TD Securities says the key U.S. data this week are producer prices (PPI) and consumer confidence. It notes that January PPI will help shape forecasts for personal consumption expenditures (PCE) inflation.
The firm expects February consumer confidence to rise to 85.5, up from 84.5 in January. It calls this a rebound, but says it would still be below the broader market expectation.
Key Inflation Signals Ahead
On inflation, it expects January core PCE to slow to 0.19% month on month, with headline PCE at 0.12%. It says this estimate is based on January CPI and will be updated after Friday’s January PPI release.
After an upside surprise in December PCE, it now forecasts core PCE at 2.9% year on year and headline PCE at 2.7% year on year by end-2026. Other releases to watch this week include jobless claims and regional Federal Reserve surveys.
The article notes it was created using an AI tool and reviewed by an editor.
We expect inflation to stay stubbornly high, which could delay any near-term interest rate cuts. The stronger-than-expected December 2025 inflation report led us to raise our end-2026 forecast for core PCE to 2.9%, well above the Federal Reserve’s target. This suggests the Fed may keep policy tight longer than markets previously expected.
Positioning For Higher For Longer
This backdrop supports positioning for higher interest rates for longer. Derivatives trades may need to reflect fewer Fed rate cuts being priced into instruments such as SOFR futures through the rest of 2026. Options strategies that benefit from steady or rising bond yields may also work well, since returning to 2% inflation still looks difficult.
At the same time, we see signs the consumer is under pressure, which complicates the outlook. Even if confidence rebounds to 85.5, that is still weak and far below the 100+ levels common before the pandemic. Because consumer spending drives about 70% of the U.S. economy, softer sentiment could weigh on corporate earnings.
Sticky inflation plus a weakening consumer could lift market volatility, making hedges more appealing. Traders may consider put options on major indices such as the S&P 500 to protect against a slowdown. The VIX, hovering near 14, suggests the market may be underpricing the risk that upcoming data releases trigger turbulence.
A similar pattern played out in 2024: early optimism about disinflation was followed by months of persistent price pressure. Weekly jobless claims have also inched up from their 2025 lows, now averaging around 235,000. This is not alarming on its own, but it supports the view that conditions are getting more challenging.
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