This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron's.

Consumers Catch a Chill

THINK economic and financial analysis ING Feb. 28: This morning's U.S. data flow includes very soft U.S. consumer spending numbers for January, falling 0.5% month on month in real terms, significantly below the -0.1% forecast. This is a really important story for first-quarter GDP growth as, even if we get a 0.4% month-over-month rebound in February and a 0.3% increase in March, the U.S. would record first-quarter consumer spending growth of just 1.6% annualized -- the weakest since the second quarter of 2023.

We already knew that retail sales fell. This was possibly cold-weather induced with some marginal impact from the Los Angeles fires, but there was an assumption that services spending would partially offset that. In the end, it didn't, which shows the U.S. economy started 2025 on a weak footing. This suggests that the steep fall in consumer confidence, which peaked in November when Donald Trump won the election, may be translating into cooler spending.

James Knightley

Mag 7 Meltdown

Quick Takes Yardeni Research Feb. 27: The S&P 500 is down 4.6% from its record high on Feb. 19 and well below its 50-day moving average. It might revisit its 200-day moving average on this pullback.

Much of the selloff since last Wednesday's record high has been led by momentum stocks, especially the Magnificent Seven. Despite the soft patch of economic data and policy uncertainty, there has also been a rotation trade away from the Magnificent Seven and into the S&P 493 in recent weeks, as we expected at the start of this year. This rotation can be seen in the recent decline of the forward P/E of the Magnificent Seven and the ascent of the forward P/E of the S&P 493.

In any event, stock investors have turned very cautious in recent days. American Association of Individual Investors bears surged to 60.6% last week, the highest since the trough of the 2022 bear market. The AAII bull/bear ratio plunged to 0.32, also as pessimistic as at the trough of the 2022 bear market. We view this widespread pessimism as bullish from a contrarian perspective.

Ed Yardeni

Quality Stocks Overseas

Insights GMO Feb. 27: Many of the most successful businesses today are American, but not all of them.

The return to long-term shareholders is driven mainly by a company's success in terms of growing earnings per share and dividends paid to shareholders. Quality investors aim to exploit the long-term fundamental success of the best businesses by participating in their growth and payout.

While technology stocks have dominated in recent years, many of the leading businesses are domiciled outside of the U.S. The world's most sophisticated manufacturer of semiconductors is Taiwan Semiconductor Manufacturing. The most seasoned luxury brands -- think Louis Vuitton and Richemont's Cartier -- are mainly European. The world's scale catering firm, Compass Group, is headquartered in London.

Such businesses often have strong long-term records of capital allocation that, combined with their natural competitive advantages, have often resulted in enviable earnings-per-share growth and dividend records, and thus strong shareholder returns.

Tom Hancock, Anthony Hene, Ty Cobb

Housing Market Headaches

Economics Research Renaissance Macro Holdings Feb. 27: Housing demand remains weak. Pending home sales sank in January, falling 4.6% following a 4.1% drop in December. At 70.6, the level of the pending home sales index is at an all-time low. A sale is listed as pending when a seller accepts a sales contract on a property. Thus, pending home sales tend to lead existing-home sales by roughly one to two months. The decline this month, which was based primarily in the South and Midwest, is a bad sign for residential investment in the current quarter as brokers' commissions drop.

Stepping back, the main issue facing housing is that the math doesn't add up for most -- mortgage rates are too high, and incomes are slowing. As a result, inventories are climbing in major markets; I'd expect price concessions heading into the critical spring selling season.

Neil Dutta

D.C. Job-Cut Tally

Special Commentary Wells Fargo Feb. 27: Federal government employment makes up a relatively small portion of total payrolls in the U.S. (1.5%). Excluding the Postal Service, federal employment growth accounted for only 4,000 of the 168,000 net jobs added over the past 12 months.

Thus far, the Trump administration's efforts to shrink federal payrolls have occurred through three channels: a 90-day hiring freeze, deferred resignations, and layoffs.... Our best guess is that between the hiring freeze and recent layoffs, total federal employment will decline by 25,000 to 50,000 over the next few months. This would be in addition to the 75,000 or so workers who enrolled in the deferred resignation program and will roll off the federal government's payroll on Sept. 30. There are likely to be further indirect effects to U.S. payroll employment in the private sector from businesses that contract with the federal government. These will be harder to disentangle in the data, and our initial suspicion is that this drag on job growth will be modest.

From a timing perspective, we anticipate that federal payrolls will decline by about 5,000 to 10,000 in the February jobs report. Larger drags are likely in the March and April data, as the hiring freeze coincides with a pickup in layoffs that has started to emerge in jobless-claims filings. We expect some near-term upward pressure on the unemployment rate but for the effects to be small.

Sarah House, Michael Pugliese, Aubrey Woessner

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February 28, 2025 18:13 ET (23:13 GMT)

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