3 Things You Need to Know This Week | US Budget, Consumer Confidence, Canada GDP (Feb. 24, 2025)

Transcript

Scott O’Leary

Hello, and welcome to 3 Things You Need to Know This Week, our regular series designed to help you sift through the noise across financial media and understand what really matters for markets.

And now here's three things you need to know this week.

First up, Congress' budget process picks up steam.

On Monday, the US House of Representatives returns to session after a week-long recess, with a government funding deadline coming up on March 14, lawmakers are expected to focus heavily on budget negotiations. If they don't agree on a budget by then, we could see a partial government shutdown. Right now, it's uncertain whether Congress will pass a full budget before the deadline or resort to a short-term extension. Either way, we don't think these debates in Washington pose a major threat to the global economy or stock market. The Republican Party controls the House and the Senate, but their slim majorities make it tough to pass anything without full support. Even one objection from a House Republican could derail a vote. On top of that, House and Senate Republicans don't always see eye to eye on priorities, slowing things down even more. But this kind of standoff isn't new. Over the years, funding deadlines have often been used as bargaining chips in negotiations. Congress almost always reaches an agreement, usually just in time.

Next, US consumer confidence.

On Tuesday, the conference board releases its latest consumer confidence survey. Sentiment has been both up and down lately. It climbed last fall, only to dip again in December and January. So, what's behind this shift? After the election, many Americans felt optimistic. But since then, doubts have grown about how much the government can actually deliver. Plus, there hasn't been much of a post-election rally in US stocks, which has tempered expectations. It's a similar story in Europe, where despite returns that have been strong so far this year, plenty of uncertainty remains, due in part to concerns over policies like tariffs under President Trump. But here's the good news: When consumer sentiment is low, it sets up more opportunity for the stock market to surprise to the upside. When expectations are low, it's easier for reality to exceed them— a bullish dynamic for stocks.

Finally, Canada GDP.

On Friday, Canada will release fourth quarter economic growth data for 2024. The first three quarters showed steady expansion driven by strong household and government spending. However, some were concerned US tariffs could hurt Canada's economy. This is understandable. Nearly a third of Canada's GDP comes from exports, with the US as its largest trading partner. But the situation might not be as dire as it sounds. During Trump's first term, similar fears arose over tariffs, yet the actual economic impact was smaller than expected. Many of those tariffs were brief and quickly rolled back after the updated US-Mexico-Canada Trade Agreement. One key reason for this resilience is the deep economic connection between the US and Canada, particularly in energy. For example, Canadian oil accounts for a large share of US imports, and American refineries are built to process Canada's heavier crude. These strong interdependencies create powerful incentives to maintain smooth trade despite any tariff turbulence.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.com. Thanks for tuning in and don't forget to subscribe!