Last week, we kicked off a broad review of the key macro forces shaping the stock market, focusing on the health of the economy and earnings expectations. The takeaway was clear: the economy appears to be in solid shape, and consensus forecasts for earnings growth this year are not just positive, but notably strong.
Admittedly, there has been no shortage of headlines and market volatility since then. It would be reasonable to dive into geopolitical developments, market breadth, or the current state of the AI trade. However, at least for now, none of these factors have altered the market’s primary trend. With that in mind, it makes sense to continue our top-down assessment of the major macro drivers.
Having already examined the economy and earnings, the remaining areas to address are inflation, Federal Reserve policy and interest rates, and market valuations. Let’s turn to those next.
What Is Inflation?
The Federal Reserve defines inflation as a sustained rise in the prices of goods and services over time, reflecting a general increase in the overall price level across the economy. Similarly, Investopedia and standard economics textbooks describe inflation as a gradual erosion of purchasing power, manifested through a broad-based increase in the prices of goods and services over time. The International Monetary Fund frames inflation as the pace at which prices rise over a given period, indicating how much more costly a representative basket of goods and services has become.
Or, as I was taught in my very first economics class many years ago, inflation can be summed up as “too much money chasing too few goods.”
In Focus
There is little doubt that inflation has dominated the attention of the Federal Reserve, policymakers, consumers, and financial markets for several years. Unless one has been completely disconnected from events, it is well known that inflation surged in the aftermath of the COVID crisis, driven by trillions of dollars in government stimulus flowing into household bank accounts and severe disruptions across global supply chains.
This surge fueled fears that the United States was heading back toward the inflationary turmoil of the 1970s—a period the Fed ultimately subdued, but only at significant cost to the economy. With the Consumer Price Index approaching double-digit territory in early 2022, such concerns were understandable.
As the pandemic faded and supply chains normalized, inflationary pressures also began to ease. By early 2024, CPI readings had fallen back near pre-pandemic levels, when face coverings were not yet a cultural norm. The key question now is whether the inflation spike has been fully brought under control.
While corporate pricing strategies and consumer behavior—both central drivers of inflation—are inherently difficult to forecast, it remains possible to analyze the components of the CPI and examine the historical forces that have shaped inflation trends.
A Framework for Understanding Inflation
Unsurprisingly, the team at Ned Davis Research Group has already taken this step. In short, there is indeed a model that addresses this—shown below.
The upper chart shows the Consumer Price Index, which represents the inflation rate, while the lower chart displays NDR’s Inflation Timing Model. Reading the model is fairly intuitive. When the blue line rises above zero, it signals that inflation pressures are likely increasing. Historically, readings above 10 have coincided with periods when inflation was significantly above normal levels.
The red box highlights the CPI period from late 2020 through early 2022. During that phase, the model effectively flagged the acceleration in inflation and warned that conditions were set to deteriorate. The model also performed well in the opposite direction in the fall of 2022. While widespread concern about inflation persisted, the model correctly indicated that inflation was poised to ease—and it did.
That downtrend continued until late 2024 or early 2025, when the model briefly suggested inflation was no longer moving in the right direction. However, the signal proved temporary, as the model dropped back below the zero line by the end of 2025. Encouragingly, recent data has validated the model’s current reading, with price pressures generally moderating and the inflation rate falling back below 3%.
Is 3% Becoming the New Inflation Norm?
Inflation skeptics are quick to push back against my relatively calm view, pointing out that inflation remains well above the Federal Reserve’s stated 2% target. From that perspective, they argue the Fed is unlikely to turn accommodative anytime soon. While this logic is understandable, it overlooks two important points: first, the Fed operates under a dual mandate, and second, its preferred inflation gauge—core PCE—differs from the inflation measures most often highlighted in the media.
Crucially, inflation is not the Fed’s sole concern. Maintaining a healthy labor market is equally central to its mission. As a result, the Federal Open Market Committee must carefully balance inflation pressures against broader economic conditions.
This helps explain why the Fed has been cutting interest rates even as inflation remains above target. The labor market has shown signs of weakening, prompting policymakers to act. Equity bulls have welcomed these moves, mindful of the long-standing adage that it rarely pays to fight the Fed. With rates coming down, investors have largely aligned with the bullish camp.
That said, it’s important to recognize that the Fed is not engaged in an aggressive stimulus campaign. Chair Jerome Powell and his colleagues are not attempting to jump-start the economy. Instead, they are seeking to bring interest rates back toward a more neutral, “normal” level—one that balances inflation with labor market stability.
In this context, the prevailing view is that the Fed is willing to tolerate inflation running somewhat above its 2% target while it works to shore up employment conditions. From that standpoint, an inflation rate around 3% may be acceptable—for the time being.
In Summary
The encouraging takeaway is that history suggests a modest amount of inflation can actually be beneficial—supporting stock prices, home values, and corporate earnings. From that perspective, inflation does not appear to be a headwind for equities at present. While this may not be a classic “don’t fight the Fed” environment, the central bank is also not acting as an adversary. As a result, my view is that investors can remain on the bullish path—for now.
U.S. stock index futures edged higher on Tuesday evening after Wall Street suffered sharp losses amid rising geopolitical tensions linked to President Donald Trump’s demands regarding Greenland. Netflix was a notable mover in after-hours trading, sliding nearly 5% after the streaming company issued guidance that disappointed the market.
Futures stabilized following Wall Street’s worst session in three months, as investors grew uneasy over President Trump’s push to acquire Greenland despite resistance from European leaders. S&P 500 futures gained 0.1% to 6,838.0 by 18:27 ET, while Nasdaq 100 and Dow Jones futures also rose 0.1% to 25,152.75 and 48,727.0, respectively.
Netflix falls after issuing a weaker-than-expected outlook; more earnings reports ahead
Netflix Inc (NASDAQ: NFLX) fell 4.8% despite reporting December-quarter earnings that topped market expectations, as its first-quarter guidance disappointed investors. The company pointed to weakening viewership for non-branded licensed content, signaling softer demand beyond its flagship in-house programming. Netflix’s outlook for 2026 also came in below expectations.
The results arrive amid a wave of mixed corporate earnings over the past week, particularly among major U.S. banks. The fourth-quarter earnings season continues in the days ahead, with Johnson & Johnson (NYSE: JNJ), Charles Schwab Corp (NYSE: SCHW), and Prologis Inc (NYSE: PLD) scheduled to report on Wednesday.
On Thursday, earnings are due from Procter & Gamble (NYSE: PG), GE Aerospace (NYSE: GE), Intel (NASDAQ: INTC), Abbott Laboratories (NYSE: ABT), and Intuitive Surgical (NASDAQ: ISRG). Elsewhere in Tuesday evening trading, United Airlines Holdings Inc (NASDAQ: UAL) jumped 5% after posting strong quarterly earnings and an upbeat outlook.
Wall Street rattled by Trump–Greenland dispute
Wall Street’s major indexes slumped sharply on Tuesday — the first trading day after a long weekend — as investors were unnerved by escalating geopolitical tensions tied to President Donald Trump’s aggressive push over Greenland and tariff threats against several European countries. The sell-off marked one of the market’s worst sessions in months, with the S&P 500, Dow Jones, and Nasdaq all posting significant declines amid heightened risk aversion.
Trump’s plan to pressure European allies with new tariffs in an effort to secure U.S. leverage over Greenland drew strong rejection from European leaders and amplified fears of broader trade conflict, prompting a flight from risk assets.
On the trading day, the S&P 500 dropped about 2.1%, the Nasdaq Composite slid nearly 2.4%, and the Dow Jones Industrial Average fell roughly 1.8%. Tech and broader market stocks led the weakness, underscoring how geopolitical uncertainty can quickly sour sentiment across sectors.
Few analysts had a U.S. invasion of Greenland anywhere near the top of their 2026 market outlooks. President Trump’s surprise weekend tariff move has triggered a classic risk-off reaction, with gold rallying around 2%, equities down 1.0–1.5%, and the dollar coming under modest pressure. This week’s World Economic Forum in Davos is now set to become a focal point for U.S.–European diplomacy, with elevated FX volatility likely.
USD: Too Early to Embrace the ‘Sell America’ Narrative
Washington escalated its pursuit of Greenland over the weekend, with the threat of 10% tariffs—potentially rising to 25%—on eight European countries appearing consistent with a broader “maximum pressure” strategy to force a deal. Political commentary in Europe suggests this could mark the end of the EU’s long-standing policy of accommodation toward the U.S., with France emerging as a key advocate for deploying the EU’s Anti-Coercion Instrument, which allows for retaliatory measures spanning tariffs, taxation, and investment restrictions against coercive trade actions.
The issue, alongside growing concerns about strains within NATO, is set to dominate the policy agenda in a week that might otherwise have focused on Ukraine. President Donald Trump is scheduled to speak at the World Economic Forum in Davos on Wednesday, followed by an EU leaders’ meeting on Thursday. A central question is whether Europe adopts China’s approach from last year—matching U.S. tariffs one-for-one—to ultimately force a de-escalation from Washington.
Initial market reactions have been cautious but telling: gold has gapped roughly 2% higher, German DAX futures are down around 1.5%, and the U.S. dollar is marginally weaker. While U.S. cash markets are closed for the Martin Luther King Jr. holiday, S&P 500 futures are indicating losses of about 0.8%. Still, it may be premature to revive the “Sell America” narrative. As with last April’s near-50% “Liberation Day” tariff threats, investors appear reluctant to chase what often proves to be aggressive rhetoric that ultimately gives way to diplomatic negotiation.
Nonetheless, these developments are likely to inject a degree of volatility into what has otherwise been a relatively calm investment environment. On the broader “Sell America” theme, we noted on Friday that there was little concrete evidence of meaningful de-dollarisation last year. Even in a scenario where geopolitical tensions were to escalate materially, it appears unlikely that the dollar would experience a sell-off on the scale of last year’s near-10% decline, particularly given that the buy-side was then unusually under-hedged in U.S. dollar exposure.
Beyond the Greenland issue, this week may also bring clarity on the future leadership of the Federal Reserve. President Trump could announce his nominee to succeed Jerome Powell as Fed Chair. The dollar rallied on Friday after reports suggested Trump wants Kevin Hassett to remain at the National Economic Council, with Kevin Warsh now viewed as the leading candidate—an outcome that would be modestly supportive for the dollar if confirmed.
Overall, U.S. economic data are likely to take a back seat to political developments in the coming days. In the near term, the dollar may probe lower levels. For DXY, gap resistance around 99.35 could cap upside, while a corrective move toward the 98.80–98.85 zone remains the mild tactical bias.
EUR: Unwelcome Developments
The renewed tensions surrounding Greenland and the prospect of fresh tariffs are particularly negative for European industry. This comes just as industrial confidence had begun to recover, with firms appearing to have adapted to last year’s tariff-related volatility. The latest developments are likely to sharpen the focus among European policymakers on boosting domestic demand and may even add momentum to long-delayed reforms such as the Savings and Investment Union, aimed at strengthening Europe’s capital markets and enhancing their competitiveness relative to the U.S.
In FX markets, EUR/USD has established support just below 1.1600. Initial intraday resistance is seen near 1.1650, with scope for a move toward the 1.1690–1.1700 area if that level is cleared. Short-dated implied volatility for EUR/USD, both one-week and one-month, has edged higher, reflecting the elevated uncertainty surrounding the week ahead.
GBP: Poised for Relative Outperformance This Week
We believe this week’s U.K. data — November employment figures and December CPI — may offer modest support to sterling, potentially extending the short-covering rally that has been underway since late November. While EUR/GBP was initially seen as the more vulnerable cross, with downside risks toward 0.8600, early-week dollar softness could shift the bulk of the move into GBP/USD. A sustained break above the 1.3415–1.3420 zone would open scope for a move toward 1.3450–1.3460.
That said, sterling historically underperforms during pronounced risk-off phases, and the current environment remains fluid with multiple cross-currents at play.
It’s been a long, cold and snowy weekend in New York—just enough snow to keep most people glued to the couch. For anyone hoping for a brief break from markets, U.S. trading is closed on Monday.
For committed market watchers, however, Weekend Wall Street and Weekend Tech offer little comfort. Both have been under pressure following the latest developments around Greenland, with Weekend U.S. Tech CFDs down roughly 75 basis points as of 8:30 a.m. ET on Sunday. While this move is not definitive, it suggests futures could open lower when trading resumes Sunday evening at 6:00 p.m. ET.
