General Market News

Morgan Stanley wealth advisor Jim Lacamp is urging investors to remain in stocks despite 2025's volatility, arguing the combination of rising earnings and falling interest rates should support markets. The S&P 500 has experienced recent weakness amid President Trump's policy announcements and geopolitical tensions, but Lacamp sees broadening market participation beyond the Magnificent Seven as a bullish sign.

• It would be 'really rare' for stocks to enter a bear market while interest rates are declining and earnings are rising, according to Lacamp
• Market breadth is improving with sectors like biotechs, banks, natural resources, and small caps all gaining momentum after years of Magnificent Seven dominance
• Key risk: Trump's hot economy push ahead of November midterm elections could keep inflation elevated and prevent Fed rate cuts, which would negatively impact stock valuations and corporate earnings

Consumer sentiment rose to 56.4 in January 2026 from 52.9 in December, according to the University of Michigan, driven primarily by easing inflation fears. However, confidence remains more than 20% lower than a year ago, as persistent inflation pressures, labor market uncertainty, and stretched household finances continue to weigh on consumer psychology.

• Year-ahead inflation expectations declined to 4.0% in January, providing modest relief, though longer-term expectations edged higher indicating consumers remain unconvinced about price stability.
• Roughly two-thirds of consumers are living paycheck to paycheck, with fewer than half able to confidently handle a $1,000 unexpected expense without falling behind on obligations.
• Both current conditions and expectations indexes remain sharply below January 2025 levels, reflecting concerns about purchasing power, job security, and income growth trailing expenditures.

The AI stock rally in 2026 is creating a stark divide between hardware and software sectors. Chip and semiconductor equipment stocks like Sandisk (up 100%), Western Digital, and Micron (both up 30%+) are soaring due to supply shortages and AI infrastructure spending, while enterprise software giants like Adobe, ServiceNow, Intuit, and Salesforce are among the S&P 500's worst performers. Investors fear AI-native startups pose an existential threat to traditional software companies, while hardware firms benefit directly from surging demand for AI-enabling components.

• Semiconductor equipment makers Lam Research, Applied Materials, and KLA are up 20-25% in 2026, driven by AI infrastructure buildout bottlenecks and high-bandwidth memory chip demand
• Major software stocks have plunged 8-24% as investors worry about competition from AI-native startups and the industry's inability to capture AI profits like 'picks-and-shovels' hardware suppliers
• Intel, briefly a top S&P 500 performer on hopes of federal and Nvidia investment, plummeted Friday after issuing disappointing guidance and warning its turnaround remains a 'multiyear journey'

U.S. stock markets headed for weekly losses despite President Trump reversing course on tariff threats related to Greenland acquisition talks. Major indices experienced their worst session since October early in the week before partially recovering when Trump softened his stance at the World Economic Forum in Davos. Gold prices reached record highs as investors sought safe-haven assets amid trade and geopolitical tensions.

• Trump initially threatened tariffs on countries opposing Greenland's sale, then reversed position saying he would 'prefer not to have to use tariffs' while citing a 'framework of a future deal'
• Several major companies disappointed markets post-earnings: 3M, Netflix, GE Aerospace, and Capital One all declined despite some beating estimates, due to margin concerns and weak guidance
• Gold and rare earth mining stocks rallied on geopolitical uncertainty, with SPDR Gold Trust (GLD) seeing heavy options activity as gold prices set new records

US consumer sentiment improved modestly in January, with the University of Michigan's Consumer Sentiment Index rising to 56.4 from 52.9 in December, though it remains more than 20% below year-ago levels. Despite the broad-based improvement across demographic groups, Americans continue to express concerns about high prices and weakening labor markets. The sentiment decline ranks among the sharpest in decades, comparable only to post-pandemic inflation peaks in 2022.

• Year-ahead inflation expectations eased to 4.0% from 4.2% preliminary reading, the lowest since January 2025, while five-year expectations slipped to 3.3%
• Consumer spending remained resilient in October and November despite sour sentiment, supporting strong economic growth in Q4 2025 and continuing the post-pandemic pattern of behavior diverging from sentiment
• Potential tariff escalations pose a risk to future sentiment, though brief episodes of trade rhetoric have not yet shifted consumer views on the domestic economy

Small-cap stocks are outperforming large-cap indices in early 2026, with the Russell 2000 beating both the S&P 500 and Nasdaq 100 across all timeframes over the past year. The shift is driven by Federal Reserve rate cuts, a strengthening economy, and increased corporate investment, sparking a risk-on rally in smaller companies. Big Money investors are particularly targeting small-cap technology and consumer discretionary stocks.

