Core Viewpoint - The Strategic Emerging Industries Purchasing Managers' Index (EPMI) for January 2026 increased by 0.9 points to 50.0, indicating stable mid-level economic conditions with three out of seven sub-industries in the expansion zone, consistent with seasonal trends observed in previous years [1][5][6]. Sub-item Summaries - **Production and Demand Indicators**: In January, production volume, product orders, and export orders increased by 1.6, 1.5, and 1.0 points respectively. The production-to-demand ratio has risen for three consecutive months, suggesting positive demand expectations among emerging enterprises [2][10]. - **Price Signals**: Purchase prices and sales prices increased by 0.4 and 0.3 points respectively. The sales price index has been on an upward trend since July 2025, with only a brief decline in November 2025 [2][11]. - **Loan Difficulty Indicator**: The loan difficulty index rose by 0.4 points, marking a two-month recovery, potentially linked to liquidity conditions in early January [2][11]. Industry Analysis - **Leading Industries**: The biotechnology, new energy vehicles, and next-generation information technology sectors have maintained high levels of prosperity since October 2025. The biotechnology sector is driven by a surge in patent applications, while the new energy vehicle sector benefits from both domestic and export growth [3][13]. - **Weak Industries**: High-end equipment manufacturing, new materials, and energy conservation sectors have shown weaker performance, remaining in the contraction zone for three consecutive months [3][13]. Manufacturing PMI Expectations - Historical data suggests that the manufacturing PMI typically experiences slight declines in January during years with late Spring Festival dates. The impact of strong exports and concentrated fiscal policies in the previous quarter on January's production preparations remains to be observed [4][17]. Economic Data Overview - The high-frequency data for January appears stable, with strong port data and weak construction and real estate data. Hard data is expected to show decent year-on-year performance due to the timing of the Spring Festival, with results to be published in March [4][21].

Core Viewpoint - The pressure on soft economic data in the U.S. has reached levels that historically prompted the Federal Reserve to consider interest rate cuts, which could benefit the stock market if the timing and scale of policy easing are sufficient to prevent a recession [2][4][7]. Group 1: Economic Data Analysis - Soft data has shown significant downward pressure, with over half of the soft data inputs now classified as "under pressure," while hard data remains stable [4][6][11]. - Historically, soft data pressure has led to Federal Reserve responses, with nearly every instance since the mid-1980s resulting in rate cuts or pauses in rate hikes [7][10]. - The interaction between soft and hard data can create a negative feedback loop, where prolonged weakness in soft data leads to declines in hard data, often culminating in a recession [4][11]. Group 2: Potential Economic Weakness - Two potential weak points in the economy are highlighted: the employment market, where layoffs are increasing, and the real estate sector, which is experiencing a decline in new home sales and building permits [13]. - The stock market's current optimism hinges on the assumption of a "non-recession" scenario, and any shift towards recession could lead to significant declines from current levels [13][16]. - The market anticipates a potential rate cut by the Federal Reserve in September, with a 20% probability of a cut in July, although this is considered low given the stability of hard data [13].

Group 1 - Investors are concerned about the risks associated with the rise in the U.S. market and how to digest weak economic growth data, but Goldman Sachs suggests there is no need for excessive worry regarding anticipated economic growth headwinds [1] - The strategist team led by David Kostin believes that the market pricing of economic growth carries both upside and downside risks, with significant deterioration in economic data potentially alarming investors [1] - Soft data has started to weaken but typically bottoms out before hard data, indicating that there is room for further improvement, which could support stock market gains [1]

Group 1 - The Bank of Canada is placing greater emphasis on soft data and intelligence from businesses [1]

Core Viewpoint - The Bank of Canada is placing greater emphasis on soft data indicators in its economic assessments [1] Group 1 - The Senior Deputy Governor of the Bank of Canada, Rogers, highlighted the importance of soft data in understanding economic conditions [1] - Soft data includes surveys and sentiment indicators that can provide insights into consumer and business behavior [1] - The shift towards soft data reflects a broader trend in central banking to incorporate qualitative measures alongside traditional hard data [1]

Group 1 - The core viewpoint emphasizes the need for caution in weighing the importance of soft data when formulating monetary policy [1]