Attention also turns to Tuesday, when the Supreme Court may issue another opinion. Given how volatility was priced on Friday, it would not be surprising to see overnight volatility dynamics re-emerge, potentially pushing implied volatility higher into the 10:00 a.m. release window.
Tuesday also marks a $14 billion Treasury bill settlement, which is expected to tighten liquidity conditions further. As a result, the session could be eventful from the outset. If overnight funding rates begin to climb this week, pressure on usage of the Federal Reserve’s Standing Repo Facility would likely increase, with the key threshold for the overnight rate seen above 3.75%.
From my perspective, the technical setup in the S&P 500 looks fragile. The index appears likely to be in negative gamma when trading resumes on Tuesday, which could further amplify volatility. The rising wedge pattern remains intact, and a decisive break below the 6,900 support level would raise the risk of a more pronounced pullback.
Ten-year Treasury yields broke higher on Friday, and much of that move may have been linked to the quarterly refunding questionnaire sent to primary dealers later in the afternoon. The most notable steepening in the yield curve occurred in the belly, which would be consistent with speculation that the Treasury is considering shifting the 7-year note from a monthly new issue to a quarterly issuance with two reopenings.
This suggests the Treasury could be preparing the market for potential adjustments to issuance size or duration in the near to medium term, though that view remains speculative. Notably, yields rose most sharply in the 5- to 7-year sector, reinforcing this interpretation.
Had the move instead been driven by expectations around Kevin Hassett no longer being considered for Fed chair, yields would likely have increased more at the front end of the curve.
Regardless of the catalyst, the key point is that the 10-year yield has broken out in a meaningful way, suggesting that a move higher may now be unfolding. While confirmation on Tuesday will be important, it is clear that market dynamics have shifted.
Futures tied to major U.S. stock indexes fell after President Donald Trump raised the prospect of imposing tariffs as part of his push to acquire Greenland. European leaders discussed possible retaliation against the measures, which they described as a form of blackmail. Gold climbed to a fresh record high, while oil prices edged lower as traders assessed Trump’s remarks and the EU’s response. Elsewhere, China’s economic growth slowed in the fourth quarter but still met Beijing’s 2025 target.
U.S. futures and global stocks decline
U.S. stock futures pointed lower on Monday as investors weighed President Donald Trump’s threat to impose tariffs on several European countries until the United States is allowed to acquire Greenland.
By 03:05 ET (08:05 GMT), Dow futures were down 404 points, or 0.8%, S&P 500 futures had fallen 66 points, or 1.0%, and Nasdaq 100 futures were off 336 points, or 1.3%.
With U.S. cash markets closed for the Martin Luther King Jr. Day holiday, the immediate reaction to Trump’s latest tariff threat will be delayed. Risk-off sentiment has spread globally, dragging equities lower across Europe and Asia.
ING analysts said Trump’s comments, following last year’s sweeping global tariffs, have pushed trade tensions into “an entirely new dimension,” driven less by economic considerations and more by political motives. They added that while past experience suggests caution in reacting to dramatic announcements, some of Trump’s threats over the past year have ultimately been carried out.
Focus on Trump’s Greenland tariffs
European leaders agreed on Sunday to intensify efforts to counter President Donald Trump’s tariff threats, with reports suggesting EU officials are considering strong retaliatory measures if the levies are imposed.
On Saturday, Trump said he would introduce 10% tariffs on exports from eight European countries—Denmark, Sweden, France, Germany, the Netherlands, Finland, Norway and the United Kingdom—until the United States is able to acquire Greenland. He added that the tariffs would be raised to 25% if the purchase of the semi-autonomous Danish territory does not go ahead. Trump has framed the move as a national security necessity, a claim European governments have rejected, describing it as blackmail.
Ahead of an emergency EU summit in Brussels on Thursday, member states are expected to debate a range of responses, including a potential €93 billion tariff package on U.S. imports and the possible use of the bloc’s “Anti-Coercion Instrument,” which could restrict U.S. access to investment, banking and services markets. Reuters, citing an EU source, reported that the tariff package currently has broader backing.
Trump’s latest tariff threat has also cast doubt over the future of a U.S.–EU trade agreement reached last year, with EU officials saying they cannot approve the deal while Washington pursues control of Greenland. ING analysts said that while the outcome of the dispute remains uncertain, it underscores the lack of predictability in global trade and tariff policy.
Gold reaches record high
Gold prices climbed to record highs in Asian trade on Monday, nearing $4,700 an ounce, as investors rushed into safe-haven assets following President Trump’s latest tariff threat.
Spot gold rose 1.6% to $4,667.33 an ounce by 02:26 ET (07:26 GMT), after earlier touching a record $4,690.75. U.S. gold futures also hit a new peak at $4,697.71 an ounce.
Silver prices surged more than 4% to a fresh all-time high of $94.03 an ounce, supported by safe-haven demand as well as its role as an industrial metal.
Oil prices edge lower
Oil prices edged lower, giving back part of last week’s gains as markets weighed the growing risk of a trade dispute linked to Greenland. Brent crude slipped 0.1% to $59.74 a barrel, while U.S. West Texas Intermediate fell 0.1% to $55.95.
Crude had rallied early last week on concerns that unrest in Iran could threaten oil supplies from the Middle East, a region that accounts for a significant share of global output. Much of that risk premium faded after President Trump ruled out immediate U.S. military action, leading prices to pull back before stabilizing toward the end of the week.
China’s economy meets 2025 growth target
China’s economy grew slightly more than expected in the fourth quarter of 2025, data released on Monday showed, as policy stimulus and a pickup in consumption helped the country meet its annual growth target.
Gross domestic product rose 4.5% year on year in the October–December period, in line with forecasts but down from 4.8% in the previous quarter, marking the slowest pace in three years. On a quarter-on-quarter basis, GDP expanded 1.2%, marginally above expectations of 1.1%.
The result brought full-year 2025 growth to 5%, meeting Beijing’s target. The government is widely expected to set a similar 5% growth goal again, as it continues to face heightened U.S. trade tensions, weak consumer demand and a prolonged property sector downturn.
European stocks dropped sharply on Monday after U.S. President Donald Trump threatened to impose economic sanctions on several countries in the region if they resist his plans to acquire Greenland.
By 03:05 ET (08:05 GMT), Germany’s DAX was down 1.3%, France’s CAC 40 fell 1.6% and Britain’s FTSE 100 slipped 0.4%.
Tariff threats dampen market sentiment
President Donald Trump said over the weekend that he plans to impose tariffs on exports to the United States from eight European countries that have opposed his proposal for the U.S. to acquire Greenland. The countries affected include France, Germany and the United Kingdom, along with several Nordic and northern European nations.
Trump said an initial 10% tariff would be introduced on Feb. 1, rising to 25% in June if no agreement is reached allowing the United States to take control of Greenland, the semi-autonomous territory of Denmark.
The European Union has already suspended ratification of a U.S.–EU trade agreement, and media reports indicate the bloc may revive a €93 billion tariff package targeting U.S. goods. Such a move could sharply escalate tensions and increase the risk of a wider transatlantic trade conflict.
According to IG market analyst Tony Sycamore, the latest dispute has intensified fears of NATO fragmentation and the breakdown of last year’s trade accords with European partners, pushing investors toward risk-off positioning in equities while boosting demand for safe havens such as gold and silver.
This has put the World Economic Forum, which gets under way later in the session in Davos, squarely in focus as global leaders convene, including a large U.S. delegation led by President Trump.
Euro zone inflation data due
Monday’s key economic event is the release of December eurozone inflation data, particularly with U.S. markets closed for the Martin Luther King Jr. holiday. Annual eurozone CPI is expected to come in at 2.0% in December, matching the European Central Bank’s target for the first time since mid-2025, down from 2.1% in November.
The ECB has left interest rates unchanged since ending its rate-cut cycle in June and signalled last month that it is under no immediate pressure to adjust policy, as inflation concerns have eased and growth surprised on the upside toward the end of 2025. The ECB’s next policy meeting is scheduled for early February.
Earlier data showed China’s economic growth slowed to a three-year low in the fourth quarter, with GDP expanding 4.5% year on year, compared with 4.8% in the previous quarter.
U.S. tech giants in focus
The European corporate earnings calendar is thin, though UK building products group Marshalls reported full-year 2025 adjusted profit before tax in line with market expectations despite ongoing uncertainty in its end markets.
U.S. technology heavyweights listed in Europe will also be in focus, as they could become targets of retaliatory measures by European authorities if President Trump follows through on tariff threats against European countries until the U.S. is permitted to acquire Greenland.
Crude slips lower
Oil prices edged lower on Monday, giving back part of the previous week’s gains as markets weighed the growing risk of a trade dispute linked to Greenland. Brent crude slipped 0.1% to $59.74 a barrel, while U.S. West Texas Intermediate fell 0.1% to $55.95.
Prices had climbed early last week on concerns that unrest in Iran could threaten oil supplies from the Middle East, a region that represents a large share of global production. However, much of that risk premium faded after President Trump said there would be no immediate U.S. military action, triggering a pullback before prices stabilized later in the week.
Bayer AG shares rose more than 7% on Monday after the U.S. Supreme Court agreed to hear the German group’s appeal in a pivotal Roundup weedkiller case, fueling optimism that a favorable decision could reduce the company’s long-standing legal burden.
The U.S. Supreme Court said on Friday it will consider whether federal pesticide regulations override state-level failure-to-warn lawsuits when the Environmental Protection Agency has not mandated cancer warnings for glyphosate-based products.
The case, known as Durnell, stems from an October 2023 Missouri jury ruling that found Monsanto—acquired by Bayer in 2018—did not adequately warn consumers about alleged cancer risks linked to Roundup, awarding $1.25 million in damages. Other allegations were dismissed, and the jury declined to impose punitive damages. A Missouri appeals court upheld the verdict in 2025.
Bayer argues that permitting such claims weakens the EPA’s authority, noting the agency has repeatedly determined that glyphosate is unlikely to cause cancer in humans and has approved Roundup labeling without cancer warnings. The U.S. Solicitor General has supported Bayer’s stance, warning that the Missouri decision could allow juries to overrule federal scientific judgments.
Investors viewed the Supreme Court’s move as a possible inflection point in litigation that has burdened Bayer’s valuation since its $63 billion purchase of Monsanto.
PCE inflation data, the start of the fourth-quarter earnings season, a Supreme Court ruling on tariffs, and the Davos World Economic Forum will all be in focus during the holiday-shortened week ahead.
GE Aerospace appears well positioned for an earnings-driven rally, while United Airlines may face downside pressure amid weaker results and persistent sector headwinds.
U.S. equities slipped on Friday, ending the week with modest declines across the Dow Jones Industrial Average, S&P 500, and Nasdaq, as investors digested President Donald Trump’s latest remarks on the Federal Reserve and broader geopolitical developments.
For the week, the Dow Jones Industrial Average slipped 0.3%, the S&P 500 eased 0.4%, and the Nasdaq Composite declined 0.7%, while the small-cap Russell 2000 gained 2% to notch another record close on Friday.
Volatility may pick up in the week ahead as investors evaluate prospects for economic growth, inflation, interest rates, and corporate earnings against a backdrop of persistent trade and geopolitical tensions.
Over the weekend, President Donald Trump said eight NATO member countries could face tariffs of up to 25% unless an agreement is reached allowing the United States to purchase Greenland.
U.S. financial markets will be closed on Monday in observance of the Martin Luther King Jr. Day holiday. On the economic front, Thursday’s core PCE price index— the Federal Reserve’s preferred inflation measure—will be the key data release to watch.
The fourth-quarter earnings season also ramps up, with results due from several high-profile companies, including Netflix (NASDAQ:NFLX), Intel (NASDAQ:INTC), United Airlines (NASDAQ:UAL), Procter & Gamble (NYSE:PG), Johnson & Johnson (NYSE:JNJ), GE Aerospace (NYSE:GE), and 3M Company (NYSE:MMM).
Investors are additionally awaiting a U.S. Supreme Court ruling on the legality of President Donald Trump’s global tariffs, after the court declined to issue a decision last week. The justices are also set to hear arguments related to Trump’s effort to remove Federal Reserve Governor Lisa Cook.
