Why market confidence matters more than inflation right now

• Political noise and policy uncertainty are driving market risk premiums, leading to investor unease and a shift into 'protection mode'.
• Midterm election years are historically more volatile, with deeper drawdowns, and 2026 is expected to follow this pattern.
• Consumer strength, boosted by real wage growth and tax refunds, is seen as a positive for the first half of the year.
• The Fed is perceived as resisting political pressure and maintaining data dependence, with rates near neutral, making further cuts unlikely despite affordability concerns.
• Debt-funded AI spending raises scrutiny on return on investment and could introduce significant volatility in the second half of the year.
• Corrections should be viewed as opportunities for long-term, disciplined investors to reallocate capital.

The video analyzes how political noise and policy uncertainty are currently driving risk pricing in financial markets. While consumer strength and tax refunds are expected to support markets in the first half of the year, historical midterm election cycles and debt-funded AI spending could lead to increased volatility and potential corrections in the latter half. Long-term investors are advised to remain disciplined and view market corrections as opportunities.