3 Things You Need to Know This Week | State of the Union, Consumer Sentiment, CA GDP

Transcript

Stephanie Kuehne:

Hello, and welcome to Three Things You Need to Know this Week, our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. And with that, here are the three things you need to know this week.

First, details on the State of the Union.

The 2026 Presidential State of the Union address will be delivered on Tuesday this week. It'll be President Trump's second address of his second term. This annual event gives the president a chance to outline his vision for the nation's direction and discuss key issues. Investors will likely tune in, hoping for insights into major policy decisions, especially on trade and tariffs. Most State of the Union addresses follow a familiar pattern. They include sweeping yet vague promises about supporting growth, creating jobs and boosting investment. But the State of the Union promises rarely become reality. Many never reach Congress, and those that do are often blocked or watered down in debates. That likely doesn't change. Extreme legislation remains a long shot. Last year's address focused on trade and tariffs. Whatever topic dominates this year's speech, it's important to keep in mind that the more a topic is discussed, the less surprise power it has for stocks.

Next, US and eurozone consumer sentiment.

The US will release final February consumer confidence data on Tuesday, followed by the eurozone on Thursday. Consumer confidence gauges how optimistic consumers are feeling about the economy. Recently, eurozone consumer confidence has been rising. Consumers are starting to feel more positive, but overall confidence remains below its long-term average. Confidence in the US is also surging. January's reading marked the third consecutive month of improvement and the strongest reading since August. Even so, sentiment dipped slightly in the preliminary February reading and remains historically low. But what do these reports really tell us? Despite popular belief, these measures aren't great at predicting the future. Instead, they're snapshots of how people are feeling right now. As we often say, it's the gap between expectations and reality that matters most for stocks. Reality doesn't need to be perfect, just better than expected. While many focus on things like tariffs, Europe's challenges and geopolitical tensions, economic reality continues to consistently beat low expectations. Weak sentiment often sets a lower bar for reality to beat. If things turn out a little bit better than people fear, it could give markets the boost that they need to keep this bull market going strong.

Finally, an economic update from Canada.

This week, Canada will release GDP figures for the fourth quarter of 2025. In Q3 Canadian GDP grew at a 2.6% annualized rate. That surprised many since most expected economic output to fall once again. But we think those third quarter numbers were less impressive than they seemed. Falling imports boosted the headline growth artificially, likely because companies rushed to stock up on goods earlier in the year to avoid tariffs. Looking at the bigger picture, the fear of a recession sets a low bar for Canada to clear, and we think Canada's economy likely proves more resilient than expected. Regardless of what this week's GDP reports show, it's important to remember this: Stocks are forward looking, while GDP is backward looking. Stocks don't wait for economic data. They price in all widely known information and move ahead of the economy. What matters to stocks is future growth, not what happened last quarter. And while tariffs remain a focus for markets, we think their actual impact is likely to be smaller than widely feared.

And that's it for this episode of 3 Things You Need to Know this Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.Com. Thank you for tuning in, and don't forget to hit "Like" and "Subscribe!"