Attention will also turn to Davos, Switzerland, where Trump is scheduled to attend the World Economic Forum, potentially generating fresh headlines.
Against this backdrop, regardless of broader market direction, I outline below one stock that appears positioned for upside demand and another that could face renewed downside pressure. These views are strictly short-term, covering the week ahead from Monday, January 19 through Friday, January 23.
Top Pick: GE Aerospace Poised for Gains
GE Aerospace is set to report earnings this week, with expectations calling for another strong quarter. Analysts are forecasting solid results, supported by robust aerospace demand and a new wave of engine orders, including Delta’s recent selection of GE’s GEnx engines for its expanding Boeing 787 fleet.
The company is scheduled to release its fourth-quarter update before the market opens on Thursday at 6:30 a.m. ET. Options markets are bracing for heightened volatility, with implied pricing suggesting a post-earnings move of approximately ±5.2% in GE shares.
Analysts are forecasting another strong quarter, with consensus estimates pointing to adjusted earnings of $1.44 per share, up from $1.32 a year earlier, alongside revenue growth of roughly 13% year over year to about $11.2 billion. Performance is being underpinned by structural tailwinds, including sustained demand for LEAP and GEnx engines—both of which are sold out for the remainder of the decade—as well as rising engine deliveries.
Investor focus is expected to center as much on GE’s forward guidance as on its headline results. Recent announcements around new orders and capacity expansions have bolstered confidence in the outlook for 2026, with analysts projecting full-year earnings of approximately $7.01 per share.
As a global leader in jet engines and aerospace systems, GE Aerospace continues to benefit from a recovery in commercial air travel and strong growth in its high-margin aftermarket services business.
GE remains in a strong upward trend, with its share price up 78.8% over the past year and trading just 2.3% below its 52-week high. Momentum indicators continue to point higher, with technical signals flashing a “strong buy” across multiple timeframes.
If GE delivers the anticipated double-digit revenue growth, maintains or expands margins, and provides upbeat commentary on future demand, the stock could extend its rally as investors further re-rate GE Aerospace as a high-quality, cash-generative industrial leader.
Trade Setup:
Entry: $326 (pre-earnings)
Targets: $340 → $350 (gain ~5%-7%)
Stop: $315 (risk ~3%)
Stock to Sell This Week: United Airlines
By contrast, United Airlines is confronting increasing headwinds ahead of its fourth-quarter earnings release, scheduled for Tuesday at 4:00 p.m. ET. While the carrier has demonstrated resilience in recent quarters, consensus expectations suggest growing challenges that could result in an earnings miss or a muted market response.
Options-implied volatility signals a potential post-earnings move of roughly ±5.9% in UAL shares, underscoring the elevated risk around the report.
Wall Street expects the Chicago-based carrier to post earnings of $2.96 per share, down 9.2% from $3.26 a year earlier. Revenue is forecast to come in around $15.4 billion, though rising operating costs, capacity-related pressures, and lingering issues such as service disruptions and softer international performance continue to cloud the outlook.
The broader airline industry remains challenged by ongoing operational strains, including flight delays, cancellations, and capacity constraints.
Adding to the uncertainty, renewed tariff pressures on European routes could further complicate United’s international operations. Heightened trade tensions and the risk of retaliatory measures may weigh on the airline’s sizable transatlantic network.
Recent technical signals reinforce the downside risk, with UAL’s one-hour indicators flashing a “strong sell” as both momentum and moving averages remain firmly tilted lower.
Against this backdrop, the stock appears vulnerable in the week ahead. Even if headline results come in near expectations, a cautious outlook or incremental pressure on key international routes could be sufficient to push shares lower.
Economic growth depends on population expansion and the formation of new households. While the idea of fewer people—less congestion, smaller crowds, and reduced strain on infrastructure—may seem appealing, the risks associated with population decline are often understated. Much like deflation, a shrinking population poses serious and potentially greater threats to long-term economic stability.
Demographers use the “total fertility rate” (TFR), defined as the average number of births per woman, as a key measure of population sustainability. A TFR of at least 2.1 is required to maintain a stable population, with the additional 0.1 accounting largely for infant mortality. Although the global TFR stood at 2.24 last year, this figure masks significant regional disparities. Excluding Africa, the global fertility rate falls well below 2.0.
In 2025, most major advanced economies reported TFRs under the replacement threshold of 2.0, underscoring the growing demographic challenge facing industrialized nations.
No major developed economy currently records a total fertility rate above the 2.1 replacement threshold. Outside of Africa, global population growth is already in decline. Historically, from 1950 to 1970, the world’s wealthiest nations averaged more than 2.7 births per woman. Since 1995, however, that figure has fallen sharply to around 1.6, reaching a record low of approximately 1.5 during the 2020–2025 period.
Globally, population growth remains marginally positive, driven largely by demographic expansion in Africa and rising life expectancy among older populations. However, Asia’s two largest economies—China and Japan—are experiencing population decline, a trend that constrains their long-term growth potential. More critically, shrinking cohorts of younger workers are increasingly unable to shoulder the financial burden of supporting aging populations that are living longer and often facing higher healthcare needs.
China has formally abandoned its long-standing one-child policy, but behavioral patterns shaped by decades of enforcement have proven difficult to reverse. Today, many young couples are reluctant to have even a single child, prioritizing career advancement and higher incomes instead. Compounding the challenge, the legacy of the policy produced severe demographic distortions. Prior to 2010, widespread prenatal sex selection—driven by the desire to raise a single male “heir” to support parents in old age—led to a significant gender imbalance, with roughly 118 male births for every 100 female births between 2002 and 2008. The result is a surplus of men and a shrinking pool of potential spouses.
In the mid-1990s, a typical Chinese household consisted of four grandparents, two parents, and one heavily relied-upon child—the so-called “young emperor.” This inverted demographic pyramid is financially unsustainable, as the burden of supporting multiple generations increasingly falls on a single income earner.
Europe faces an even steeper demographic challenge. With an average fertility rate of just 1.4 children per woman and a comparatively generous system of old-age pensions, the region confronts mounting fiscal pressure. These constraints help explain Europe’s historical reliance on the United States for security spending—a strategy that may prove risky as President Donald Trump presses European nations to assume greater responsibility for their own defense.
The United States remains in a stronger demographic position than Europe or much of Asia, in part because of its relatively effective assimilation of immigrants and higher rates of family formation in more conservative regions of the country. However, with the administration introducing tighter immigration restrictions and stepping up efforts to detain and deport undocumented workers, questions are emerging over whether there will be a sufficient supply of willing young workers to staff the growing number of factories being brought back onshore.
Another structural risk embedded in these demographic trends is the growing strain on Social Security and Medicare. These programs function as intergenerational compacts, in which today’s workers finance the retirement and rising healthcare costs of the elderly. Unlike 401(k) plans or IRAs, they are not savings vehicles but largely unfunded entitlements built on historical assumptions of higher birth rates and a broad, growing workforce.
As younger generations are increasingly less likely to marry, have children, or pursue stable, high-earning careers—instead relying more on gig-based employment—the system faces mounting pressure. These shifts raise serious concerns about the long-term sustainability of funding future benefits, particularly in a society producing fewer contributors to support the next generation of retirees.
Most Asian equities declined on Monday after U.S. President Donald Trump reignited global trade concerns by slapping tariffs on several major European countries over Greenland.
Chinese stocks limited their losses after fourth-quarter GDP data came in above expectations, with the economy also meeting Beijing’s 2025 annual growth target of 5%.
South Korean shares outperformed regional peers, driven by gains in chipmakers after U.S. memory giant Micron Technology said it would acquire a fabrication plant from Taiwan’s Powerchip Semiconductor Manufacturing for $1.8 billion.
Other regional markets largely followed the slide in Wall Street futures after Trump’s tariff threat, with S&P 500 futures dropping as much as 1% during Asian trading. U.S. markets are closed on Monday for a public holiday.
Asian stocks slip after Trump’s Greenland tariff move
Japan’s Nikkei 225 and TOPIX fell 1% and 0.5%, respectively, while Hong Kong’s Hang Seng index declined 0.8%.
Australia’s ASX 200 slipped 0.4%, Singapore’s Straits Times index lost 0.5%, and futures for India’s Nifty 50 dropped 0.4%.
Over the weekend, Trump threatened to impose trade tariffs of up to 25% on several European countries, saying the measures would stay in place until an agreement was reached for the United States to acquire Greenland.
European nations largely rejected Trump’s demands for the Danish territory, with France also reportedly preparing retaliatory economic steps against Washington.
Trump’s tariff threats compounded already elevated geopolitical tensions worldwide, keeping investors cautious toward risk-sensitive assets. Gold prices surged to a record high on Monday amid strong safe-haven demand.
Trump has repeatedly pressed for control of Greenland, arguing the territory is vital to U.S. national security. He has also floated the possibility of military action, a threat that appeared more credible following a U.S. incursion in Venezuela earlier this year.
China stocks steady as 2025 GDP hits official target
China’s CSI 300 and Shanghai Composite indexes traded within a narrow range on Monday after official data showed quarter-on-quarter GDP growth slightly exceeded expectations in the December period.
GDP expanded 4.5% year-on-year in the fourth quarter, matching forecasts and bringing full-year 2025 growth to 5%, in line with Beijing’s target.
The outcome was largely supported by resilient exports, as demand outside the United States remained strong, helping keep the manufacturing sector buoyant.
Consumer activity was also aided by ongoing stimulus measures, as policymakers worked to reverse a prolonged post-COVID confidence slump.
However, December data still pointed to uneven recovery, with fixed-asset investment contracting far more than expected and retail sales growth falling short of forecasts.
South Korean shares jump on chipmaker rally after Micron deal
South Korea’s KOSPI outperformed regional peers on Monday, climbing more than 1% on the back of gains in semiconductor stocks.SK Hynix and Samsung Electronics, the country’s two largest chipmakers, rose 0.2% and 1.9%, respectively.
Sentiment toward the memory-chip makers was boosted after rival Micron Technology announced a $1.8 billion investment to acquire a facility from Taiwan’s Powerchip Semiconductor Manufacturing.
Powerchip shares jumped 10% in Taipei trading following the announcement.Elsewhere in Asia, chip stocks retreated on Monday but remained supported by gains from last week after strong earnings from industry bellwether TSMC.
The Federal Reserve’s Beige Book released Wednesday indicated that “tariff-driven cost pressures were widespread across every district.” Out of the 12 Fed districts, only two saw mild price increases, while the remaining 10 experienced more intense price pressure. This suggests the Fed is unlikely to reduce benchmark interest rates at the upcoming FOMC meeting—unless signs of labor market weakness push them to cut rates again to support hiring.
Meanwhile, a 5.1% increase in existing home sales in December could point to a potential recovery in the housing sector. The median price of homes sold last month was $405,400, a gain of just 0.4% year-over-year, indicating that home price appreciation remains limited.
The Commerce Department reported that retail sales increased 0.6% in December, surpassing economists’ forecasts of a 0.5% gain. In addition, October’s retail sales were revised to a 0.1% decline, instead of the previously estimated 0.2% rise. Overall, 10 of the 13 retail categories posted higher sales in November, making this a strong performance that should continue to support solid GDP expansion.
Meanwhile, three missile-capable ships and an aircraft carrier are being deployed to the Middle East in a show of force aimed at pressuring Iran’s government. Crude oil markets are pricing in the possibility that Iran’s oil exports could be removed from global supply, depriving the regime of revenue. This signals that President Trump may take further action beyond sanctions and a 25% tariff on nations that trade with Iran.
Intense diplomatic efforts have been taking place between Iran and neighboring Arab countries. On Wednesday, President Trump said Iran had halted the killing of anti-government demonstrators and would not carry out death sentences against people accused of seeking to overthrow the regime. His comments suggested the U.S. might be stepping back from launching military strikes. Trump told reporters that the U.S. had received word Iran had “no plans to execute protesters.”He went on to say that new information indicated the deaths had ceased and the executions had been stopped, adding that many believed executions were scheduled for that day.
U.S. stock index futures were little changed Thursday evening as strength in tech shares and a strong report from TSMC helped Wall Street break a two-session slide.
Gains were further supported by upbeat results from Morgan Stanley and Goldman Sachs, though worries over escalating geopolitical risks in Iran limited the broader market advance.
