Weekly Market Outlook | 23 – 27 February

Global markets enter the final week of February in a fragile equilibrium, caught between deteriorating macro data and still-resilient pockets of risk appetite. The weakness of a disappointing U.S. Q4 GDP print that confirmed a sharper-than-expected deceleration in domestic demand was not isolated: Japan’s latest GDP figures also undershot expectations, reinforcing concerns that external demand and capital expenditure are losing momentum, while the UK’s recent data flow—spanning retail sales and industrial production—painted a picture of stagnation rather than recovery.

Overlaying the macro picture, U.S. trade policy has taken a dramatic turn. The previously announced tariff measures were blocked by a federal court ruling last Friday, temporarily halting their implementation and injecting a new layer of legal and political uncertainty into the outlook for global trade. In response, President Trump has escalated his rhetoric, now threatening to impose blanket 15% tariffs globally with immediate effect, up from the initially proposed 10%. 

The release of the latest FOMC minutes added another layer of complexity. While the Committee acknowledged tighter financial conditions and softer growth, the tone remained broadly cautious on inflation, emphasizing that rate cuts would require “greater confidence” in a sustained disinflation trend. The minutes were interpreted as mildly hawkish relative to market pricing, prompting a modest repricing higher in front-end Treasury yields and capping equity upside into the weekend.

Key Points to Watch

• Trump’s Trade Rhetoric: The President is expected to speak publicly on trade policy at least twice this week. Given the market sensitivity to tariff headlines — particularly for semiconductors, autos, and European luxury goods — any escalation or, conversely, any hint of negotiation, carries significant asymmetric impact.
• NVIDIA Earnings: Wednesday’s after-hours NVDA print is unambiguously the event risk of the week. With a market cap implying nothing less than perfection, any shortfall in data center revenue guidance or margin outlook could trigger a sector-wide repricing of the AI infrastructure trade.
• Fed Speakers — A Crowded Podium: No fewer than five Federal Reserve officials are scheduled to speak across the week, including heavyweights from the Board of Governors. After minutes confirmed the policy pause, markets will be listening intently for any shift in tone on the tariff-inflation transmission mechanism.
• PCE and Core Inflation Data: The Fed’s preferred inflation gauge, Core PCE for January, is due Friday. Coming on the heels of the FOMC minutes’ hawkish hold, a hot print would all but extinguish any lingering hope for a first-half rate cut and could push the 2-year Treasury yield meaningfully higher.
• Bitcoin at $65,000: Crypto markets will be watching macro sentiment closely after Bitcoin dropped to near the $65,000 level.

United States: The Tariff Story, NVIDIA and PCE

The U.S. investment landscape was upended late Friday after a federal court temporarily blocked the administration’s initial tariff rollout. In a characteristically aggressive response, President Trump has now countered by threatening a 15% global import surcharge—up from the original 10% proposal—with immediate effect, citing national security and trade deficits. This “tit-for-tat” between the executive and judicial branches has spiked volatility in the S&P 500, as investors weigh the inflationary impact of higher duties against the Q4 GDP collapse to 1.4%. All eyes now shift to NVIDIA’s earnings on Wednesday and the Fed’s favorite inflation gauge, PCE, on Friday 

UK and Europe: Stagnation Risks Intensify 

The European narrative remains one of managed decline. The UK’s 0.1% GDP print has effectively silenced the “growth sprint” narrative, putting Governor Andrew Bailey in a difficult position as services inflation remains elevated despite a stalling economy. In the Eurozone, the focus remains on the export-heavy sectors now facing the brunt of the new 15% U.S. tariff threat. If German industrial data continues to underperform, the pressure on the ECB to decouple from the Fed and pursue more aggressive easing will become an irresistible market force, likely keeping the EUR/USD pair under some downward pressure.

Asia: Japan’s Fragile Recovery

Japan’s weaker-than-expected GDP was the most underreported story of last week and deserves more attention than it received. The Nikkei’s elevated levels — still holding above 57,000 — are pricing in a successful execution of the Takaichi fiscal expansion agenda, but the growth data suggests the transmission from policy to real economic activity is slower than bulls assumed. The Bank of Japan’s dilemma deepens: hiking into a slowing economy risks a Nikkei correction, while standing pat risks renewed yen weakness. USD/JPY continues to trade in a technically precarious range, and any material yen depreciation from current levels would likely prompt verbal intervention from Tokyo. 

Digital Assets: Bitcoin at the $65k Crossroads

Bitcoin has retraced to $65,000, a level that represents a significant psychological and technical support zone. The retreat from recent highs is largely attributed to “whale” profit-taking and a broader “risk-off” sentiment triggered by the escalating tariff rhetoric. Crypto markets are now navigating a period of deleveraging; a failure to hold $65,000 could open the door to the $60,000 support level, especially if this week’s Fed speakers lean into the “higher-for-longer” narrative, which strengthens the USD and drains speculative liquidity.

Global Themes and Conclusion

The dominant theme entering the final week of February is fragility beneath the surface. Equity indices in the U.S. and Japan remain close to highs, but the macro underpinnings — GDP disappointments in the U.S., UK and Japan, an on-hold Fed, and a tariff environment that shows no sign of de-escalating — suggest that the risk-reward for aggressive long positioning is increasingly asymmetric. The divergence between headline index levels and the deteriorating breadth of economic data is a tension that requires resolution, and NVDA’s earnings this week will serve as the most immediate catalyst.

We enter the week with a cautiously defensive bias, favoring quality cyclicals with pricing power and limited tariff exposure, while maintaining a watchful position on the long end of the Treasury curve. Tech remains a high-conviction sector only on confirmed strong guidance from NVIDIA; absent that, the risk of multiple compression in the AI complex is real. The Fed’s silence on rate cuts, combined with a slowing growth picture, is precisely the stagflationary grey zone that is hardest to navigate — and the one that demands the most disciplined risk management.