Market Note: Strong Growth, Rising Affordability Focus

By Hightower Great Lakes on January 19, 2026

Economic Momentum Remains Strong

Economic data over the past week continued to reinforce the view that U.S. growth remains well above trend. GDPNow rose to 5.3% last Wednesday, underscoring the underlying strength in economic activity.

That momentum was further supported by labor market data, as weekly jobless claims declined to 198,000, while the four-week moving average fell to 205,000, marking a two-year low and highlighting ongoing labor market resilience.[1]

Manufacturing data also surprised to the upside. Both the Empire State and Philadelphia Fed manufacturing indices showed broad-based improvement, with gains across new orders, shipments, and prices paid. These readings suggest a reacceleration in manufacturing activity, which we believe is increasingly being driven by AI and the continued buildout of data center infrastructure.

On the consumer side, retail sales exceeded expectations, reinforcing the durability of household demand. While final figures are still forthcoming, holiday spending is tracking toward approximately $1 trillion[2], providing an additional tailwind for the economy.

Housing and Affordability

What is notable about the current expansion is that it is occurring largely without meaningful support from the housing market. Elevated mortgage rates and affordability constraints have left the housing sector effectively sidelined, reinforcing the K-shaped nature of the recovery.

Lower- and middle-income households remain disproportionately impacted, as high home prices and financing costs have kept homeownership out of reach for much of the next buyer cohort.

Against this backdrop, the administration has made clear that affordability, particularly in housing, will be a central policy focus heading into the midterm elections. While proposals such as credit card interest rate caps have been discussed, we view these measures as unlikely to be implemented.

More tangibly, policy efforts have focused on lowering borrowing costs, including actions taken through the housing finance agencies. Fannie Mae and Freddie Mac have been ordered to purchase approximately $200 billion in fixed-income instruments in an effort to bring down mortgage rates.

The popular consensus is that a sustained move in mortgage rates below 6% could begin to unlock pent-up demand, driving a modest but important reacceleration in housing activity.

Loan Growth and Bank Earnings

Bank earnings were strong, though elevated expectations tempered the market’s immediate reaction. Despite some near-term volatility around results, our conviction in owning financials into 2026 remains high.

In an environment where economic growth is tracking near 5%, loan growth should continue to run above trend, and recent results support that view. The big six U.S. banks reported loan growth in the 6%–7% range, an encouraging signal that credit demand remains healthy and balance sheets are being put to work.

Beyond traditional lending, capital markets and M&A activity continue to represent meaningful tailwinds, particularly for the large investment banks. The anticipated easing of capital requirements has yet to fully materialize in earnings, suggesting additional capacity for balance sheet growth and shareholder returns ahead.

Management teams also highlighted the increasing use of artificial intelligence to improve efficiency and productivity, reinforcing operating leverage across the sector.

Wells Fargo (WFC) faced pressure following a net interest income miss, though expense control helped offset the shortfall. With the asset cap now lifted, the firm is positioned to reinvest in growth initiatives and regain market share over time.

Bank of America (BAC) delivered a strong quarter with broad-based beats, but shares reacted modestly as management reiterated guidance. Meanwhile, Morgan Stanley (MS) and Goldman Sachs (GS) continue to benefit from improving investment banking activity. Morgan Stanley reported 47% growth in investment banking revenues while raising estimates.[3]

Fixed Income

U.S. Treasury yields moved modestly higher across the curve last week after December’s core CPI posted its slowest annual increase since March 2021. The softer inflation print led investors to reassess the expected path of Federal Reserve easing in 2026, contributing to a measured upward shift in yields.

By Friday’s close, the 2-, 10-, and 30-year yields were higher by 5, 5, and 2 basis points, respectively. Credit markets saw continued strength last week. Investment-grade spreads tightened 4 basis points to +103, while high-yield spreads narrowed 7 basis points to +314. In the municipal market, tax-exempt yields moved lower across the curve, with declines ranging from 1 to 7 basis points.[4]

Return for Selected Indices[5]

Click here to read last week’s Market Note (1/12).

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.

All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

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[1] Department of Labor: As of January 15, 2026

[2] National Retail Federation: As of November 6, 2025

[3] Morgan Stanley Earnings Call: As of January 15, 2026

[4] Bloomberg: As of January 19, 2026

[5] Source: Bloomberg. As of January 19, 2026.