S&P 500 futures edged up 0.1% to 6,988.50 by 18:35 ET (23:35 GMT). Nasdaq 100 futures also gained 0.1% to 25,727.0, while Dow Jones futures ticked up to 49,670.0.
Tech, chipmakers rise after TSMC’s bumper Q4
Chipmakers led Wall Street higher on Thursday after TSMC (NYSE:TSM) reported record fourth-quarter earnings and pointed to continued strong demand driven by artificial intelligence. As the world’s largest contract chip producer and a key industry barometer, TSMC surged 4.4% in U.S. trading.
Customer NVIDIA Corporation (NASDAQ:NVDA) advanced 2.2% after its report, while competitor AMD (NASDAQ:AMD) gained 1.9%. TSMC CEO C.C. Wei noted that both the firm’s clients and their own customers are still eager to secure more semiconductors amid a major buildout of AI infrastructure.
Wei also projected a steep increase in capital investment in 2026 as the company scales production to meet accelerating demand. Chip strength extended modestly into the wider tech sector, which had seen some profit-taking earlier in the week after sharp early January gains.
Wall St breaks 2-day losing streak, bank stocks gain
Wall Street’s major indexes ended a two-day slide on Thursday, helped by gains in tech stocks and upbeat earnings from several banks. Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) jumped 4.6% and 5.8% after reporting strong December quarter results—boosting sentiment despite softer bank earnings earlier in the week.
The results effectively kicked off the fourth-quarter earnings season, with a wave of heavyweight names set to follow. Netflix Inc (NASDAQ:NFLX), 3M Company (NYSE:MMM), and U.S. Bancorp (NYSE:USB) will release earnings on Tuesday, while Johnson & Johnson (NYSE:JNJ) is due Wednesday.
Later in the week, Visa Inc (NYSE:V), Intel Corporation (NASDAQ:INTC), Abbott Laboratories (NYSE:ABT), and Intuitive Surgical Inc (NASDAQ:ISRG) are among many firms scheduled to report. By the close, the S&P 500 rose nearly 0.3%, the NASDAQ Composite added 0.25%, and the Dow Jones Industrial Average outperformed with a 0.6% gain fueled by bank strength.
The three major indexes had dropped for two consecutive sessions earlier this week amid market anxiety over escalating geopolitical tensions involving Iran.
Jerome Powell’s eight-year leadership at the Federal Reserve is ending amid significant challenges for the U.S. central bank and divided opinions among policymakers about the right approach to monetary policy. So, what might Powell’s last moves as Chair look like in this environment?
The labor market is still slightly weaker than full employment. Private sector job growth has stalled recently, and although the unemployment rate dropped a bit in December, it remains above what most economists consider the long-term natural rate.
On the inflation front, recent data are more promising. Core CPI inflation fell to 2.6% year-over-year in December from 3.1% in August. Some temporary shutdown effects may be lowering this figure by about 0.1 percentage points, and the Fed’s preferred inflation gauge, the PCE deflator, likely hasn’t improved as much. However, the overall trend for core inflation entering 2026 is clearly downward.
Given this, the Federal Open Market Committee (FOMC) likely has room to continue guiding the federal funds rate toward a neutral level in the near term. The forecast remains two quarter-point rate cuts in March and June, with the rate then holding steady at 3.00%-3.25%.
However, the opportunity for further rate reductions is narrowing. Fiscal stimulus from the recent One Big Beautiful Bill Act is expected to start boosting the economy by spring or summer. Additionally, tariff risks seem to be declining, which could also spur faster growth later in the year. The recent 75 basis points of rate cuts over the past three months will likely provide some support as well.
If labor market and inflation indicators show signs of overheating in the coming months, Powell and the FOMC might opt to pause policy adjustments and leave things steady for the next Chair. This successor could face skepticism from a committee under pressure from the Trump administration. The expectation of stronger economic growth in spring and summer further supports holding rates steady.
For now, the current forecast stands, but there is growing risk that rate cuts may be delayed or reduced compared to the baseline prediction.
TSMC (NYSE: TSM) reported a better-than-anticipated net profit for the fourth quarter on Thursday, as the global leader in contract chip manufacturing continued to capitalize on strong demand for its advanced chips driven by artificial intelligence.
The company also announced a significantly increased capital expenditure outlook for 2026, aiming to rapidly expand production capacity to keep up with growing AI-related demand.
TSMC’s CFO, Wendell Huang, revealed in a post-earnings call that the company expects its capital expenditure for 2026 to range between $52 billion and $56 billion, a substantial increase from $40.9 billion in 2025.
Huang also cautioned that TSMC’s mid- to long-term profit margins are likely to decline as the company continues expanding its production capacity, particularly in overseas locations. CEO C.C. Wei echoed these concerns, highlighting “significantly higher” capital spending and costs in the years ahead.
For the quarter ending December 31, TSMC posted a record net profit of T$505.74 billion ($16 billion), surpassing Bloomberg’s estimate of T$467 billion and significantly up from T$374.68 billion the previous year.
The company’s quarterly revenue, previously disclosed, rose to T$1.046 trillion ($33 billion), up from T$868.46 billion a year earlier. Huang forecasted first-quarter 2026 revenue between $34.6 billion and $35.8 billion.
TSMC’s strong performance was driven by robust demand for its advanced chips, with its 3-nanometer products contributing over 25% of revenue from its wafer segment.
CEO C.C. Wei indicated that the strong AI-driven demand is expected to continue in the coming years, with positive feedback from TSMC’s largest customers. He emphasized that the “AI megatrend” remains firmly in place.
While TSMC’s high-performance computing segment continues to be its primary revenue source, the smartphone chip division’s contribution increased slightly to 32% in Q4, up from 30% the previous quarter. This growth was likely boosted by Apple Inc., which incorporated new TSMC-made chips in its iPhone 17 lineup.
TSMC is also a crucial supplier of advanced AI processors to NVIDIA Corporation, a partnership that has significantly boosted its earnings and market value over the past two years.
The company has benefited greatly from a surge among major tech firms to expand data center infrastructure supporting AI development, as advanced processors are vital for handling AI models’ intense computing demands.
Last year, TSMC announced a $165 billion investment in the U.S., mainly targeting increased production capacity at its Arizona facility. This move also appears aimed at addressing the Trump administration’s push for more domestic manufacturing.
On Thursday, TSMC signaled plans to further expand U.S. production, with a goal of allocating 20% to 30% of its overall capacity to the Arizona plant.
TSMC is broadly seen as a key indicator of chip demand and the AI market trends.
ECB policymaker Martins Kazaks warned that the European Central Bank must remain vigilant as the U.S. administration’s criticism of the Federal Reserve introduces new risks to the global economic outlook. He was speaking after Fed Chair Jerome Powell was reportedly threatened with criminal charges over remarks about the renovation of the central bank’s headquarters, a move that has raised concerns about the independence of the world’s most influential monetary authority.
Kazaks, who heads Latvia’s central bank and is a contender for the ECB’s vice presidency, said such attacks resembled the politics of emerging economies and added to growing uncertainties facing the ECB, alongside the potential for an AI-driven financial bubble and China’s assertive trade practices. He stressed that risks to both inflation and growth exist on both sides, leaving no room for complacency, and warned that weakening the Fed’s independence could ultimately hurt lower-income Americans through higher inflation and interest rates. On China, he criticized subsidies, rare-earth export limits, and exchange-rate policies that restrain the yuan’s rise, suggesting they may conflict with WTO rules, and called on Europe to respond through long-overdue reforms and, if necessary, targeted industrial policy.
Kazaks said ECB interest rates remain appropriate, noting that euro zone inflation is showing positive signs, with even core inflation measures—excluding volatile items—moving closer to the ECB’s 2% target.
Today may bring another chance for the Supreme Court to issue a ruling on tariffs—we’ll know around 10:00 a.m. whether an opinion is released. The timing is notable for equities, as the S&P 500 is tightly consolidating and approaching a point where it must break in one direction. I still believe the setup looks more like a market top than the beginning of a melt-up. Technically, it could even be interpreted as a terminal diagonal triangle.
Ultimately, the key factor is volatility, which remains extremely subdued. While Tuesday did bring a notable rise in the left-tail index to 10.7—still a relatively low level—it was higher than before. In any case, we’ll find out today which way things break.
For now, interest rates seem stuck in place, with neither strong nor weak economic data moving the long end of the curve. Even the CPI report—despite undershooting on core inflation—failed to budge the 30-year yield. The setup still resembles a bull flag, but at the moment, there’s little follow-through.
If you’re looking for rising yields, Japan is where to focus. The 10-year JGB continues its steady ascent and is now around 2.17%. Based on the wedge pattern and a forward projection, the yield could push toward 2.25%.
On Tuesday, USD/JPY broke out, climbing past the 159 resistance level. Currently, the market seems to be focusing more on Japan’s fiscal spending plans than on interest rate differentials. A move up to 162 is looking more and more probable.
Software stocks took a severe hit. Shares of Salesforce (NYSE:CRM), ServiceNow (NYSE:NOW), and Workday (NASDAQ:WDAY) were heavily battered. Notably, ServiceNow has fallen back to its 2021 highs, which also align with the lows seen in April 2025.
Workday’s performance is actually even more troubling.
Salesforce seems to be holding up better than the others, but that’s not exactly reassuring. It looks like the market fears these companies might get disrupted or cannibalized by AI. Honestly, the charts across the board look pretty bleak.
WASHINGTON — On January 12, former Federal Reserve chairpersons strongly condemned the ongoing U.S. criminal investigation into current Fed Chair Jerome Powell, describing it as an “unprecedented attempt” to undermine the central bank’s independence.
Two Republican senators also criticized the Trump administration and questioned the Justice Department’s credibility in pursuing charges against Powell, whom President Trump has long aimed to replace amid his push for lower interest rates.
On January 11, Powell disclosed that the Federal Reserve had received grand jury subpoenas and faced threats of a criminal indictment related to his Senate testimony from June.
The controversy centers on a $2.5 billion (S$3.2 billion) renovation project for the Federal Reserve’s headquarters. In 2025, President Donald Trump suggested he might dismiss Chair Jerome Powell due to cost overruns related to the historic building’s refurbishment.
On January 12, former Fed Chairs Ben Bernanke, Alan Greenspan, and Janet Yellen, along with other ex-economic leaders, publicly criticized the Department of Justice’s investigation.
In a joint statement, they condemned the probe as “an unprecedented attempt to use prosecutorial attacks” aimed at undermining the Fed’s independence.
The statement added, “This is typical of how monetary policy is conducted in emerging markets with fragile institutions, often resulting in severe inflation and broader economic dysfunction.”
“Such practices are unacceptable in the United States.”
In an unusual statement on January 11, Mr. Powell criticized the administration, calling the building renovation and his congressional testimony mere “pretexts.” “The possibility of criminal charges stems from the Federal Reserve’s commitment to set interest rates based on its best judgment of the public’s interest, rather than aligning with the president’s preferences,” Powell stated.
He pledged to perform his duties “without political fear or favor.”
Separately, New York Fed President John Williams noted that historically, political interference in monetary policy often results in “unfortunate” consequences such as inflation.
Stocks Reach New All-Time Highs
Despite concerns triggered by the investigation, U.S. stock indices closed at record highs.
Bernard Yaros, lead U.S. economist at Oxford Economics, noted, “The fact that market-based inflation expectations have stayed steady suggests that investors are largely dismissing the probe as having little or no effect on the Fed’s independence.”
The Federal Reserve operates independently with a dual mandate to maintain price stability and low unemployment. Its primary tool is adjusting the benchmark interest rate, which influences U.S. Treasury yields and borrowing costs.
President Trump has frequently criticized Powell, labeling him a “numbskull” and “moron” for the Fed’s policy choices and not cutting rates more aggressively.
On January 12, White House spokeswoman Karoline Leavitt told Fox News that Powell “has proven he’s not very good at his job.” Regarding whether Powell is a criminal, she added, “That’s a question the Department of Justice will have to answer.”
Republicans Push Back Against Investigation
The Justice Department’s investigation has faced backlash from across the political spectrum.
On January 11, Republican Senator Thom Tillis, a member of the Senate Banking Committee, pledged to block the confirmation of any Federal Reserve nominee—including the next Fed chair—until the legal issue is “fully resolved.”
