2 min readU.S. Economic slowdown to expect?
It was surprising to see weak retail sales across the board in January, even after the CPI report and Fed Congress meeting. Total sales fell by 0.9%, sales excluding autos dropped 0.4%, and the control measure declined 0.8%. Unseasonably cold weather and wildfires likely played a role in the slowdown, but this report also revealed clear signs that the recent surge in durable goods spending—driven by consumers trying to get ahead of new tariff threats—is beginning to fade.
Real consumer spending growth looks set to slow significantly compared to the rapid 4.2% increase in Q4, though much could still change over the rest of the quarter. While adverse weather explains part of January’s steep retail sales drop, fading tariff-driven spending is another key factor. This sets the stage for much slower consumer spending growth in Q1.
What will the Fed do?
The January FOMC meeting minutes, released on Wednesday, revealed uncertainty among policymakers about whether interest rates are significantly above the neutral rate. Some Fed members suggested they may not be far above it. Discussions also covered inflation risks from trade tariffs and immigration policies, as well as the impact of debt-ceiling negotiations and balance-sheet normalization.
While policymakers see reduced downside risks in the labor market and increased upside risks to inflation, they believe they are well-positioned to respond to shifting economic conditions. Given these factors and continued uncertainty around trade tariffs, the FOMC is expected to keep interest rates on hold in the near term. However, markets interpreted the minutes as slightly less hawkish than expected, which provided a minor boost to Bitcoin prices.
Markets are also increasingly questioning the independence of the Federal Reserve after the Justice Department’s recent stance suggesting that protections from political influence granted to agencies like the FTC and CPSC may be unconstitutional due to their significant executive power. While the Fed wasn’t explicitly mentioned, this position could set a precedent for greater presidential control, potentially undermining its autonomy.
With fiscal austerity imposed through recent executive orders and trade tariffs dragging on economic growth, the president would likely seek to offset these effects with monetary stimulus. If given the chance, he would likely appoint a dovish Fed Chair, potentially leading to a dramatic shift in monetary policy.
Meme Coin Scandals and Solana’s Struggles
Recent scandals involving meme coins allegedly issued by high-profile public figures—including Presidents Trump and Milei—have had a dramatic impact on Solana. A series of “rug pulls,” where issuers withdraw funds shortly after launching a token, have raised serious concerns within the crypto industry.
Solana, a top platform for meme coin trading (which accounts for 80% of its volume), previously benefited from the TRUMP coin launch. However, disillusioned investors are now pulling back, reducing their positions.
Additionally, investors appear to be more discerning about token fundamentals this year, contributing to the underperformance of most altcoins. Interestingly, Bitcoin has remained relatively unscathed, continuing to trade in line with the Nasdaq.
