Fed Holds Steady, Tech Valuations Reset, and What It Means for Your Portfolio
Each week, we break down the key economic developments and market movements shaping the investing landscape. From central bank decisions to sector-level shifts, this update highlights what mattered most—and how it impacts portfolios.
Federal Reserve Signals Confidence While Keeping Its Options Open
The Federal Reserve held interest rates steady this week, and the tone of its messaging was notably more confident. Chair Jerome Powell pointed to a “clear improvement” in economic conditions and a stabilizing labour market, reinforcing the idea that the economy has found firmer footing without the need for additional stimulus.
Importantly, the Fed removed language referencing employment risks from its policy statement—an indication that officials believe the job market can sustain itself. Markets are now pricing in no rate changes until at least June, providing businesses and consumers with greater planning certainty.
For investors, this kind of policy stability matters. When interest rates are predictable, markets tend to refocus on company fundamentals rather than macro speculation. High-quality businesses with strong cash flows and durable competitive advantages typically perform well in these environments—which aligns closely with how portfolios are positioned.
Technology Investors Demand Results, Not Just Promises
Technology stocks experienced renewed volatility this week after Microsoft shares declined sharply. The sell-off followed news of record spending on artificial intelligence infrastructure alongside slower-than-expected growth in its cloud business.
The market reaction sends a clear message: investors are becoming more discerning. AI enthusiasm alone is no longer enough—markets want to see a clear path from investment to profitability.
Notably, many technology stocks recovered part of their losses later in the week, suggesting this was less about abandoning the sector and more about resetting expectations. This shift toward accountability is ultimately healthy. Companies that can demonstrate real returns on AI spending should continue to be rewarded, while those without a clear strategy may face ongoing pressure.
Microsoft’s long history of shareholder value creation suggests this reaction may prove short-lived. More broadly, our focus remains on technology leaders with proven business models and the financial strength to invest strategically through market cycles.
Investors Look Beyond the U.S. Dollar for Diversification
The U.S. dollar continued its gradual decline this week, even as policymakers reiterated their commitment to a strong currency. Rather than signalling panic, the move reflects a broader diversification trend.
Investors are increasingly spreading risk across currencies and real assets such as gold and silver, driven in part by concerns around long-term government debt and policy uncertainty. This kind of diversification is a natural response in late-cycle environments.
For portfolios, a weaker dollar can be beneficial. Companies with global operations often see overseas earnings rise when converted back into U.S. dollars, and exposure to real assets can provide additional balance. This backdrop reinforces the value of global diversification rather than relying too heavily on any single market or currency.
What Drove Portfolio Performance This Week
Transparency matters. Here’s a look at the key contributors to performance across portfolios.
Top Company: Shell PLC
Shell shares rose roughly 7% this week, reflecting continued strength among disciplined energy producers. The company’s focus on capital discipline, shareholder returns, and financial flexibility has resonated with investors.
Energy holdings like Shell play an important role in portfolios by providing income, inflation protection, and diversification—particularly during periods of economic uncertainty.
Top Sector: Communication Services
Communication Services was the strongest-performing sector this week. Meta Platforms surged more than 14%, while AT&T gained over 6%, highlighting the sector’s unique blend of growth and defensive characteristics.
On one side are dominant digital platforms benefiting from scale and resilient advertising demand. On the other are essential telecommunications providers offering stable cash flows and attractive dividends. This internal diversification helps smooth returns while maintaining exposure to long-term growth.
Top Quant Strategy: Size
Large-cap stocks significantly outperformed smaller companies this week, making “Size” the strongest-performing strategy. Meta once again led the charge.
In uncertain environments, investors tend to favor large, established businesses with strong balance sheets, diversified revenue streams, and access to capital. These advantages are difficult to replicate and continue to be rewarded by the market.
What to Watch Next Week
Several key economic reports will shape market expectations in the days ahead.
ISM Manufacturing PMI (Monday)
This report provides insight into factory activity and broader economic momentum. While manufacturing remains in contraction, any improvement in new orders could signal rising business confidence.
ISM Services PMI (Wednesday)
Services make up the majority of the U.S. economy. Continued strength here would support employment and consumer spending, while price data will offer clues on inflation trends.
January Jobs Report (Friday)
The most important release of the week, the employment report will include annual data revisions that could reshape views on labour market trends. The results may influence expectations for future rate policy and move both equity and bond markets.
As always, we continue to focus on owning high-quality businesses, maintaining diversification, and positioning portfolios to navigate a range of economic outcomes—rather than trying to predict short-term market moves.
Source of All Economic Data: Bloomberg