Thoughts from Themes: Dollars and Sense

Gold is breaking records, the dollar is stabilizing, and Bitcoin is attempting to carve out a durable bottom, all against the backdrop of moderating U.S. growth and a landmark Supreme Court decision striking down sweeping tariffs. The ruling removes a major policy overhang, potentially easing inflation pressures and improving the growth outlook just as disinflation takes hold and AI-driven investment accelerates. With GDP cooling but resilient, inflation trending lower, and rate-cut speculation building, investors are navigating a pivotal moment where macro policy, monetary expectations, and risk appetite are converging.

Gold Glitters, the Dollar Drifts, & Bitcoin Builds a Base

Gold, the U.S. dollar, and Bitcoin are exhibiting divergent, yet interconnected trends shaped by moderating U.S. growth, geopolitical risks, and the landmark Supreme Court ruling striking down expansive tariffs earlier today.

Gold remains in a powerful bull market, currently trading at approximately $5,060–$5,066 per ounce. The metal is up more than 1.3% today and an impressive 72% year-over-year, having consolidated firmly above the $5,000 psychological level after posting all-time highs near $5,608 in January. Strong central-bank accumulation, persistent safe-haven buying amid U.S.-Iran nuclear tensions, and gold’s growing role as an inflation and currency hedge continue to underpin demand. Even with U.S. disinflation progressing, gold’s decoupling from traditional correlations underscores its enduring appeal as a premier store of value

The U.S. Dollar Index (DXY) sits comfortably in a 96–100 trading range for most of 2026, currently hovering near 97.8–97.9. While showing modest intraday stabilization, the dollar remains softer overall, reflecting balanced Federal Reserve expectations, mixed economic data, and the removal of tariff-related uncertainty. A modestly weaker dollar environment is broadly supportive for commodities and risk assets alike.

Bitcoin may have hit a cycle bottom last week and is currently trading in the $67,000–$67,500 range after posting its worst year-to-date performance on record, falling nearly 24% from its October 2025 peak above $126,000 amid ETF outflows and broad deleveraging. Yet clear signs of capitulation have emerged: prices stabilized after testing $65,600 lows, sentiment indicators have plunged to extreme-fear territory (with “Bitcoin to zero” searches hitting record highs, a classic contrarian bottom signal), and volatility is compressing in a manner that historically precedes large directional moves. Today’s Supreme Court decision invalidating sweeping tariffs delivered an immediate risk-on lift, pushing Bitcoin briefly above $68,000 and reinforcing expectations of reduced trade friction and improved growth prospects. With institutional adoption accelerating, AI-infrastructure synergies expanding, and potential monetary easing on the horizon, Bitcoin is increasingly viewed as “digital gold” poised to recapture flows.

These markets remain tightly linked: gold thrives on uncertainty, the softer dollar aids both commodities and crypto, and the tariff ruling removes a key policy overhang. Gold leads in outright strength, the dollar provides a stable backdrop, and Bitcoin shows mounting evidence of having formed, or being very near, a cyclical bottom.

Soft Landings, Hard Data

The U.S. economy demonstrates resilience amid moderating growth and easing inflationary pressures. According to the Bureau of Economic Analysis advance estimate released today, real GDP expanded at a 1.4% annualized rate in Q4 2025, down from 4.4% in Q3 and below expectations, contributing to full-year 2025 growth of 2.2%, a deceleration from 2.8% in 2024.

This slowdown reflects softer consumer and government spending, partly due to the government shutdown, as well as tariff-related drags on trade and investment. However, underlying fundamentals remain supportive, with robust business investment in artificial intelligence and technology bolstering productivity, consumer spending, and stock market performance near record highs.

The labor market stays healthy but has cooled. Nonfarm payrolls rose by 130,000 in January 2026, with the unemployment rate holding at approximately 4.3%. Wage growth persists at around 3.8% year-over-year, supporting household incomes, though thinning savings buffers and tighter credit conditions pose risks to sustained demand in 2026.