He stated, “The independence and credibility of the Department of Justice are now at stake.”
Another Republican senator, Lisa Murkowski of Alaska, backed Thom Tillis’ stance, describing the investigation as “nothing more than an attempt at coercion.”
Earlier, Senate Majority Leader Chuck Schumer, a leading Democrat, criticized the probe as an assault on the Federal Reserve’s independence.
David Wessel, a senior fellow at the Brookings Institution, warned of serious risks if the Fed were to come under President Trump’s influence.
Politicians might be tempted to keep interest rates low to stimulate the economy before elections, while an independent Fed is expected to set policy focused on controlling inflation and maximizing employment.
Wessel told AFP that if Trump succeeds in swaying the Fed, the U.S. could face higher inflation and reduced willingness from global investors to finance the Treasury.
Powell was originally nominated as Fed chair by Trump during his first term. His chairmanship ends in May, but he may remain on the Fed board until 2028. In 2025, Trump also attempted to remove Fed Governor Lisa Cook over allegations of mortgage fraud.
Chinese semiconductor shares climbed on Wednesday after reports said Beijing will restrict purchases of Nvidia’s H200 AI chips to limited, special-use cases. The news largely outweighed an earlier announcement that the U.S. had cleared sales of the H200 to China.
Shares of Semiconductor Manufacturing International Corp, the country’s largest chipmaker by output, rose nearly 2% in Hong Kong, while Hua Hong Semiconductor gained almost 5%. On the mainland, Cambricon Technologies and Moore Threads Technology—both promoted as domestic alternatives to Nvidia—also advanced.
According to The Information, Chinese authorities have told local technology firms that H200 purchases will only be approved under exceptional circumstances, such as for university research and development facilities. This development muted the impact of the U.S. Commerce Department’s decision to allow H200 exports to China, a move previously hinted at by President Donald Trump in late December and accompanied by strict conditions.
Beijing is seen as taking a cautious approach to the approval as it continues to pursue full self-reliance across the artificial intelligence supply chain, with chip manufacturing playing a central role due to the heavy computing demands of AI development and deployment. Although China made progress in chip production in 2025, it is still widely regarded as far from achieving complete technological independence.
Chinese technology stocks have advanced over the past week, driven by a wave of high-profile IPOs from leading domestic AI companies that boosted confidence in the sector’s growth outlook. The rally extended on Wednesday, with MiniMax Group and Zhipu—listed as Knowledge Atlas— the first of China’s so-called “AI tigers” to go public, climbing 4.4% and 17%, respectively.
The VIX 1-Day index closed below 10 on Monday, indicating that if a significant price surge follows the CPI report, it is unlikely to be driven initially by increased implied volatility. Instead, any substantial move would need to be supported by actual buying activity rather than a rise in volatility. However, volatility could still spike overnight, setting the stage for the familiar CPI-driven market reaction.
The S&P 500 appears stable for now, but I don’t believe this is the significant breakout many have anticipated since late October. Currently, the index hasn’t even fully cleared resistance at the trendline by a single bar. We witnessed similar patterns at the beginning of 2022 and 2025.
The market could keep inching up by 10, 20, or even 30 basis points, but considering the unusually low levels of both realized and implied volatility, along with one-month implied correlation at just 7, the odds aren’t in favor of a strong move. Monday’s trading volume in S&P 500 futures was so thin, it felt like December 22 all over again.
It seems the authorities have the ability to push the 3-month VIX back down to its July 2024 lows.
Perhaps those same market forces can drive the 1-month implied correlation down to 2.
Alternatively, the VXTLT bond market volatility index might decline to levels unseen since 2019.
The main takeaway is that, in my opinion, the market’s current structure is not set up for a sharp, explosive rally. While it may continue to grind upward, eventually volatility is likely to mean-revert higher, triggering a pullback similar to the one seen from late October into November.
Interestingly, despite numerous challenges in the oil market over the past four years, XLE has largely avoided a significant breakdown, instead trading mostly sideways throughout this period. If oil prices were to break out decisively and start climbing, it could signal a strong bullish trend for the sector. Currently, XLE is approaching a critical resistance level and merits close attention.
This could prove significant if oil’s breakout above the downtrend sustains and prices start climbing back into the $60 range. For now, $55 seems to be a support level, and oil remains one of the few commodities yet to make a notable upward move. It’s definitely worth monitoring for potential gains.
With holiday decorations packed away and investment professionals back at their desks, the serious market work for 2026 is officially underway. So far, investor sentiment appears optimistic, as the S&P 500 has posted a 1.76% gain—a promising start to the year.
Looking ahead, nearly every major Wall Street firm forecasts another strong year for stocks. While leadership within the market may shift, the broad consensus remains that stock prices are poised for healthy gains in 2026.
You might wonder how this optimism holds up amid concerns about AI bubbles, geopolitical tensions, inflation, and lofty valuations. Having wrestled with this question myself, I believe it’s worthwhile to step back and review the fundamental drivers underpinning the stock market.
From my experience managing money for over 40 years, I’ve learned that while short-term market movements are nearly impossible to predict, understanding the broader macroeconomic environment helps to get the major market moves “mostly right, most of the time.” Simply put, aligning with the dominant primary market cycle is my foremost objective in this line of work.
So, without wasting any time, let’s briefly review the key macro drivers: the economy, corporate earnings, inflation, the Fed and interest rates, and, naturally, valuations.
Since there’s quite a bit to cover—and I doubt many of you want to read a 5,000-word report on a Monday morning—I’ve decided to split this analysis into several parts. Today, we’ll begin with a focus on the economy and corporate earnings.
Overview of the Economy
The U.S. economy is generally divided into three main sectors: manufacturing, consumers, and government. Of these, the consumer sector—also known as the services sector—is by far the largest, accounting for roughly 70% of overall economic activity in the United States.
Because of this, the sluggish manufacturing sector, which has been in a prolonged slowdown, is less of a concern. While an improvement there would be welcome, consumer sentiment remains the primary driver of economic growth today.
It’s also important to highlight that high-income earners now dominate consumer spending. Reports indicate that the wealthiest individuals account for just over 50%—a record high—of all U.S. consumer expenditures. These affluent consumers are less sensitive to price increases and tend to maintain their spending habits despite inflation.
Indeed, the labor market has shown signs of weakening, which could eventually affect consumer spending. However, current evidence suggests that job market softness is primarily impacting lower-income consumers at this stage. This situation remains fluid—if job losses accelerate, the services sector would likely feel the impact. But for now, this hasn’t been the case.
The key takeaway is that despite negative headlines, the economy appears to be performing well. U.S. GDP growth was strong last year, moving from a slight contraction of -0.6% in Q1 to +3.8% in Q2 and +4.3% in Q3.
More recently, the Atlanta Fed’s GDPNow model—a real-time GDP estimate—registered a robust +5.4% last week.
From my perspective, anyone claiming the economy is weak or unstable is overlooking the actual data.
Company Earnings Reports
Earnings are often described as the lifeblood of the stock market, making it crucial to stay informed about corporate profit trends. To get straight to the point, corporate earnings are very strong—remarkably so.
For example, Q3 results showed about a 15% increase, significantly surpassing analyst expectations.
Looking forward, consensus estimates from Wall Street analysts predict that S&P 500 companies will see earnings grow by approximately 17.3% in 2026. Quite impressive.
Of course, analysts rarely get their projections exactly right. Estimates often start off too optimistic and are revised downward over time. So, it would be unwise to assume that 2026 earnings per share (EPS) will definitively rise by 17% compared to last year.
The important takeaway is that EPS growth is still expected to be strong this year—significantly above the historical average. (Goldman Sachs recently released a report titled “2026: An Earnings Story.”) My view is that as long as earnings come reasonably close to these expectations, there should be plenty of room for stocks to advance.
Is There Further Upside Potential?
The key question is how much further the stock indices can climb. While I’ll address valuations in the coming weeks, it’s clear to everyone that current stock multiples are quite high. This likely explains why Wall Street analysts are forecasting relatively modest gains of around 10% for the year—roughly in line with the S&P’s average annual return since 1980—even with anticipated earnings growth.
Given the strong economic outlook and expected earnings growth, it’s difficult for me to take a negative stance on the stock market.
That said, it might be prudent to temper enthusiasm somewhat due to elevated valuations. However, from a broader perspective, I believe the best approach is to stay on the bullish path and trust the market leaders to navigate any near-term challenges.
What shapes our lives are the questions we ask, refuse to ask, or never think to ask.
If economists were meteorologists, this week’s forecast would predict a data blizzard. However, clarity is expected to improve as markets receive highly anticipated reports on inflation, retail sales, and industrial production ahead of the Federal Reserve’s policy meeting on January 28.
Few economists expect Fed Chair Jerome Powell and the Federal Open Market Committee (FOMC) to ease monetary policy again later this month—and neither do we. This week’s data could either confirm or challenge that view, starting with the December consumer price index report on Tuesday.
The Fed drama intensified last week after President Donald Trump instructed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds—an action typically undertaken by the Fed itself. Many saw this move as an attempt to restart quantitative easing. Meanwhile, Fed Governor Stephen Miran told Bloomberg he anticipates 150 basis points of rate cuts this year.
What’s still missing, however, is significantly lower inflation and a recession that would justify such aggressive easing. This week will also feature speeches from several Fed officials, which could provide insight into the central bank’s thinking. The lineup starts with New York Fed President John Williams on Monday, followed by Governors Miran (Wednesday), Michael Barr (Thursday), Michelle Bowman (Friday), and Vice Chair Philip Jefferson (Friday).
Here’s a rundown of this week’s key data releases likely to influence the timing and scale of any future Fed rate cuts:
Inflation
Since the 43-day government shutdown in October and November, investors have struggled to gauge inflation accurately. The 2.7% year-over-year CPI rise in November, a slight dip from October’s 3.0%, was met with caution, as the shutdown likely disrupted the Bureau of Labor Statistics’ data gathering.
This increases the importance of the upcoming CPI and PPI reports, which will be key indicators before the FOMC’s January 28 interest rate decision.
The upcoming CPI report on Tuesday is expected to show a modest easing in inflation, with the Cleveland Fed’s model forecasting a 0.2% monthly increase and 2.6% year-over-year growth. The November PPI report, due Wednesday, is considered less impactful, while import and export price data for November will be released on Thursday.
Retail sales
Retail sales (Wednesday) are expected to show a slight increase in November after remaining flat in October (see chart). Overall, we believe consumer spending remains resilient despite rising living costs and soft employment figures. Additional important demand indicators this week include December existing home sales (Wednesday) and mortgage applications for the week ending January 9 (Wednesday).
Jobless claims
We anticipate layoffs will stay minimal, which has been the key insight from recent initial unemployment claims data (Thursday) (see chart). While demand for labor may be slowing in certain sectors, the feared AI-driven collapse in the job market has not materialized yet.
Composite economic indicators & business surveys
The composite cyclical indicators for December, due Thursday, are expected to show the coincident index holding at a record high, while the (mis)leading index continues its decline. Additionally, given delays in official hard data, the National Federation of Independent Business’ Small Business Optimism Index for December (Tuesday) should provide valuable insights, following its rise to 99 in November. Later in the week, the Federal Reserve banks of New York and Philadelphia will release their January business surveys (Thursday).
Our preferred coincident indicator is the S&P 500 forward earnings per share, which has accelerated in recent weeks and hit record highs (see chart).
This week, market attention will be on CPI inflation figures, retail sales data, and the kickoff of the Q4 earnings season.
Morgan Stanley is expected to see gains driven by robust quarterly results.
Meanwhile, Capital One Financial is likely to face challenges due to a proposed cap on credit card interest rates.
The stock market closed the first complete trading week of 2026 with the Dow Jones Industrial Average and S&P 500 reaching record levels, buoyed by the latest employment report.
Wall Street’s major indexes enjoyed a strong week, with the Dow Jones Industrial Average rising 2.3%, the S&P 500 gaining 1.6%, the tech-focused Nasdaq Composite climbing 1.9%, and the small-cap Russell 2000 soaring 4.6%.
Looking ahead, the upcoming week promises significant market activity as investors assess economic prospects and interest rate trends.
Key events on the economic calendar include Tuesday’s U.S. consumer price inflation report for December, which could trigger market volatility if the data exceeds expectations. This report will be released alongside producer price figures, offering a broader view of inflation, as well as the December retail sales numbers.
