This Week in Review | Government Shutdown, Global PMIs, Q4 Earnings

Transcript

Hello and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up to date, subscribe to our YouTube channel or visit FisherInvestments.com.

Now let's review what happened this week. First, a partial government shutdown. The US government entered a partial shutdown last weekend after Congress missed the deadline to finalize a spending package. Government shutdowns worry some investors who believe they can damage the economy and stocks. But history shows that is rarely the case. Last week, the Senate worked late into Friday evening to pass an agreement, but the House wasn't scheduled to take it up until this week. On Tuesday, Congress passed a continuing resolution to give lawmakers two weeks to continue negotiating on the three remaining appropriation bills.

For context, the annual budget is split into 12 bills that cover all government expenditures. With nine bills already passed, only a portion of the government is facing a potential funding lapse if Congress fails to reach an agreement. But for stocks, here's what's important, history shows these political fights rarely derail markets or economies, despite the frustration and potential pain they cause. Over time, long term economic growth and corporate earnings tend to outweigh the effects of temporary political disruptions. As we highlighted in our recent MarketMinder article during the Q4 2025 shutdown, the longest in US history, US stocks gained 2.5%. And generally, history suggests such disruptions don't significantly impact markets. Short funding gaps shouldn't spook markets, given a shutdown just occurred last year and stocks took it in stride. Markets tend to reflect broader economic trends rather than short term political drama. We believe today's broader market drivers continue to support an ongoing bull market.

Next, a check in on global businesses. Investors got a look at the final readings for January, 2026, Purchasing Managers Indexes, or PMIs, from key global economies including the US, UK, Eurozone and Japan. PMI's serve as key economic indicators. The composite readings combine monthly surveys of private sector manufacturing and services businesses. They offer timely snapshots of business activity and valuable context for investors. So, what does the latest data reveal? January's releases showed that the number of businesses reporting expansion increased in the US, UK and Japan. In the Eurozone, most businesses expanded, but fewer than in December. Here's a key takeaway for investors, private sector activity in major developed economies is holding steady. The global economy isn't perfect and there will always be weak spots in the data.

However, despite the noise and alarming headlines, these surveys point to an underappreciated positive for markets. But it's not just about how strong the global economy is or how fast it's growing. What really matters to stocks is how reality measures up to expectations. Right now, global businesses are more resilient than many investors anticipated. For context, remember that global stocks delivered a total return of over 21% in 2025, despite economic headwinds. This highlights an important lesson, stocks don't need a perfect economy to rise. Stocks don't even need a great economy. They just need reality to exceed investors expectations.

Finally, Q4 2025 Earnings Season. Fourth quarter earnings season continued this week, with major tech, healthcare and pharmaceutical companies reporting results this week. While Q4 figures are old news to stocks, investors analyze these earnings releases for how reality measured up to expectations and for management guidance on where firms are going in the future. So far, Q4 2025 earnings seem off to a generally positive start, with a number of high profile firms beating earnings expectations. What did these reports reveal to investors? Falling global uncertainty is motivating businesses to ramp up capital expenditures, pumping investment worldwide and showing that economic activity seems to be chugging along nicely. Cash-rich balance sheets, along with strong banking and capital market activity, continue to give many of these businesses ample capital to invest in growth while avoiding overextension for now. Continued earnings strength suggests that bull market stands on real gains in profitability, not waves of unfounded investor exuberance.

That's it for this week. Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, Three Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com any time for our latest thoughts on markets.

Thanks again for joining us and don't forget to hit Like and Subscribe.