• The Russell 2000 is now outperforming the S&P 500 and Nasdaq 100 in all timeframes from year-to-date through 12-month periods, marking a significant reversal after years of underperformance
• MoneyFlows data shows strong investor appetite for smaller market-cap companies in 2026, with sector leadership rotating from technology and communications into energy, materials, and industrials
• Featured small-cap stocks receiving Big Money inflows include ACM Research ($3.4B market cap, 44.5% three-year sales growth), Fox Corporation ($32.1B), New York Times ($11.6B), and Rambus ($13.4B)

U.S. stock markets tumbled early in the week on President Trump's Greenland tariff threats but recovered after he called them off, with major indexes roughly flat while the small-cap Russell 2000 hit record highs. Earnings season produced mixed results, with regional banks and brokerages rallying while Intel and Netflix disappointed on guidance. Tesla made news by removing safety monitors from some robotaxis in Austin, Texas.

• The S&P 500 and Nasdaq fell below their 50-day moving averages Tuesday but recovered those key levels; the Russell 2000 continued leading with new record highs
• Interactive Brokers and Charles Schwab hit new highs after strong earnings, with IBKR reporting 27% EPS growth and 32% customer account increases; multiple regional banks rallied on solid results
• Intel guided weak for Q1 citing supply issues and failed to name new foundry customers, while Netflix's Q1 outlook disappointed with projected 15% growth vs. 16% in 2025; Tesla stock rose modestly ahead of Jan. 28 earnings

Major asset managers including Pimco and State Street are promoting 'portfolio construction alpha' as a new investment strategy that seeks outperformance through diversified asset allocation rather than traditional stock picking. The approach involves rebalancing away from U.S. large-cap heavy portfolios (often 80% exposure) into small-caps, commodities, precious metals, and inflation-linked bonds. This shift comes amid geopolitical uncertainty, divergent global monetary policies, and the continued 80-90% failure rate of active U.S. large-cap mutual funds to beat benchmarks over a decade.

• Managers recommend reducing U.S. large-cap equity exposure from 80% to 70-75% of portfolios, adding real assets like gold (which had its best return since 1979 in 2025) and inflation-linked bonds where clients are 'structurally underweight.'
• Enhanced cash management and active fixed income strategies can generate 1-2% additional returns versus traditional accounts, with divergent global monetary policies creating relative-value opportunities across countries from Canada to Japan.
• Small-cap stocks have outperformed large-caps since mid-2025, with the Russell 2000 up nearly 9% year-to-date and doubling the S&P 500's return over the past six months, while 70% of international stocks beat U.S. markets in 2025.

US stocks opened mixed on Friday, with the S&P 500 and Nasdaq flat while the Dow fell 0.5%, as investors paused after a relief rally driven by easing geopolitical tensions. Both the S&P 500 and Nasdaq are on track for their first back-to-back weekly declines since June. Focus is shifting to corporate earnings and next week's Federal Reserve policy decision.

• Chip stocks rallied on reports that Nvidia CEO Jensen Huang plans to visit China and Chinese regulators gave in-principle approval for major tech firms to prepare for potential H200 AI chip purchases, though Intel fell 7% on weak guidance
• President Trump backed away from Feb. 1 tariff threats on eight European nations after citing a 'framework' deal on Greenland, though Greenland's Prime Minister said he was unaware of details
• Goldman Sachs declined 2%, weighing on the Dow, while traders await upcoming manufacturing, services, and consumer sentiment data ahead of the Fed meeting

Small-cap stocks are significantly outperforming the broader market in 2026, with ten stocks in the S&P Small Cap 600 index up 35% or more year-to-date, led by semiconductor-related companies. The S&P 600 small-cap index has gained 8.5% compared to the S&P 500's 1% gain. Investors attribute the rally to expectations of lower interest rates benefiting smaller companies.

• Ichor Holdings leads small-cap gains with a 79.4% year-to-date return, followed by Ultra Clean Holdings at 74.3% and Vicor at 52.2%, all benefiting from semiconductor and tech sector demand
• The State Street SPDR Portfolio S&P 600 Small Cap ETF (SPSM) has outpaced the S&P 500 with an 8.5% gain versus 1% for large caps
• Lower interest rate expectations are driving the small-cap rally, with top performers concentrated in information technology, industrials, and healthcare sectors

Private credit, a $3.4 trillion lending sector dominated by nonbank institutions, faces rising scrutiny after recent bankruptcies of borrowers like Renovo and First Brands exposed potential risks. JPMorgan CEO Jamie Dimon and billionaire investor Jeffrey Gundlach have warned that problems in the opaque, lightly-regulated sector could spread. Concerns center on questionable loan valuations, increasing defaults, and the sector's rapid growth to an estimated $4.9 trillion by 2029.

