And market volatility shows an increase…

Markets finished last week in a volatile fashion, erasing most of the week’s gains with all three major indexes closing down at least 1% on Friday. The Dow Jones and S & P 500 both experienced their biggest one day drop this calendar year, with both indexes closing the day down 1.7%. Largely fueled by poor economic data reported throughout the week. Further adding fuel to the fire on Friday was the bombshell report that the Justice Department was investigating United Healthcare, the largest private health insurer, for its Medicare billing practices.

Last Wednesday the Fed released their minutes from its January meeting, and the minutes largely reflected what the central bankers have been saying publicly. Echoing the uncertainty on policies surrounding trade and immigration, the Federal Open Market Committee (FOMC) members have opted for a wait-and-see approach on future rate decisions. The Fed is in no rush to lower, nor raise rates at this point in time. The Fed’s ideal rate remains the same – one that keeps unemployment at a healthy level while continuing to reduce inflation to its 2% target.

The Wall Street Journal published a report over the weekend detailing the changing consumer profile. The study showed the top 10% of earners, households who make roughly $250,000 or more a year, account for 49.7% of all U.S. consumer spending. Further, the report indicated that this cohort of households account for almost one-third of overall U.S. GDP. In short, the financial situation of the wealthy has never been stronger, their spending is all-time highs, and the economy is more reliant on this group than ever before.

At the end of this week, the Fed’s preferred inflation measure, the PCE Index, will be released. Expectations are that the year-over-year inflation will have increased by 2.6%. If expectations are accurate, this would represent a small reduction from last month’s annual figure of 2.8%. With looming tariffs, and other inflationary policies being pursued by the new Administration, the Fed will be putting more attention on this vital measure of inflation.