Warning Signs? 3% Inflation and Weak Growth | S3 E123 | 02-20-26

The latest economic data is sending mixed — and potentially troubling — signals.

In today’s episode of Markets with Megan, Megan reveals the newest U.S. GDP report and inflation data, and why markets are watching closely.

🚨 The Headlines:
Q4 GDP came in at just 1.4%, far below expectations of 2.8%
Core inflation rose back to 3% year-over-year
Short-term core trends accelerated to 3.1%
Durable goods inflation jumped
Consumer spending slowed, led by weaker auto sales
So what does it mean when growth weakens but inflation heats back up?

We walk through:
✔ What drove the GDP slowdown
✔ Why inflation is reaccelerating
✔ The risk of sticky price pressures
✔ What this means for Federal Reserve policy
✔ Whether rate cuts could be delayed
✔ And how investors should think about markets right now

While markets turned positive today, the combination of slower economic growth and rising inflation creates uncertainty for interest rates, equities, and bond markets.

Is this just a temporary data blip — or an early warning sign?

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https://youtu.be/4NAWBQW7DrY

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 
or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. This material is being provided for informational purposes only and is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice. Past performance is not a guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance 
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Transcript

Opening And Housekeeping

Megan Horneman 0:00

What was a bit of some disappointing economic news this morning? It is Friday, February the 20th, and this is Markets with Megan. If you like this podcast, you can subscribe to it. Hit that alarm bell. You can also share with any friends, family, or colleagues that might be interested on that economic data that you see in the news headlines and what it means for your investments. Let's break down what we got this morning. First, we got the fourth quarter reading of GDP, and it came in much weaker than expected. The US economy only rose 1.4%. Now again, this is subject to revisions, but the first reading here is that it rose 1.4%. It was worse than the expectation, which was 2.8%. And just remember that a few weeks ago, the Atlanta Fed GDP now model had showed that we may see growth of upwards of 5%. So much weaker than expected. It was primarily led by federal consumption. That was the worst quarterly drop since the third quarter of 2020. Remember, we had the longest U.S. government shutdown on record during the fourth quarter of last year. We also saw consumption, personal consumption, which usually drives GDP. It was weak, not awful, but it was the slowest since we had that first quarter drop in GDP of last year, primarily led by a decline in auto sales. CapEx spending continued to be strong, but it was primarily due to the intellectual property and prime and specifically software and research and development. And when we look at net exports that have been in focus because of the tariffs, that was relatively flat. Now, alongside this report, we also got December inflation data. And the reason why we think that the data in general was disappointing is because we had a weaker GDP, but we also had hotter than expected inflation. So core inflation rose two point, I'm sorry, rose 3% on a year-over-year basis. It was 2.9%. The super core that excludes some of the volatile items like housing, that was up three tenths on an annualized basis over the past three months. That core inflation is now up 3.1% versus 2.4% the prior month. And it's not just services where we've saw the inflation pressures. And that has been a primary focus on inflation for a long time now, but we did see a big jump in the inflation on durable goods. And that could have been primarily due to auto prices rising. So that's all that we have today. The markets didn't necessarily were weaker on this because of the weaker economic trajectory. They've turned around today. We do have some news coming up from the Supreme Court Court on Trump's tariffs. We'll be back on Monday when we dig through all those details to give you some of our thoughts on what that means for the future of tariffs and as well as the markets. Thank you very much. If you want a history of our podcast, you can go to marketswithmegan.