• Banks have tripled their exposure to nonbank financial institutions, with JPMorgan's loans to this sector growing from $50 billion in 2018 to $160 billion in 2025, and total bank loans to NDFIs reaching $1.14 trillion
• Private credit lenders mark their own loan values, creating incentives to disguise or delay recognition of borrower problems, as seen when Renovo's debt was valued at full worth until shortly before being marked down to zero
• Defaults among private loans are expected to rise in 2026, with borrowers increasingly using payment-in-kind options to avoid defaulting, while Trump-era deregulation may further weaken underwriting standards as competition intensifies

Markets showed volatility this week amid Trump's Greenland dispute with Denmark, which saw U.S. equities post their worst day Tuesday before rallying when tensions eased. The episode highlighted ongoing uncertainty about U.S. trade policy and deal stability, with the dollar weakening, gold rising, and European stocks posting their first weekly gain in over a month. Japan's 10-year bond yield surged 18 basis points after PM Takaichi called a snap election, while the Fed meeting next week is expected to maintain rates with focus on Powell's potential successor.

• U.S. equity indices posted their worst day Tuesday during peak Greenland tensions, then rallied Wednesday after Trump indicated he would not impose additional 10% tariffs on European allies
• Japan's 10-year government bond yield jumped over 18 basis points in two days to multi-year highs following Prime Minister Takaichi's snap election call for February, with the yen briefly strengthening to 157 per dollar amid intervention speculation
• The dollar index is on track for weekly losses while gold continues rising, reflecting anxiety over Trump's willingness to reopen closed trade deals as a negotiating tactic in non-economic disputes

Adani Group stocks plunged on Friday after the U.S. Securities and Exchange Commission sought permission to issue summons to founder Gautam Adani and another executive over fraud and bribery charges. The billionaire chairman was indicted in November 2024 by a New York federal court alongside seven others for allegedly orchestrating a massive bribery scheme involving Indian government officials.

• Adani Green Energy fell 12%, Adani Enterprises dropped over 8%, and Adani Power declined 5% following the SEC's court filing
• Adani and co-defendants are accused of paying over $250 million in bribes to Indian officials to secure solar energy contracts worth more than $2 billion in profits
• The SEC claims it repeatedly sought assistance from the Indian government to deliver summons but was unsuccessful, prompting the request to the U.S. District Judge

A January 2026 report finds that December wage gains among U.S. Labor Economy workers—roughly 60 million employees earning $25/hour or less—could add $32 billion to GDP. Despite these gains, worker confidence remains persistently low at 50 versus 57 for non-Labor Economy workers, driven by concerns about rising expenses, limited savings, and technology-driven job displacement.

• Labor Economy workers represent 36.5% of U.S. employees and drive $1.7 trillion annually (15.1% of total U.S. spending), making their financial stability critical to overall economic health
• Roughly half of Labor Economy workers expect income to remain flat while nearly half anticipate monthly expenses to rise, forcing difficult spending tradeoffs in 2026
• Two-thirds of workers express concern about automation and job cuts, with many doubting their skills will remain valuable as technology reshapes work, creating an 'automation overhang' that compounds financial anxiety

European markets are expected to open slightly lower on Friday following events at Davos, where Ukrainian President Volodymyr Zelenskyy criticized Europe as 'lost' for trying to convince Trump to support it rather than uniting to defend itself. Markets also digested Trump's announcement of a 'framework' agreement on Greenland and his decision to call off escalating tariffs on European countries.

• Zelenskyy announced trilateral meetings between Ukraine, Russia and the U.S. would take place in the UAE on Friday and Saturday to discuss ending the war
• Ericsson reported Q4 2025 adjusted EBIT of 12.26 billion krona, beating forecasts of 10.09 billion krona, and announced a 15 billion krona ($1.7 billion) buyback scheme
• Trump stated the U.S. has an 'armada' headed toward Iran amid government crackdowns on protesters, while investors await a Supreme Court decision on his attempt to fire Federal Reserve Governor Lisa Cook

Japan's inflation cooled to 2.1% in December 2024, the lowest since March 2022, down from 2.9% in November. The data comes as Prime Minister Sanae Takaichi prepares for a snap election on Feb. 8, with cost of living as a key campaign issue. The Bank of Japan is expected to hold rates at 0.75% in its policy decision later today.

