent, a low not seen since late 2022. Yet sentiment just hit a five‑month high, with optimism broadening across income tiers and political lines. Potentially larger tax refunds could provide a near-term cushion for household budgets, while one-year inflation expectations ticked down to 4 percent—better, but still too hot for comfort. We connect these dots to corporate margins, pricing power, and how management teams might guide with earnings underway.

Through it all, geopolitical noise and earnings season create a volatile backdrop where positioning matters. We share what we’re watching next: services inflation versus wage growth, capex tied to AI and automation, and the tug-of-war between resilient demand and tight savings. If growth stays strong while inflation cools slowly, the Fed will want more proof before easing, keeping financial conditions in focus. Tune in for a clear read on the data and a practical map for the weeks ahead. If this breakdown helps you navigate the noise, follow the show, share it with a friend, and leave a quick review—what’s your top data point to watch next?

https://youtu.be/_LR4fz38HaM

Disclaimer:  material was prepared by Verdence Capital Advisors, LLC (“VCA”). VCA believes the information and data in this document were obtained from sources considered reliable and correct and cannot guarantee either their accuracy or completeness. VCA has not independently verified third-party sourced information and data. Any projections, outlooks 
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Transcript

Data Week And Show Intro

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We got several different indicators about the U.S. economy this week. It is Friday, January the 23rd, and this is Markets with Megan. If you like this podcast, you can subscribe, hit the alarm bell, share with friends, family, or colleagues. But we're here to go over a lot of the data that we've received this week. It's been coming in with some of the data that we've missed during that government shutdown. We're still getting that now, almost going into the month of February. But let's start with the first, which is the third reading on US, third reading on third quarter US GDP. And what we saw was that the economy grew slightly better than um the set the second reading at 4.4% versus 4.3%. And if you look at the historical average over the trailing three years, you're looking at growth that was that was more like 2.8 to 3% on a quarter over quarter basis. So the economy is doing very well. And when you look at some of the readings that we're seeing for the potential growth for the fourth quarter, what we look at is the GDP now forecasts that come out from some of the different uh central banks. And you're looking at growth that might come in above 5% for the fourth quarter. So the economy is doing very, very well. Now that upward revision was primarily due to a slightly better reading on CapEx spending, not necessarily on structures, but you're seeing a little bit better on equipment and then intellectual property. That again is that AI spending. We also saw a much better reading on exports, and imports are still on a negative basis, a little bit better than originally reported. So you're seeing a nice contribution there from that net export uh number. Now, this the other reading that we got was the Fed's preferred inflation indicator, that PCE core. Now, this was from the month of October. So this is when we mentioned we're still getting some of that data coming out that's that's been lagging because of the government shutdown. So it does, it can be market moving, but let's keep in mind that this was for the month of October. The inflation came in as expected, so no big surprises to the market at 2.7% on a year-over-year basis. Um, now that is still well above the Fed's preferred inflation target range, and that's 2%. So it's getting a little bit better, but still well above the Fed's target. The other readings that come out with that report is on personal income and spending. And we saw personal spending rise more than the increase in income. And what happens when that occurs is we see the savings rate decline. We're now looking at a savings rate of about 3.5%. And to put that in perspective, that's the lowest level we've seen since October of 2022. So consumers are still being hit by some of those higher prices. Now, the last thing that we received this morning was the final reading on consumer sentiment for the month of January. And this tells a very different story as we kick off 2026. It's showing you that consumers are getting a lot more confident about not only the current economic conditions, but also their expectations for the future. We saw that confidence came in better than it was originally reported. Um, it's now a five-month high. And some of that has to do with the expectation for um the tax refunds that will be coming out in the coming months. We've talked about that it's going to be a very big tax refund season because of the one big beautiful bill. We all saw the confidence rise across not only income levels, but also across political party lines. So again, confidence is doing very well. We also saw that inflation expectations from consumers over the next 12 months dipped to 4%, which was slightly lower than the expectation in the first reading, which was 4.2. So anything better is good from an inflation standpoint, but let's keep in mind they're still looking for 4% price increases over the next 12 months, which is simply way too inflationary for the US economy. And the Fed's going to have to address that in their upcoming meeting. That's all that we have today. We'll be back next week with some more economic data and what that means for the markets. Markets are down today. There's some other geopolitical noise going on that could be impacting the markets. And remember, we're in the heart, we're starting to get in the heart of earnings season. So the expect some volatility in the markets. And if you want a history of our podcast, you can go to marketswithmegan.fm.