Additionally, the Q4 earnings season is about to begin, featuring major companies such as JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley, BlackRock, Delta Air Lines, and Taiwan Semiconductor set to report their results.
Additionally, the Supreme Court may deliver a ruling on the Trump tariffs this week, after not doing so last Friday.
No matter how the market moves, below I identify one stock expected to attract buying interest and another that might face renewed selling pressure. Keep in mind, my outlook covers just the upcoming week, from Monday, January 12 to Friday, January 16.
Morgan Stanley: Top Stock Pick to Buy
Morgan Stanley is set to deliver one of the strongest earnings reports in the financial sector this quarter, fueled by a notable rebound in mergers and acquisitions, a thriving IPO underwriting business, and strong results across its core investment banking divisions.
The company will release its Q4 results before the market opens on Thursday at 7:30 AM ET. Investors anticipate significant volatility in MS shares following the announcement, with options markets pricing in a potential move of about ±4.2% post-earnings.
Analysts hold a positive outlook, with all nine recent earnings revisions reflecting upward adjustments, highlighting Morgan Stanley’s strong presence in high-growth sectors such as AI-related financing and capital markets.
Morgan Stanley is projected to earn $2.41 per share, an 8.5% increase compared to last year, while revenue is expected to rise 9.4% year-over-year to $17.72 billion. This growth is anticipated to be driven by a rebound in global mergers and acquisitions, alongside robust performance in IPO underwriting and trading revenues.
In recent quarters, Morgan Stanley has effectively increased its market share in high-margin advisory services while sustaining its leading role in equity and debt underwriting, both of which contribute significant fee income when market conditions are favorable.
Technically, Morgan Stanley’s shares closed near $186.50 on Friday, trading above key moving averages and displaying bullish momentum ahead of the earnings report. Should the company deliver strong results with an optimistic outlook, the stock could push toward $200 shortly, making it an appealing buy for investors confident in the financial sector’s continued strength.
InvestingPro’s AI-driven quantitative model assigns Morgan Stanley a ‘GOOD’ Financial Health Score of 2.65, indicating solid capital reserves, strong liquidity, and a long history of dependable dividends.
Capital One Financial: Recommended Sell
On the other hand, Capital One Financial, a leading credit card lender, is expected to face considerable selling pressure this week following President Trump’s announcement of a temporary 10% cap on credit card interest rates. This policy, designed to alleviate consumer financial strain, poses a direct threat to the profitability of lenders that depend heavily on interest income from credit cards.
Given its large consumer credit card portfolio, Capital One is particularly exposed. With average credit card interest rates typically between 20-30%, a 10% cap would wipe out most of the company’s net interest income, which forms the backbone of its overall profits.
The proposed interest rate cap poses an urgent and substantial challenge to Capital One’s financial results, forcing the company to either accept sharply lower profits or withdraw from large segments of the credit card market that would no longer be financially viable.
Even prior to this announcement, Capital One Financial was struggling with increasing charge-offs and slowing loan growth, leaving the stock susceptible to further declines.
Shares closed around $250 on Friday, but if upcoming earnings (due January 22) reveal worsening credit quality or management signals concerns about future profitability, the stock could drop to $229 or below—a decline of 8-10% from current levels.
Whether you’re a beginner investor or an experienced trader, using InvestingPro can help you discover investment opportunities while managing risks in today’s challenging market environment.
Ankur Banerjee provides a preview of the day ahead in European and global markets. Investors remain focused on the escalating conflict between U.S. President Donald Trump and Federal Reserve Chair Jerome Powell, who is pushing back against attempts to exert political control over the Fed and its interest rate decisions.
Meanwhile, growing turmoil in Iran—where over 500 people have reportedly been killed, according to human rights groups—adds to the geopolitical uncertainties shaping market sentiment at the start of 2026, supporting demand for safe-haven assets.
Markets opened Monday with shocking news that the Trump administration had threatened to indict Powell over his Congressional testimony last summer concerning a Fed building renovation. Powell described this as a “pretext” aimed at increasing political influence over monetary policy.
“This issue centers on whether the Fed can continue setting interest rates based on data and economic realities, or if monetary policy will instead be shaped by political pressure and intimidation,” Powell stated.
The initial market reaction saw the dollar weaken and stock futures decline, although the impact on interest rate policy remains unclear. Gold prices surged past $4,600 per ounce as investors sought refuge.
Despite the unsettling news, market responses were measured, with no signs of panic selling as investors await further clarity on the Fed’s independence and the future path of interest rates.
WASHINGTON, DC – DECEMBER 13: U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on December 13, 2023 in Washington, DC. The Federal Reserve announced today that interest rates will remain unchanged. (Photo by Win McNamee/Getty Images)
Markets may now generally anticipate that the Federal Reserve will yield to Trump’s influence and ease interest rates freely once a new Fed chair takes over after Powell’s term ends in May. Futures pricing currently reflects expectations of two rate cuts this year.
With Japanese markets closed on Monday, no cash trading occurred in Treasuries during Asian hours. Attention will shift to the Treasury market when London trading begins.
Key events that could impact markets on Monday include: Germany’s November current account balance and the euro zone Sentix investor confidence index for January.
Most Asian markets advanced on Monday, led by Chinese AI stocks amid rising optimism about the sector, though gains were limited by mounting geopolitical and macroeconomic risks. Trading volumes across the region were also muted due to a market holiday in Japan.
Technology stocks led the session, supported by gains in Chinese AI names and by following a rally on Wall Street late Friday. Weaker-than-expected U.S. nonfarm payrolls data also offered some backing, though near-term rate expectations were unchanged.
S&P 500 futures slipped 0.5% by 00:04 ET (05:04 GMT) after reports of a U.S. government probe into the Federal Reserve, which Chair Jerome Powell said was politically driven, raised concerns about the central bank’s independence.
Meanwhile, persistent global geopolitical tensions—including protests in Iran, a U.S. incursion into Venezuela, diplomatic friction between China and Japan, and the White House’s push to acquire Greenland—continued to weigh on sentiment.
Asian tech stocks rise, led by a rally in Chinese AI shares
South Korea’s KOSPI led regional gains, rising 1.2% thanks to strength in technology and semiconductor stocks. Hong Kong’s Hang Seng index climbed 0.8%, driven by gains in tech shares, while China’s mainland indices—the Shanghai Shenzhen CSI 300 and Shanghai Composite—advanced between 0.5% and 1%.
In Hong Kong, several newly listed AI companies continued their strong momentum. Z.AI, trading as Knowledge Atlas Tech (HK:2513) and recognized as China’s first publicly listed “AI tiger,” surged 25% on Monday.
Fellow newcomer MiniMax Group Inc (HK:0100) jumped over 20%, while chipmaker Shanghai Iluvatar CoreX SemiCon Co (HK:9903) gained nearly 3%. On the mainland, Cambricon Technologies Corp Ltd (SS:688256) rose by more than 3%. Taiwan’s TSMC (TW:2330), the world’s largest contract chipmaker, saw its shares increase 1.4% following strong year-on-year December sales reported last Friday.
TSMC’s solid performance, together with NVIDIA’s (NASDAQ:NVDA) recent chip launch and positive reception at the CES trade show, bolstered investor sentiment toward AI stocks.
Nevertheless, the sector was still recovering from significant losses experienced through late 2025 amid concerns about inflated valuations and circular investment patterns in AI.
Asian stocks open 2026 with mixed performance amid tech gains and geopolitical concerns
Broader Asian equities climbed on Monday, although the region still showed a mixed performance in the early weeks of 2026. A surge in technology stocks helped lift markets, but rising geopolitical tensions around the world dampened appetite for risk assets over the past week, counterbalancing much of the tech‑led rally.
South Korea’s KOSPI and Japan’s Nikkei 225 were among the strongest performers in the opening week, and Chinese benchmarks also finished higher, while indices with less tech exposure underperformed. Singapore’s Straits Times Index gained 0.7%, continuing its advance after the government signalled potential changes to sovereign wealth fund investment rules for GIC and Temasek. Australia’s ASX 200 rose 0.5%, supported by gains in mining stocks as precious and base metals strengthened.
In contrast, India’s Nifty 50 lagged its regional peers, dropping 0.5% amid increasing uncertainty over potential new U.S. trade restrictions on New Delhi. Geopolitical developments—including a U.S. intervention in Venezuela, ongoing diplomatic tensions between China and Japan, fears of possible U.S. action against Iran, and slow progress toward a Russia‑Ukraine ceasefire—kept market sentiment cautious.
Last year was another strong period for the world’s top technology firms, known as the Magnificent 7. While artificial intelligence clearly provided a boost, these companies’ core business performance remained robust even without AI-driven growth, continuing to deliver steady revenue increases and strengthening competitive advantages that few rivals can match. They remain central to some of the most powerful and lasting secular trends shaping the global economy. This strong foundation persists as we enter 2026, though individual positioning within the group has started to vary.
Interestingly, Meta Platforms (META) and Amazon (AMZN)—which were the two weakest performers in 2025—now appear to be among the best positioned for gains in the coming year, along with Alphabet (GOOGL). This doesn’t rule out further upside potential for the rest of the group, but it does indicate a shift in relative opportunities. Below, I detail the changing dynamics for each of the Magnificent 7 and share insights on how to approach trading them in 2026.
Amazon, Meta Platforms, and Alphabet Stocks Take Center Stage
After trailing the broader group in 2025, Amazon and Meta Platforms seem poised for a strong recovery in the coming year. Both companies continue to show steady revenue and earnings growth, but their stock prices have lagged, resulting in some of the most attractive valuations seen in years. Meta is currently trading at about 21.9 times forward earnings, while Amazon is around 30.7 times—both significantly below their historical averages. According to analyst ratings, Meta holds a Zacks Rank of #3 (Hold), indicating stable earnings revisions, whereas Amazon has a more favorable Zacks Rank of #2 (Buy).
Technical indicators also favor both Meta and Amazon. Meta’s shares have been trading within a narrow range recently, a pattern that often signals an impending breakout. Amazon shows a similar pattern but has already begun to move upward, breaking out on strong volume just yesterday.
From a fundamental perspective, both companies have strong bullish catalysts. Amazon is actively pursuing various AI-driven growth opportunities, particularly through AWS, where demand for cloud computing services remains strong. Meta has been one of the most effective users of AI in its advertising platform, converting technological advances into better monetization and higher margins. Additionally, Meta’s recent acquisition of Manus AI, though relatively low-profile, could be strategically important. Manus stands out among large language model (LLM) applications for its sophistication and may help Meta reestablish itself as a serious competitor in consumer-facing AI, an area where it has previously fallen behind.
In contrast, Alphabet was the best performer in the group last year as the market finally recognized its AI strengths. Its large language model is among the industry’s top, and its vertically integrated hardware ecosystem—centered on proprietary TPUs—provides a strong and unique competitive edge. Alphabet’s shares are now emerging from their own consolidation phase, indicating potential for further gains.
Together, these three companies present a well-rounded investment opportunity: two former laggards with improving technical and valuation setups, and one established leader continuing to deliver. In all cases, AI acts as a powerful catalyst, but not the sole basis for investment.
Nvidia and Microsoft Continue to Show Strong Potential
Microsoft (MSFT), a dominant force in global technology, has experienced a pause in its share price momentum in recent months, with little sustained progress since early summer and a slight decline during the fourth quarter. However, this consolidation seems to be settling. The stock has consistently tested a critical support level but has yet to break significantly below it, indicating that downward pressure may be easing.
On the fundamentals side, Microsoft’s outlook is strengthening. Earnings estimates have seen modest upward revisions, contributing to a Zacks Rank of #2 (Buy) for the stock. As long as the shares remain above the key support level around $470, the risk-to-reward ratio looks increasingly favorable.
Nvidia (NVDA) currently holds a Zacks Rank of #1 (Strong Buy), reflecting unanimous upward revisions to earnings estimates across various time frames. In just the past 60 days, analysts have increased next year’s EPS forecasts by about 16%, signaling continued positive surprises in its fundamentals.
The company’s valuation remains attractive relative to its growth prospects. Nvidia trades at roughly 40.1 times forward earnings, while its long-term EPS is expected to grow at an annualized rate of around 46% over the next three to five years. This results in a PEG ratio below 1—a rare and favorable setup for a company of this size.