Core Viewpoint - The volatility of U.S. trade policies is leading investors to increasingly rely on "soft data" for decision-making, as traditional "hard data" indicators become outdated in a rapidly changing environment [1][2]. Group 1: Shift to Soft Data - Investors are turning to sentiment surveys and other forms of soft data to gauge current conditions, as hard indicators like unemployment rates and retail sales lag behind [1]. - Cresset Capital's CIO Jack Ablin emphasizes the need for soft data to understand the present situation due to a lack of real-time information [1]. - Reflection Asset Management's CIO Jason Britton notes that consumer sentiment is crucial, as poor consumer feelings can lead to reduced spending and economic harm [2]. Group 2: Divergence of Signals - There is a noted divergence between signals from hard data and soft data, which can sometimes fail to accurately depict future economic conditions [2]. - In 2022, despite a drop in consumer confidence, strong labor markets and household balance sheets led to continued consumer spending, contradicting recession predictions [2]. Group 3: Alternative Data Sources - Some market participants are seeking alternative indicators beyond traditional surveys, with Duke University professor Campbell Harvey highlighting the importance of new data sources during uncertain times [3]. - Harvey points to predictive markets like Polymarket, where users bet on various economic events, as valuable insights based on real-world interactions [3]. - Glenmede's Mike Reynolds is exploring new metrics, such as international tourist spending in the U.S., to assess the impact of tariffs [3][4]. Group 4: Caution on Soft Data - Despite the trend towards soft data, some experts, including U.S. Treasury Secretary Yellen, advocate for focusing on hard data, which they believe provides a more accurate economic picture [5]. - Federal Reserve Chairman Jerome Powell acknowledges the tension between hard and soft data, indicating that both will be considered in future rate decisions [5]. - Goldman Sachs' chief economist Jan Hatzius warns against over-reliance on soft data, as it may reflect sentiment rather than actual economic activity, potentially leading to false alarms [5].

Core Viewpoint - The Federal Reserve is expected to maintain interest rates between 4.25% and 4.50% during the upcoming meeting, with a low probability of a rate cut in the near term, reflecting a cautious stance amid economic uncertainties [2][3][6]. Interest Rate Decision - The market anticipates a 2% chance of a 25 basis point rate cut in the upcoming meeting, with an overall expectation of 72 basis points of cuts throughout the year [2]. - Following a strong employment report, major banks like Goldman Sachs and Barclays have pushed back their rate cut predictions from June to July [2]. Economic Assessment - Morgan Stanley suggests that the Fed may downgrade its economic activity assessment from "sustained robust expansion" to "slowing growth" [3]. - The divergence between "soft data" (surveys) and "hard data" (actual economic indicators) is notable, with soft data showing deterioration while hard data remains resilient [6][10]. Inflation and Policy Stance - Many officials describe the current policy stance as "moderately tight," with some considering it "significantly tight" [9]. - The Fed is closely monitoring long-term inflation expectations, which remain stable, providing some reassurance [8]. Internal Disagreements and External Pressures - There is a mix of opinions within the Fed, with some officials advocating for a wait-and-see approach while others, like Waller, lean towards a more dovish stance [7]. - President Trump continues to exert pressure on the Fed to lower rates, emphasizing that the Fed's actions have been too slow [7]. Market Reactions - In the foreign exchange market, tactical buying of the dollar is suggested, although the impact of the Fed on currency markets is expected to be limited [12]. - In the stock market, there is a belief that the market has fully priced in the baseline predictions, but risks of recession remain significant, with a 45% probability assessed by the U.S. team [13].

Economic Outlook - The U.S. economic outlook is under scrutiny as consumer and business surveys signal anxiety, reflecting market concerns about economic development [1][3] - Despite the anxiety in market sentiment, fundamental economic data shows resilience, with GDP growth and industrial production indices maintaining certain levels without significant declines [3][4] Consumer Sentiment - Consumer confidence indices have declined, leading to a pessimistic outlook on future income growth and employment prospects [3] - Consumers are becoming more cautious in their spending decisions due to price fluctuations and potential risks in the job market, impacting overall domestic demand [3] Business Sentiment - Business surveys indicate that many managers are worried about market demand uncertainty, leading to conservative investment decisions and some companies reducing expenditures [3] - The overall economic landscape is complicated by the contrast between negative market sentiment and stable fundamental data [3][4] Federal Reserve Policy - Goldman Sachs economists suggest that the Federal Reserve is unlikely to ease monetary policy based solely on "soft data" from consumer and business surveys [4] - Historical experiences show that soft data has often incorrectly predicted recessions, leading the Fed to be more cautious in its policy decisions [4] Labor Market Indicators - The Fed is looking for clear changes in labor market indicators, such as employment participation rates and wage growth, before considering any interest rate cuts [4] - The labor market is viewed as a critical indicator of economic health, influencing the Fed's assessment of recession risks and the need for monetary easing [4] Interest Rate Decision - Goldman Sachs aligns with the consensus that the Fed is likely to maintain interest rates in the upcoming decision, as fundamental data has not deteriorated to a level that necessitates immediate action [5] - The Fed's policy adjustments will consider multiple factors, including inflation levels and the global economic environment, to avoid unintended consequences [5]

Summary of Key Points Industry: Federal Reserve and Economic Outlook Core Insights and Arguments - Goldman Sachs economists believe that the Federal Reserve is unlikely to ease monetary policy solely based on "soft data" indicating economic anxiety among consumers and businesses, as the fundamental data does not show a severe economic slowdown [1] - The team at Goldman Sachs noted that soft data has previously misled predictions of impending recessions, particularly during the Fed's efforts to combat inflation in 2022 [1] - The Federal Reserve is expected to seek evidence from the labor market and other hard data before considering any interest rate cuts [1] Additional Important Content - Goldman Sachs, along with other Wall Street institutions, anticipates that the Federal Reserve will maintain interest rates at their current levels during the upcoming rate decision [2]