• Core inflation fell to 2.4% and 'core-core' inflation eased to 2.9%, both showing significant cooling from previous months
• Rice prices remain elevated near record levels at 4,267 yen per 5kg bag despite rice inflation declining to 34.4% in December after peaking in May 2025
• Prime Minister Takaichi has proposed suspending the 8% food tax for two years and implemented a $135 billion stimulus package including subsidies for electricity and gas bills

Energy stocks outperformed other S&P 500 sectors on January 20, 2026, rising over 6% year-to-date amid broader market turmoil driven by tariff concerns, bond market stress in Japan, and geopolitical tensions. Baker Hughes will report Q4 earnings unusually on Sunday night, January 25, followed by major oil companies Exxon Mobil and Chevron on January 30, with investor focus on Venezuela commentary following the Maduro capture.

• Japan's bond market saw historic volatility with 40-year yields hitting record 4.20% and 30-year rates jumping 27 basis points to 3.88%, ahead of upcoming Bank of Japan policy decision
• Natural gas prices surged nearly 30% on forecasts of extreme cold weather threatening power grids from Texas to Mid-Atlantic, contrasting with oil prices near five-year lows at $2.82 per gallon
• XOM and CVX stocks gained almost 9% in 2026, outpacing S&P 500 by eight percentage points, offering dividend yields of 3.2% and 4.1% respectively; Venezuela operations remain long-term opportunity requiring years to develop

Defiance ETFs and Futurum Equities launched a new actively managed ETF targeting 30-50 stocks that appeal to retail investors seeking high-growth, high-momentum opportunities. The fund focuses on companies expected to remain relevant for decades, avoiding volatile meme stocks, with initial holdings including Micron, Palantir, Robinhood, and Oklo. This launch comes as retail investors demonstrate growing market influence, recently pouring $12.9 billion into U.S. stocks in one week, nearly double the 12-month average.

• The Defiance Retail Kings ETF will hold companies like Micron, Palantir, Robinhood, and Oklo (which has surged 170% over 12 months) rather than volatile meme stocks
• Retail investors steered $12.9 billion into U.S. stocks in the week ended Wednesday, nearly double the 12-month average of $6.7 billion per week
• On the biggest day of net purchases since October, retail investors bought $1.8 billion in stocks on Tuesday even as markets fell, according to Vanda Research

Research shows that companies reaching market capitalization dominance typically underperform by 300-400 basis points annually over the following decade. The Magnificent Seven tech stocks, while not all literal 'Top Dogs,' now face this pattern as their combined net cash position has collapsed from $300 billion in 2017 to below zero today, driven by massive AI infrastructure spending. Investor Eric Fry recommends rotating out of Mag 7 stocks into copper and European equities for outperformance in 2026.

• The five leading 'hyper-scaler' data center operators have invested $1.5 trillion over the last five years, with spending accelerating and turning AI from a growth driver into a capital-intensive cost center
• Copper is projected to reach at least $8 per pound in 2026, with demand expected to surge 50% by 2040 while supply faces deficits of 150,000-400,000 tonnes and a potential 30% supply gap by 2035
• European stocks are forecasted to outperform U.S. markets in 2026 due to valuations at substantial discounts and Europe's shift toward intra-European trade and supply-chain self-reliance amid geopolitical uncertainty

U.S. stocks rallied after President Trump walked back threats to use force or tariffs to acquire Greenland, reviving the 'TACO Trade' strategy on Wall Street. The TACO (Trump Always Chickens Out) trade involves buying stocks during dips caused by Trump's aggressive policy threats, betting he will eventually reverse course. However, investors are becoming less reactive to Trump's threats after a year of observing this pattern.

• The S&P 500 gained over 37% between April 2025 lows and year-end by following the 'buy-the-dip' strategy during Trump's tariff threats and subsequent reversals
• Recent market events suggest diminishing panic responses—stocks hit highs despite unprecedented actions like DOJ investigation into Fed Chair Powell and the capture of Venezuelan President Maduro
• The TACO trade faces a paradox: it relies on market panic to create buying opportunities and trigger Trump's reversals, but growing investor certainty about those reversals reduces the panic needed to make the strategy work