Trump weaponized tariffs again over the weekend but this time in order to pursue his global territorial ambitions. He proposed tariff-based sanctions on allied countries voicing concerns over a proposed illegal US annexation of Greenland, including the UK, France, Germany, the Netherlands as well as the Nordic bloc, who reacted by forcefully reiterating their “non-negotiable” support for Greenland’s fundamental right to self-determination and Denmark’s existing oversight over the territory.
US markets were closed on Monday but stocks tumbled in Europe in response to the growing Greenland s**t-show as European leaders finally showed the first hint of a backbone, weighing retaliatory tariffs on $100 billion of US goods.
Meanwhile the skies above Davos, Switzerland were swarming with private jets as the odious, self-absorbed annual gathering got under way and attendees began scoffing their caviar and lobster while bracing for Trump’s arrival on Wednesday.
Back in the real world, Wall Street aggressively dumped stocks across the board on Tuesday, driven by the apparent resumption of global tariff wars (Trump threatened a crushing 200% on French wines and, annoyingly for the Davos crowd, champagne) and a return of the “Sell America” trade as well as developments in Japan where fiscal concerns caused local long term interest rates to skyrocket to all-time highs (see .. AND I QUOTE .. below).
Stock indexes all closed substantially lower for their worst session since last April’s “Liberation Day” meltdown with Big Tech/AI names worst affected.
After the closing bell, Netflix reported decent Q4 earnings, but the market reaction was negative with continued uncertainty about the company’s spending pending the final outcome of the Warner Brothers saga and the stock extended its recent slump (down 30% over the last three months).
On Wednesday morning, Trump delivered a rambling 90-minute + speech in Davos to an audience very well-schooled in business and economic data that was filled with a lot of statistics and statements that were, shall we say, rather divergent from the truth (including the “total defeat” of US inflation, a 5%+ economic growth rate, the mathematically impossible reduction of prescription drug prices by thousands of percent, his eight solved wars etc., to name but a few).
He doubled down on the US annexation of Greenland (“it’s our territory”), mistook Iceland for Greenland four times, revived his 2020 election delusions (“prosecutions are coming”) andfloated his absurd notions of capping credit card interest rates at 10% till just after the midterms, banning institutional ownership of houses and blocking private companies in the aerospace and defense sectors from paying any dividends to shareholders.
From this smorgasbord of available narratives, Wall Street initially chose to pick up on his apparent pledge not to take Greenland by military force and stocks stabilized after Tuesday’s rout. Then, mid-afternoon, Trump unveiled his biggest and quickest TACO climbdown ever in the face of a unified resistance from Europe and the worrying reaction of financial markets, announcing that the punitive Greenland-related tariffs proposed just four days earlier would now not go into effect.
This obliterated much of the rationale for Tuesday’s heavy decline and the stock indexes roared higher to erase about two-thirds of it in the final hours of trading.
The geopolitical de-escalation recovery in stocks continued on Thursday as dip-buyers held a victory lap. The PCE report came in as expected, confirming continued sticky inflation (2.8%) and gradually slowing economic growth. The indexes closed nicely higher again although still a little short of where they were on Friday of the previous week. After hours, Intel (10% owned by the US government) disappointed with its earnings report and provided a shaky outlook. The stock price got absolutely spanked in the after-market.
A wild week came to a muted close on Friday as the recovery rally faded with Intel’s plunge stifling any further gains. By the closing bell, the indexes had barely moved, suffering their first back-to-back weekly losses since June and New York traders hurried home to prepare for the monster snowstorm.
The Fed interest rate-setting meeting this coming Wednesday will be interesting, not because it is likely to make any moves (see INTEREST RATE EXPECTATIONS below), but because chairman Powell will be peppered with questions from the financial press pack about his job security and the future of Fed independence from presidential interference.
The beauty pageant that is the selection process for the role to succeed Powell as the next Fed chairman seems to be coming to a close and the odds are changing rapidly. Wall Street seems mightily relieved that Trump glove puppet Kevin Hassett’s chances appear to have collapsed and that Rick Rieder’s star is on the rise.
I was recently interviewed by Vetta-Fi who host the annual Exchange ETF conference in Las Vegas about my practice. You can read the interview here.
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ARTICLE OF THE WEEK ..
Even if you definitively knew the future (impossible, of course), you would still fail to successfully time the market because you wouldn’t know how others will react, which is all that matters.
A must-read article from Ritholz’s Nick Maggiulli for anyone who thinks they can outsmart the market. TLDR: You can’t.
.. AND I QUOTE ..
“What happened in Japan is a very important message to the House and to the Senate: You need to get our fiscal house in order.”
Ken Griffin, CEO of Citadel
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Energy (two biggest holdings: Exxon-Mobil, Chevron) ⬆︎ 3.2% for the week
Last week’s worst performing US sector: Financials (two biggest holdings: Berkshire Hathaway, JP Morgan) ⬇︎ 2.5% 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 1.1% so far this year and ended the week 1.0% 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 fell 0.4% last week, is up 7.6% so far this year and ended the week 1.0% below its all-time record closing high (01/22/2026).
* 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 1.1% last week, is up 5.4% 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 ⬆︎ 3.70% (3.67% a week ago)
* 2 YEAR TREASURY ⬆︎ 3.60% (3.59% a week ago)
* 5 YEAR TREASURY ⬆︎ 3.84% (3.82% a week ago)
* 10 YEAR TREASURY *** ⬌ 4.24% (4.24% a week ago)
* 20 YEAR TREASURY ⬇︎ 4.78% (4.79% a week ago)
* 30 YEAR TREASURY ⬇︎ 4.82% (4.83% 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:
* ⬆︎ 6.09%
One week ago: 6.06%, one month ago: 6.19%, one year ago: 6.96%
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 .. ⬆︎ 97% probability (96% a week ago)
* 0.25% lower than now .. ⬇︎3% 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:
* ⬇︎ 65%
One week ago: 67%, one month ago: 61%, one year ago: 60%
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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