Importantly, Nvidia is actively advancing despite its dominant position in the AI market. It is investing heavily across the entire AI technology stack, with a growing focus on next-generation architectures and inference optimization, which is set to become an increasingly lucrative area as AI workloads expand. This strategy was further supported by Nvidia’s recent acquisition and partnership with chip startup Groq, enhancing its capabilities in low-latency inference and performance-optimized chip design ahead of the upcoming Rubin architecture. These moves keep Nvidia firmly on investors’ radar.
Apple and Tesla Stocks Experience a Downward Trend
Although both Apple (AAPL) and Tesla (TSLA) experienced rallies late last year, their price trends remain concerning as we head into 2026. They are currently the only two stocks among the Magnificent 7 clearly trading in sustained downtrends, highlighting a shift in leadership within the group.
Tesla’s story remains ambitious, with Elon Musk emphasizing long-term prospects like autonomous driving and humanoid robots. However, investors are now focused more on near-term fundamentals, which have weakened. Tesla’s top-line growth has stalled since 2023, and its market share declined after being overtaken by BYD as the world’s largest EV producer last year. So far, there’s little sign of a meaningful rebound in vehicle demand.
Valuation also poses a major challenge for Tesla. It currently trades at over 200 times forward earnings and about 13 times forward sales—levels that surpass most high-growth, high-margin software firms. While Tesla has historically commanded premium valuations, slowing growth and changing market sentiment increase the risk of downside in the near to medium term.
Apple, on the other hand, doesn’t face the same fundamental risks but appears less attractive compared to its peers. The company has taken a cautious approach in the AI race, choosing not to match competitors’ aggressive infrastructure investments. Although this initially hurt sentiment amid fears Apple might fall behind, this strategy has proven more justifiable over time. Apple remains the world’s leading platform for mobile computing and consumer devices, positioning it as a key distribution channel for AI-powered applications in the future. Nevertheless, with fewer immediate catalysts and weaker momentum, Apple currently lags behind other Magnificent 7 stocks from a trading standpoint.
How Investors Can Position Themselves Within the Magnificent 7
As we enter 2026, the Magnificent 7 continue to present a wide range of opportunities. Variations in earnings momentum, technical trends, and near-term catalysts offer multiple ways for investors to engage—whether by riding the momentum of leaders or capitalizing on laggards poised for a rebound.
For investors, the key is to focus on areas where strong fundamentals align with positive price action. When approached thoughtfully, the Magnificent 7 should remain a central source of opportunity throughout 2026, not only as a group but also through the unique trajectories each company follows as the market cycle progresses.
Semiconductor Stocks to Consider Beyond Nvidia
The soaring demand for data is driving the next digital gold rush in the market. As data centers keep expanding and upgrading, the hardware suppliers behind these giants are set to become the NVIDIAs of the future.
One lesser-known chipmaker is uniquely poised to capitalize on this next phase of growth. It focuses on semiconductor products that industry leaders like NVIDIA don’t produce. This company is just starting to gain attention—exactly the kind of opportunity investors want to spot early.
Reflecting on the start of this century, the first striking observation is our national shortsightedness. After surviving Y2K and the dot-com crash in 2000, our leaders assumed the path ahead would be smooth sailing from year one onward.
However, reality proved otherwise, beginning with a series of black swan events, notably the attacks on the World Trade Center and Pentagon on September 11. While such events are inherently unpredictable, it’s remarkable that the Congressional Budget Office (CBO) economists confidently forecasted in 2001 a future of continuous budget surpluses, anticipating the complete elimination of national debt by 2011.
For reasons unknown, the CBO issues 10-year federal spending and revenue projections, despite having no solid factual or practical foundation to accurately forecast beyond a year or two—akin to trying to predict the weather a year in advance.
The January 2001 CBO report highlights this myopia. Their projections simply extended current trends indefinitely without grounding in reality. Under this unrealistic mandate, the CBO projected a cumulative surplus of $5.6 trillion for 2002–2011.
In reality, deficits over that decade totaled $6.1 trillion—a swing of $11.7 trillion. It would have been much simpler to just flip a plus sign to a minus. The projections failed to account for the soaring costs of Bush’s “War on Terror” post-9/11, which led to prolonged wars in Afghanistan and Iraq, the bursting of the real estate bubble, and massive TARP bailouts to rescue large banks.
In short, this is a summary of CBO’s flawed foresight:
The first takeaway from this bleak forecast is that the CBO economists assumed deficits would increase in a smooth, predictable fashion—almost as if they were drawing a straight line with minor fluctuations, rather than reflecting the unpredictable realities of economic growth.
A second point is that the 2003 Bush tax cuts were not the main driver of the deficits. In fact, annual deficits dropped significantly—from $413 billion in fiscal year 2004 (which began October 1, 2003) to just $161 billion in fiscal year 2007. This means the deficit shrank by more than half during the four years following the tax cuts and before the 2007 real estate crash.
While much of this now feels like distant history, the ongoing wars and the Federal Reserve’s drastic response to the 2008 financial crisis—keeping interest rates near zero for eight years, essentially through the entire Obama administration—contributed to massive deficits that have persisted through to today, especially in the five years following the COVID-19 pandemic.
Since 2001, U.S. federal deficits have averaged about $1 billion annually, but that figure has surged to over $2 trillion per year since 2020, according to the U.S. Treasury.
Today, the total federal deficit stands at $38 trillion, which amounts to roughly $110,000 owed per American—far from the anticipated surpluses once projected.
Following a Challenging 2000–2009, Markets Surged in the First Quarter
What about the markets? After nearly a “lost decade” lasting nine years from March 2000 to March 2009, all major market indexes have experienced remarkable growth—particularly gold relative to the U.S. dollar.
By March 9, 2009, three of the four major indexes—the S&P 500, NASDAQ, and Russell 2000—had fallen by 50% since the decade began (while the Dow was down 40%), but they bounced back strongly from 2009 through 2025:
Over the same 25-year period, the Consumer Price Index (CPI) increased by 83%, which means the real market gains were somewhat diminished.
The U.S. dollar performed even worse, losing about 10% in value overall (and 8% against the euro), while gold and silver surged more than 15 times in value:
The first-quarter returns were decent, but the strong performance of gold and silver signals that the dollar—and the CBO’s deficit forecasts—cannot be relied on in the long run. In fact, President Trump has set a goal for 2026 to deliberately weaken the dollar against the Chinese yuan to “help” exporters boost overseas sales. Much of the talk about the dominance of the “King Dollar” is just rhetoric. In reality, many politicians aim to devalue their currencies to encourage trade, turning paper money into a “race to the bottom,” while gold quietly holds its value, watching from the sidelines.
This brings us to the 2025 summary—a major victory for precious metals as the dollar dropped by 10%.
2025 Brought Massive Gains for Precious Metals
The year 2025 exemplified the key trends seen over the past 25 years—while the stock market continued to climb, gold and silver surged even faster. Although inflation is easing, gold today serves less as an inflation hedge and more as a safeguard against crises, a hedge against the dollar, and increasingly, a hedge against cryptocurrency volatility.
In 2025, the U.S. Dollar Index (DXY) dropped by 10%, allowing major global currencies to gain between 5% and 15%. Meanwhile, the poorest-performing investments of 2025 brought good news for consumers through lower food and energy prices:
So, if 2026 mirrors the gains of 2025, it will surely be a rewarding year for most investors.
The self-driving car industry has experienced a cycle of high hopes, costly setbacks, and ongoing delays. From Tesla’s (NASDAQ:TSLA) frequent missed deadlines to General Motors (NYSE:GM) shutting down its Cruise autonomous division following a pedestrian accident, achieving fully autonomous vehicles has been much tougher than early developers expected.
However, a fresh wave of innovation driven by artificial intelligence and strategic collaborations is revitalizing this groundbreaking technology.
At the forefront of this resurgence is Nvidia (NASDAQ:NVDA), the chipmaker whose leadership in AI computing is now expanding into the automotive sector, providing Western car manufacturers with a potential way to rival China’s rapidly progressing autonomous driving advancements.
The Present State of Autonomous Driving in the U.S.
The U.S. self-driving industry is currently at a critical juncture, with only a few companies still seriously competing. In 2019, Tesla CEO Elon Musk confidently predicted that a million autonomous vehicles would be on the roads within a year. However, the company only rolled out a limited robotaxi pilot program in late 2025, falling six years behind schedule. A major challenge has been the countless unpredictable scenarios, known as edge cases, that can confuse autonomous systems.
Traditional automakers have mostly pulled back from the sector. General Motors shut down its Cruise autonomous division following a serious incident where one of its vehicles hit and dragged a pedestrian.
Similarly, Ford Motor ceased its internal autonomous vehicle projects, choosing to withdraw from the capital-heavy competition. Alphabet’s (NASDAQ:GOOGL) Waymo remains the only company maintaining consistent operations, currently offering Level 4 robotaxi services in several U.S. cities.
At the same time, China has made significant advances supported by strong government backing and rapid deployment. Chinese automakers now account for about seventy percent of global electric vehicle production, while companies such as BYD, Baidu, and Pony.ai are growing their robotaxi services throughout Asia and the Middle East.
The Chinese government recently authorized two vehicles with Level 3 autonomous driving capabilities, permitting hands-free driving. This regulatory endorsement, along with better network infrastructure and more affordable costs, has established China as a rising leader in autonomous technology.
Nvidia’s Self-Driving Platform: Revolutionizing the Industry
At CES 2026 in Las Vegas, Nvidia introduced its solution to the autonomous driving challenge: the Alpamayo platform. Simply put, Alpamayo is a comprehensive toolkit that enables automakers to develop self-driving systems without starting from zero.
The platform features reasoning models that help vehicles interpret and respond to their environment, simulation tools for safely testing various scenarios, and datasets for training the AI. It can process data from cameras and radar sensors to make decisions on steering, braking, and acceleration while also providing explanations for its choices.
What makes Alpamayo especially noteworthy is that Nvidia has made it open-source, allowing any company to use and adapt it freely. This approach contrasts sharply with Tesla’s proprietary model.
Industry experts liken this to the smartphone battle between Apple’s (NASDAQ:AAPL) closed ecosystem and Android’s open platform. By offering a shared foundation, Nvidia empowers automakers to concentrate on differentiating their products rather than reinventing fundamental technology, potentially speeding up the entire industry’s development.
The platform is quickly gaining momentum. Mercedes-Benz revealed that its upcoming CLA model will incorporate AI-driven driving features powered by Nvidia’s technology, set to hit U.S. roads later this year. Additionally, a robotaxi partnership involving Lucid Group, Nuro, and Uber plans to leverage Nvidia’s chips and platform.
Ali Kani, Nvidia’s general manager of the automotive division, expressed optimism that recent fundamental AI improvements have resolved critical issues that once hindered self-driving technology, indicating the industry might be nearing a major breakthrough.
NVDA Share Forecast and What Investors Should Know
Nvidia’s stock mirrors its leading position in several AI-driven markets. As of January 2026, NVDA shares are trading around $185 each, with a market cap near $4.5 trillion, ranking it among the world’s most valuable companies.
The stock has delivered remarkable returns, rising more than 32% in the past year and an impressive 1,297% over five years, significantly outperforming the S&P 500’s 81% gain during the same timeframe.
Despite its high valuation, key financial indicators remain strong. In Q3 FY26, Nvidia reported revenues of $57 billion and earnings of $31.8 billion, surpassing analyst expectations for earnings per share by four cents.
The trailing price-to-earnings (P/E) ratio stands at about 46, while the forward P/E is 24, reflecting the market’s high growth expectations. However, a PEG ratio of 0.70 indicates that the stock’s valuation could be reasonable relative to its anticipated earnings growth. Nvidia continues to demonstrate strong profitability, with a profit margin above 53% and a return on equity exceeding 100%.
Analysts generally hold a positive outlook on Nvidia’s future. The average price target of $252 suggests about a 36% potential increase from current levels, with forecasts ranging from $140 on the low side to $352 at the high end. Most analysts have Buy or Strong Buy ratings, highlighting sustained strong demand for AI infrastructure.
While Nvidia’s automotive division offers a growing avenue beyond its core data center business, investors should be aware that the stock exhibits high volatility, with a beta of 2.31. The upcoming earnings report on February 25, 2026, is expected to shed more light on the company’s progress.
