The U.S. economy grew at just 1.4% in Q4 2025. Wall Street expected 2.5%. That’s not a miss — that’s a whiff. And yet, as of Friday afternoon, the S&P 500 is green. The Nasdaq is up nearly 1%. Someone forgot to tell the market it’s supposed to be scared.
The headline number is ugly, no question. A 1.4% GDP print is the weakest quarter since the economy briefly contracted in early 2022. For the full year, the U.S. grew at 2.2%, down from 2.4% the year before. On paper, this looks like an economy losing steam. But context matters — and this time, context tells a very different story.
The government shutdown is the elephant in the room. The prolonged federal shutdown in Q4 directly dragged on output, pausing government spending and disrupting agencies across the board. Heather Long, chief economist at Navy Federal Credit Union, was blunt about it: “The government shutdown hurt growth at the end of 2025. The economy will likely bounce back in early 2026, but it isn’t harmless to do prolonged shutdowns.” In other words, this isn’t organic weakness. It’s self-inflicted — and temporary.
Strip out the shutdown noise and the underlying economy looks surprisingly solid. Consumer spending held up. Business investment in AI infrastructure continued to boom. The labor market, while cooling at the margins, never cracked. Long summed it up well: “The U.S. economy was resilient in 2025 despite many headwinds. Solid consumption and the AI boom kept the economy growing.”
For traders, the GDP miss actually opens an interesting door. Weak growth gives the Federal Reserve more cover to cut rates — and markets are already pricing in two cuts this year, with the possibility of a third. Lower rates are rocket fuel for growth stocks, REITs, and anything duration-sensitive. The GDP miss doesn’t signal recession; it signals a Fed that might move sooner than later.
Meanwhile, next week brings Nvidia earnings — the single most important catalyst for the AI trade. Citi just reiterated a buy, arguing NVDA looks attractive at current valuations. Goldman is bullish on Broadcom heading into its report. The tech-heavy spending theme that carried 2025 shows zero signs of slowing down, regardless of what one backward-looking GDP number says.
The bottom line: GDP missed, the market yawned, and the real action is happening elsewhere. Sometimes the scariest-looking number on the screen is the least important one in the room.