Three potentially significant market-impacting stories developed over the weekend.
* Firstly, Trump’s desperation to do away with Fed chairman Jerome Powell, demolish the independence of the central bank and take personal control of US interest rate policy resulted in an obvious intimidation tactic of a criminal prosecution threat. Incredibly, a haggard-looking Powell was forced onto YouTube on Sunday, vowing to stand firm against extraordinary White House political interference.
* Secondly, the president outright told reporters “We are going to take Greenland” even though the US has precisely zero legal or historical basis for doing so. Such a move by military force could destroy NATO.
* Thirdly, an escalation in both rhetoric and violence in Iran put to the test Trump’s recent threat to react militarily to the Iranian authorities killing protesters, something that has undoubtedly already taken place.
Wall Street was understandably spooked by this avalanche of uncertainty at the opening bell on Monday. Stocks initially pulled back from record high levels, interest rates jumped and the US Dollar dived. The financial sector was particularly rattled after Trump baselessly claimed that any credit card company charging over 10% interest (the national average is currently 21%) after Monday 20th January would be “breaking the law”.
Traders eventually turned their focus from the stream of bizarre proclamations coming from the White House to upcoming Q4 earnings and the indexes recovered to score mild gains and close at yet more new record highs. Alphabet/Google became just the fourth company to ever move above a $4 trillion valuation.
After Asian stock markets reached new all-time record highs overnight amid the announcement of a snap election in Japan, the main event in the US on Tuesday was the pre-market CPI report which showed an as-expected 2.7% annualized inflation rate, but falling prices at the gas pump masked some quite significant increases elsewhere.
The data provided a brief crumb of hope for a Fed Funds Rate cut on January 28th, but it is still considered to be a very long shot (see INTEREST RATE EXPECTATIONS below). JPMorgan and Delta Airlines kicked off the earnings season but traders were unimpressed and the indexes slipped downwards, finishing near the lows of the day.
Wells Fargo, Bank of America and Citibank joined JPMorgan on Wall Street’s naughty step after earnings disappointments on Wednesday morning. We also got a pre-market PPI reading that validated the CPI inflation outlook but Retail Salescontinued to hold up.
Big Tech/AI names bore the brunt of what appeared to be an intense bout of Large Cap profit-taking with S&P 500 and NASDAQ finishing the session meaningfully lower with every Magnificent Seven stock closing in the red, but at the same time the Russell 2000 Small Cap Index scored its fourth all-time record high of the young year, emphasizing the under-the-surface rotation that seems to be taking place.
On Thursday morning, a very low weekly Jobless Claims number poured cold water on any flickering hopes of a January rate cut and interest rates spiked up again to four month highs.
Goldman Sachs, Morgan Stanley and Taiwan Semiconductor all delivered solid Q4 earnings and the major indexes finished the session back in the green with a renewed spring in their step as the somewhat shaky start to the week seemed to trigger some dip-buying of the more beaten-down names.
Stocks meandered along aimlessly on a quiet Friday in advance of a three-day weekend as a volatile week came to an end with another utterly bonkers proposal, this time teased by Fed chairmanship candidate and Trump’s grinning bootlicker-in-chief Kevin Hassett, to encourage people to empty their workplace retirement plans to buy a house.
The major indexes closed on Friday pretty much where they had opened on Monday, except for Small Caps which were considerably higher following eleven consecutive days of outperforming the big boys in the S&P 500 - the longest such streak since the late 1980s.
The events of the last couple of weeks have shown that pretty much anything is on the table for this administration when it comes to short term electoral bribes between now and the midterms. Investors need to be braced for a “flood the zone”strategy of wave after wave of outlandish populist proposals in the lead-up to November 3rd, many (but not all) of which may well be just mindless rhetoric and constitutionally unachievable.
The relative lack of market reaction to all this preposterous blather, as well as to the now open warfare between the president and the central bank, seems to be emboldening Trump. So far, financial markets are treating it all as just political theater but at some point (maybe this week at the repulsive and out-of-touch orgy of self-congratulation, brown-nosing and performative b******t in Davos?), the ambiguity and recklessness of many of these Soviet-style interventionist schemes will likely take their toll with potentially damaging consequences for risk assets and, while we’re not there yet, we may well be getting closer.
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ARTICLE OF THE WEEK ..
“If the home you live in goes from $200k to $1m, you are not wealthy, because the replacement home also costs $1m. You are trapped.”
Ritholtz’s Nick Maggiulli asks, Is Home Equity Fake Wealth?
.. AND I QUOTE ..
“An unprecedented attempt to use prosecutorial attacks to undermine [Federal Reserve] independence”.
Eleven ex-Treasury Secretaries, past Fed chairs and top economists in a joint statement describing last week’s threatened criminal probe into Fed chairman Powell.
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Real Estate (two biggest holdings: Welltower, Prologis) ⬆︎ 4.2% for the week
Last week’s worst performing US sector: Communication Services (two biggest holdings: Google, Meta) ⬇︎ 2.3% for the week
* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price fell 0.4% last week, is up 1.4% so far this year and ended the week 0.6% below its all-time record closing high (01/12/2026)
* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price rose 2.1% last week, is up 8.0% so far this year and ended the week at its all-time record closing high.
* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. Its price rose 1.0% last week, is up 4.2% so far this year and ended the week at its all-time record closing high.
INTEREST RATES:
* FED FUNDS RATE * ⬌ 3.625% (unchanged from a week ago)
* PRIME RATE ** ⬌ 6.75% (unchanged from a week ago)
* 3 MONTH TREASURY ⬆︎ 3.67% (3.62% a week ago)
* 2 YEAR TREASURY ⬆︎ 3.59% (3.54% a week ago)
* 5 YEAR TREASURY ⬆︎ 3.82% (3.75% a week ago)
* 10 YEAR TREASURY *** ⬆︎ 4.24% (4.18% a week ago)
* 20 YEAR TREASURY ⬆︎ 4.79% (4.76% a week ago)
* 30 YEAR TREASURY ⬆︎ 4.83% (4.82% a week ago)
Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday
* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.
** Wall Street Journal Prime Rate as of Friday’s close. Tending to move in lockstep with the Fed Funds Rate, this measure is used as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending.
*** Used as a basis for determining mortgage interest rates and some business loans
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
* ⬇︎ 6.06%
One week ago: 6.16%, one month ago: 6.21%, one year ago: 7.04%
Data courtesy of the Freddie Mac Primary Mortgage Market Survey
INTEREST RATE EXPECTATIONS:
Where will the Fed Funds interest rate be after the next rate-setting meeting on January 28th?
* Unchanged from now .. ⬌ 96% probability (96% a week ago)
* 0.25% lower than now .. ⬌ 4% probability (4% a week ago)
With eight rate-setting meetings in 2026, what is the most commonly-expected number of 0.25% Fed Funds interest rate cuts this year?
* ⬌ Two (unchanged from a week ago)
Data courtesy of CME FedWatch Tool
All data based on the Fed Funds interest rate (currently 3.625%). Calculated from Federal Funds futures prices as of the market close on Friday.
PERCENT OF S&P 500 STOCKS ABOVE THEIR OWN 200-DAY MOVING AVERAGE:
* ⬆︎ 67%
One week ago: 64%, one month ago: 60%, one year ago: 58%
Data courtesy of MacroMicro as of Friday’s market close
This widely-used technical measure of market breadth is considered to be a very robust indicator of the overall health of the S&P 500 index.
A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffett.
Data courtesy of CNN Business as of Friday’s market close
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
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