Inflation continues its "disinflationary" path, with the CPI at about 2.4–2.5% year-over-year in January, approaching the Federal Reserve’s 2% target. Core measures remain near 3%, reflecting lingering tariff effects. The Fed maintains the federal funds rate at 3.5%–3.75%, signaling a cautious, data-dependent approach with room for measured easing. Should Kevin Warsh get confirmed and act aggressively on rate cuts as anticipated, this could awaken animal spirits and jump start GDP and growth.

Fiscal challenges persist, with the deficit projected at 5.8% of GDP and public debt exceeding 100% of GDP. Leading indicators point to softness into early 2026, but AI-driven innovation provides meaningful tailwinds.

Also, the U.S. Supreme Court struck down President Trump’s sweeping global tariffs in a 6-3 decision. The Court held that the 1977 International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose these “reciprocal” tariffs—covering a 10% levy on imports from nearly all trading partners plus higher rates on China, Canada, Mexico, and others—which generated over $130–200 billion

since 2025. This removes a significant headwind, expected to ease cost pressures on businesses and consumers (previously adding $1,000–1,700 per household annually), lower goods prices, and support trade volumes and growth. Uncertainty remains over potential refunds (possibly $140+ billion) and the administration’s plans to pursue alternative authorities, which could add short-term policy volatility and fiscal strain.

Overall, the economy is on a soft-landing trajectory with positive momentum from technological investment. The Supreme Court decision enhances near-term prospects by alleviating tariff burdens, though risks

from fiscal sustainability, consumer endurance, and geopolitical tensions warrant close monitoring. Forecasters project 2026 GDP growth of 2.0–2.4%, with unemployment near 4.5% and further inflation moderation.

Macro Minute

This week, all eyes will be on how the Trump administration responds to the Supreme Court shutting down his tariff plan and Nvidia earnings, which will be a key indicator of the health of all things AI. A strong print from Nvidia could put investors back into “risk on" mode and bolster big tech and the broader market. The expectation is the NVDA numbers will be exceptional and the market's reaction to those results very telling for market sentiment and future direction.

Monday opens with Factory Orders (December) and the Chicago Fed National Activity Index (January), offering early reads on industrial demand and broader momentum. Tuesday features the Conference Board Consumer Confidence Index (February)—a high-impact gauge of household sentiment—alongside S&P/Case-Shiller Home Prices (December) and Richmond Fed Manufacturing Index. Thursday brings weekly Initial Jobless Claims, tracking labor-market steadiness near 4.3% unemployment. Friday’s centerpiece is the Producer Price Index (January), including core measures, widely viewed as the week’s most market-moving release for its implications on wholesale inflation and Fed policy (funds rate 3.5–3.75%). The Chicago PMI (February) and Construction Spending data round out the session.

Fed speakers, including Governor Waller (Monday/Tuesday) and others, will provide commentary on growth and disinflation. International highlights include Canadian Q4 GDP and select European inflation prints.

These data points will clarify whether recent policy shifts and technological tailwinds sustain the soft-landing trajectory, with PPI in particular shaping near-term expectations for easing and asset prices. Investors anticipate contained volatility unless surprises emerge on inflation or confidence.

This Week’s Major US Economic Reports & Speakers

Monday, February 23

8:00 AM Fed Governor Chirstopher Waller speaks

10:00 AM Factory orders

Tuesday, February 24

8:00 AM Chicago Fed President Austan Goolsbee speaks

9:00 AM S7P Case-Shiller home price index (20 cities)

9:00 AM Atlanta Fed President Raphael Bostic speaks

9:15 AM Fed governor Christopher Waller speaks

10:00 AM Wholesale inventories

10:00 AM Consumer confidence

Wednesday, February 25

9:35 Richmond Fed President Tom Barkin speaks

Thursday, February 26

8:30 AM Initial jobless claims

Friday, February 27

8:30 AM Producer price index (delayed report)

8:30 AM Core PPI year over year

8:30 AM Core PPI

8:30 AM PPI year over year

9:45 AM Chicago Business Barometer (PMI)

10:00 AM Construction spending (delayed report)

10:00 Construction spending

Disclosures:

All data sourced from Bloomberg as of February 20, 2026, unless otherwise cited.

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