Markets begin the year near record highs, but the software sector raises doubts among the investment community.
By Mario Catalá
The global economy begins the year with a constructive tone in the main macroeconomic indicators, especially in the United States, although with signs of divergence depending on the economic data considered, and with a geopolitical environment that has once again moved to the forefront. The evolution of inflation and the decisions of central banks remain the main focus of financial markets, in a context where growth continues, though not without risks, with recent weeks adding concerns about the software sector.
Several of the leading companies in the software sector (Microsoft, Palantir, Oracle, Adobe, etc.) experienced significant declines at the beginning of February, amid investor fears that artificial intelligence could call into question these companies’ traditional business models. The emergence of artificial intelligence models such as “Claude” could erode much of the added value traditionally offered by these companies, such as manual development (based on teams of programmers), technical consulting, or customized automation. These types of solutions could replace a large part of the previous tasks at a lower cost, while ensuring tailored solutions for each user. We are only at the beginning of a long debate that we merely wish to mention, but it will undoubtedly be important to observe how the different companies in the sector are able to adapt to this new environment.
United States
The macroeconomic data published in recent weeks have generally been favorable, although the labor market is beginning to generate some uncertainty. Leading indicators have shown a promising start to the year, with January PMIs clearly exceeding market expectations. The Manufacturing PMI stood at 52.4 points compared to 51.9 in December, while the Services PMI advanced to 52.7 from the previous 52.5, with both remaining in expansion territory.
Economic growth data continue to surprise to the upside in the United States, as third-quarter 2025 GDP once again exceeded expectations with growth of 4.4%. In addition, the Atlanta Federal Reserve estimated significant growth (around 3.5%) for the final quarter of the year, which, if confirmed, would place U.S. economic growth above 3% for the full year 2025.
On the consumption side, retail sales disappointed in December, remaining flat when the market expected a 0.4% monthly increase, despite a strong start to the holiday shopping season. This data could begin to generate concern if confirmed in the coming months, although adverse weather conditions may have had a temporary negative impact. Consumer confidence continues to show mixed signals. The Conference Board survey continues to deteriorate, and the January reading hit lows at 84.5, well below the estimated 90.6 and the previous 94.2. In contrast, the University of Michigan indicator has improved for the fourth consecutive month, reaching 57.3 and moving away from historic lows.
The labor market remains the main source of divergence among different indicators. The January ADP private employment data reported the creation of 22,000 jobs, compared to the 46,000 expected, while JOLTS job openings fell sharply to 6.54 million versus the 7.2 million forecast. Conversely, nonfarm payrolls contradicted previous signals, with 130,000 jobs created in January versus the 66,000 estimated, and 172,000 private payrolls versus the 70,000 expected, which also placed the unemployment rate at 4.3%.
Last Friday, the January CPI data were released, surprising at 2.4%, below the estimated 2.5% and the 2.7% published in December. On a core basis, it fell one-tenth to 2.5%, as expected. Interestingly, both figures are still quite far from the levels reflected by the Truflation indicator, which measures in real time the price data of more than 15 million products from 30 different sources. This indicator, which seeks to avoid the lag and lack of dynamism of official data, would suggest that current inflation in the United States stands at around 0.75%.
For its part, the Federal Reserve kept the benchmark interest rate in the 3.50%–3.75% range at its January meeting, as expected. The appointment of Kevin Warsh as successor to Jerome Powell was well received by the market, easing fears of a loss of independence by the institution. The Fed signaled a 25-basis-point rate cut during 2026, although the market is pricing in at least two cuts, a fact that, together with the dispersion in the dot plot presented after the meeting, suggests that volatility will remain present throughout the year.
Europe
Europe continues to present a mixed macroeconomic scenario, although compatible with growth similar to that of the previous year, with GDP expected to grow in an approximate range of 1.2% to 1.5%. January PMIs reflect this duality. The manufacturing PMI exceeded forecasts at 49.5, although it remains below the expansion threshold. The Services PMI, meanwhile, did not reach the projected target and stood at 51.6, although it remains in expansion territory. At the national level, the manufacturing sector shows improvement in France, which reached a 43-month high with a reading of 51.2, and in Germany, which rose to 49.1, while Spain declined to 49.2, a nine-month low.
In terms of growth, following the upward revision of third-quarter 2025 GDP to 1.4%, the estimate for the fourth quarter points to growth of 1.3%, which would allow a more favorable starting point for 2026. Consumption remains the main weak spot. Retail sales fell by 0.5% in January, clearly below the forecasted 0.2% decline. The persistence of core inflation above 2% has particularly affected non-perishable goods, and consumption has yet to take off. On the positive side, investor confidence as measured by the ZEW Institute maintains a favorable trend. The January reading, at 40.8, marks the third consecutive increase, reflecting high investor optimism in the European industrial sector.
The labor market continues to show notable resilience, with the January unemployment rate standing at 6.2%, one-tenth better than expected and very close to the historic low of 6.1% reached in February 2025.
In terms of inflation, the year has begun positively in Europe, as January CPI fell to 1.7%, three-tenths lower than in December. In addition, core inflation declined by one-tenth to 2.2%, improving on forecasts and reaching levels not seen since 2021. Given these price levels, it was foreseeable that the European Central Bank would not introduce changes at its first meeting of the year, and therefore it kept the deposit facility at 2%. In fact, the general market consensus expects that the ECB will not act on rates in 2026 thanks to the good performance of the economy, although several research houses are betting on cuts of between 25 and 50 basis points if inflation clearly falls below 2% and a strong euro reinforces the disinflationary process.
China
China continues to await the long-desired recovery of domestic demand, as well as its real estate sector. Economic growth remains solid and could be boosted both by government stimulus plans and by investments in the artificial intelligence sector, although geopolitical conflicts remain the main obstacle facing the Asian giant.
January PMIs have shown a clear divergence between official data and the Caixin survey, as official PMIs continue to reflect weakness, with readings slightly above 49, while Caixin data show growth and stand in expansion territory, with readings of 50.3 and 52.3 respectively. GDP met the government’s target by growing 5% in 2025, although various forecasts suggest that in 2026 growth will be somewhat more moderate, at around 4.5%. The external sector has positively surprised: exports grew 6.6% in December, far exceeding the +3% estimated by consensus, while imports advanced 5.7%, well above the forecasted 0.9%.
December industrial production recovered part of the ground lost in previous months and stood at 5.2%, also exceeding forecasts. The unemployment rate remained at 5.1%, one-tenth better than expected, showing a labor market that is holding up well, although without a clear recovery in consumption. As for prices, January CPI corrected significantly after three months close to 1%. The published increase of 0.2% contrasts with the 0.4% forecast and the previous 0.8% reading.