Will The "Growth Scare" Continue?

1.)  EPS – Earnings Season is simply confirming what price has been telling us about the large-cap tech “pause,” with 78 of the NASDAQ 100 companies having reported an aggregate Year-over-Year Earnings Per Share slowdown to only +9.8%, whereas 851 of the Russell's (small caps) companies have shown a Year-over-Year EPS acceleration to +23.2%.  Notice that while the +9.8% is still growth, it’s a “deceleration” from the previous year’s data, or base effect.  Markets don’t care so much about the actual number, but about the Rate of Change (RoC) of the number.

2.)  GROWTH – US Q4 GDP came in at 1.4% (vs. 3% expected).  That’s a big miss.  But here’s why we’re not overly concerned: The main driver behind the slowdown was the government shutdown.  Zoom out, and the broader picture still looks solid.  Growth momentum appears to be turning higher after the “growth scare” in Q4 2025.  As long as shutdown disruptions don’t become a pattern, we expect the US economy to expand. This looks more like a temporary drag than a structural downturn.

U.S. Growth Momentum Sees Upward Trend: A detailed look at the U.S. Growth Momentum Index from 2024 to present, showcasing increasing economic momentum.

3.)  INFLATION – According to Bloomberg, there is a 97% correlation between Truflation (an independent macroeconomic signal provider) and CPI with a 1-month lag, suggesting CPI will decline sharply in the next few months.  That’ll be okay as long as growth can start to move back up again.  Growth and inflation both decelerating on a rate of change basis at the same time can create a difficult environment for risk assets.