In our December report, we combined the Elliott Wave (EW) Principle with average midterm election-year seasonality and the Armstrong Pi-cycle turn dates to analyze the S&P 500 (SPX). We concluded that:
“… As long as the index remains above the November 21 low of 6720, it can position itself for a subdividing final 5th wave (gray waves W-i, ii, iii, iv, and v), potentially reaching as high as 7490 around April 18-28, 2026.”
Since then, the SPX has risen nearly 2% and appears to be unfolding as expected. With new price data now available, we have revised our short- to intermediate-term EW count but kept the same ultimate upside target range of approximately 7345-7490. Please refer to Figure 1 below.
Figure 1: Intermediate Elliott Wave analysis for the SPX.
Assuming the price stays above the specified warning levels*, with each additional breach raising the probability of the uptrend ending by 20%, we anticipate the index to ideally reach around 7100 for the blue W-iii wave, then decline to roughly 7015 for the blue W-iv wave, followed by a rally to approximately 7160 ± 40 for the orange W-3 wave, and so on. The current pattern depicts a standard impulse wave; however, the green W-5 wave could potentially form an overlapping ending diagonal, leading to an overlapping rally toward the lower boundary of the target zone (around 7345). At this stage, there is no sign that this scenario will unfold. Nevertheless, it’s important to note that once the green W-5 completes—expected around April 18-28—we anticipate a bear market similar to that of 2022 before a larger, multi-year rally to new all-time highs can commence.
Zenas BioPharma, Inc. (NASDAQ: ZBIO) disclosed in a Form 4 filing that Chief Executive Officer Leon O. Moulder Jr. acquired 100,000 shares of the company’s common stock across three transactions between January 7 and January 9, 2026. The total value of the purchases was approximately $1.639 million, with share prices ranging from $16.30 to $16.55.
Moulder bought 50,000 shares on January 7 at a weighted average price of $16.38, through multiple trades executed between $16.21 and $16.53. On January 8, he added 30,000 shares at an average price of $16.30, with individual transactions ranging from $15.82 to $16.60. The final purchase occurred on January 9, when he acquired 20,000 shares at a weighted average of $16.55, with prices between $16.05 and $16.87.
After these transactions, Moulder directly holds 366,155 shares of ZBIO stock. He also has voting and investment authority over an additional 36,928 shares held in a trust and 1,672,039 shares held indirectly through Tellus BioVentures LLC.
Separately, Zenas BioPharma recently announced favorable results from its Phase 3 INDIGO study of obexelimab for Immunoglobulin G4-Related Disease (IgG4-RD). The trial showed a 56% decrease in flare risk versus placebo and met all primary and secondary endpoints with statistical significance. However, Morgan Stanley downgraded the stock from Overweight to Equalweight and reduced its price target from $37 to $19, noting that the reported hazard ratio of 0.44 did not fully meet investor expectations.
In contrast, H.C. Wainwright reiterated its Buy rating and set a $44.00 price target, highlighting the trial’s clinically meaningful outcomes. Jefferies likewise maintained a Buy recommendation but lowered its target from $62.00 to $48.00, citing a higher-than-expected proportion of recurrent patients in the study. Analyst responses have been mixed, underscoring differing views on the trial’s implications. The study enrolled 194 participants and delivered notable reductions in investigator-reported flares as well as in the need for rescue therapy.
Most Asian stock markets saw modest gains on Friday, following a mixed close on Wall Street as investors remained cautious ahead of crucial U.S. jobs data that could influence expectations for future Federal Reserve interest rate cuts.
U.S. markets closed Thursday with mixed results: technology stocks pulled back after recent advances, putting pressure on the Nasdaq, while the Dow and S&P 500 showed little movement.
Futures for major Wall Street indexes remained mostly flat during Friday’s Asian trading session.
Asian stocks mostly flat as Nikkei posts gains
Asian markets showed limited movement, reflecting investor caution, with the technology sector leading declines.
South Korea’s KOSPI index remained mostly flat after reaching record highs earlier in the week, as chipmakers Samsung Electronics (KS:005930) and SK Hynix (KS:000660) dropped between 1.5% and 3%.
Australia’s S&P/ASX 200 gained 0.3%, while Singapore’s Straits Times Index held steady.
Futures for India’s Nifty 50 also remained largely unchanged.
In contrast, Japanese stocks outperformed the region, with the Nikkei 225 rising 1% and the broader TOPIX index increasing 0.3%. A weaker yen against the U.S. dollar supported exporters’ prospects.
Looking ahead, investor attention is focused on the U.S. nonfarm payrolls report expected later on Friday, which could offer crucial insights into the health of the world’s largest economy and influence the Federal Reserve’s monetary policy outlook.
China’s December CPI reaches highest level in 3 years, PPI deflation slows
In China, official data released on Friday showed consumer inflation rose to its highest level in nearly three years, offering tentative signs of improving demand.
The consumer price index increased 0.8% year on year in December, the fastest pace in about 34 months, while monthly prices rose 0.2%. At the same time, producer price deflation eased, indicating some stabilization in factory-gate prices.
The data indicated that China could be nearing an end to a prolonged deflationary period that has dampened economic growth, squeezed corporate earnings, and restrained consumer spending.
China’s blue-chip Shanghai Shenzhen CSI 300 index gained 0.3%, while the Shanghai Composite rose 0.6%. Hong Kong’s Hang Seng traded flat.
The S&P 500 ended Wednesday down roughly 34 basis points. The index now appears to be forming a possible 2B reversal top after failing to sustain a breakout to new highs. Instead, it turned lower and finished the session back near support around 6,920.
If the index cannot clear the 6,950 level and subsequently falls below 6,920, it could open the door toward the 6,835 area. More broadly, the S&P 500 has shown little net progress since late October, and such a move would also threaten the uptrend established from the November 21 lows. As a result, the index looks more exposed to downside risks than it might initially suggest.
BTIC S&P 500 Total Return Futures (EFFR) for the December 2026 contracts declined again on Wednesday, reaching their lowest level since March 2024. While some may interpret this as bullish on the basis that financing costs are easing, it is difficult to identify periods when the S&P 500 advanced while these contracts were falling—at least based on my observations. To me, this is clearly bearish and suggests that demand for leverage is weakening or that positions are being unwound.
Implied volatility increased on Wednesday ahead of Friday’s employment report and upcoming Supreme Court opinions, which could include a ruling on tariffs. Kalshi currently assigns a 30% probability that the Court upholds the tariffs, implying a 70% likelihood that they are overturned.
I anticipate implied volatility will keep increasing as we approach this news event. The VIX 1-day is likely to rise significantly by Thursday afternoon and could continue climbing after the jobs report, given that the Supreme Court rulings are expected later that day. In my view, a VIX 1-day reading between 15 and 20 appears very probable.
The ISM service index suggests potential positive revisions for fourth-quarter GDP growth. On Wednesday, the Institute for Supply Management (ISM) reported that its non-manufacturing service sector index increased to 54.4 in December from 52.6 in November, marking the third consecutive month of expansion and the fastest pace of growth in over a year.
The new orders sub-index rose sharply to 57.9 from 52.9, while business activity climbed to 56 from 54.5. Additionally, new export orders improved to 54.2, up from 48.7 in November. Out of 16 surveyed service industries, 11 showed expansion in December.
Conversely, the ISM manufacturing index fell to 47.9 in December from 48.2 the prior month, continuing its contractionary trend for the tenth straight month (a reading below 50 indicates contraction). Only 2 of 17 manufacturing industries—Electrical Equipment, Appliances & Components, and Computer & Electronic Products—reported growth, likely supported by strong data center demand.
ADP’s December report showed private payrolls increasing by 41,000, missing economists’ expectation of 48,000. This follows a loss of 29,000 private jobs in November, meaning just 12,000 private jobs were created over the last two months. Manufacturing shed 5,000 jobs in December, while education and health services added 39,000, and leisure and hospitality gained 24,000 jobs. Regionally, the West lost 61,000 private sector jobs, while the South led with a gain of 54,000.
Residential investment acted as a 5.1% drag on GDP growth during the second and third quarters. Strengthening GDP going forward will depend largely on stabilizing the residential real estate market, which remains sluggish due to high mortgage rates, rising insurance costs, and an oversupply in several key areas. According to the Intercontinental Exchange, prices for U.S. condominiums dropped 1.9% in September and October, with high homeowners association (HOA) fees and insurance expenses cited as major factors. In nine major metropolitan regions, over 25% of condominiums have fallen below their original sale prices. While multiple Federal Reserve rate cuts could help support home prices, the current weakness is fueling deflationary concerns that the Fed needs to address.
If deflation emerges from (1) weak housing and rental prices, (2) low crude oil prices, and (3) deflation imported from China and other struggling global economies, the Fed may need to implement rapid interest rate cuts totaling around 100 basis points. With President Trump expected to nominate a new Fed Chair soon, current Chair Jerome Powell is likely to become a lame duck. Minutes from the December Federal Open Market Committee (FOMC) meeting indicated at least one more 0.25% rate cut is probable, but any further deflationary signals could prompt the Fed to enact much larger reductions in key rates in the coming months.
President Trump is expected to nominate a new Federal Reserve Chair in January who will likely reverse the Fed’s current restrictive policies and adopt a more pro-business stance. Should Kevin Hassett, the current Chair of the Council of Economic Advisors, be appointed, the Fed would gain a strong economic advocate, a development that many find promising and exciting.
U.S. stock index futures were mostly flat on Wednesday evening, after Wall Street’s major benchmarks ended the session broadly lower from record highs, as investors looked ahead to key U.S. employment data due later this week.
S&P 500 futures edged up 0.1% to 6,967.0, while Nasdaq 100 futures were little changed at 25,837.25 by 20:03 ET (01:03 GMT). Dow Jones futures also added 0.1% to 49,263.0.
Wall Street Pulls Back From Record Highs Ahead of U.S. Jobs Data
During the session, the S&P 500 declined 0.3%, while the Dow Jones Industrial Average dropped 0.9%. In contrast, the Nasdaq Composite added 0.2%, supported by selective gains among large-cap technology stocks that helped offset broader market weakness.
Both the S&P 500 and the Dow had reached record highs in the previous session, and the mixed performance pointed to some profit-taking after the recent rally.
Figures from payroll processor ADP showed that private-sector job growth in December came in below expectations, signaling a slowdown in hiring momentum toward year-end.
Although the ADP report is often seen as volatile and not always a reliable guide to official government data, it added to evidence that the labor market may be gradually cooling.
Focus now shifts to Friday’s highly anticipated nonfarm payrolls report, which is expected to offer clearer insight into employment trends and wage growth. The data will be closely watched by markets evaluating the probability and timing of potential Federal Reserve rate cuts in the months ahead. Weaker-than-expected job growth could reinforce expectations that the Fed may begin easing policy earlier in 2026.
Attention on rising tensions between the US and Venezuela
Geopolitical strains continued to run high after U.S. forces apprehended Venezuelan President Nicolás Maduro, yet financial markets have so far exhibited only limited, short‑lived reactions to the dramatic turn of events. Investors appear to be largely unfazed by the heightened political risk, although the episode has introduced fresh uncertainty into the outlook for energy markets. U.S. President Donald Trump stated that Venezuela’s interim leadership would transfer up to 50 million barrels of crude oil to the United States.
After months of rising tensions, the United States launched a major military operation in Venezuela on 3 January 2026, resulting in the capture of President Nicolás Maduro and his wife, Cilia Flores. U.S. President Donald Trump confirmed the operation, saying Washington would administer Venezuela until a stable transition government could be established. This marks one of the most dramatic U.S. interventions in Latin America in decades, with Maduro removed from power and taken into U.S. custody.
Maduro, long a focal point of U.S. sanctions and foreign policy pressure, was transported to the United States to face federal charges—such as narco‑terrorism and drug trafficking—filed in the Southern District of New York.
Venezuela holds the world’s largest proven oil reserves, and the sudden change in leadership carries significant geopolitical and economic implications well beyond its borders.
Why Did the US Capture Maduro?
Nicolás Maduro rose through the Venezuelan political system under socialist leader Hugo Chávez and became president in 2013. His time in power was widely criticized domestically and internationally, with opponents accusing him of suppressing dissent, restricting freedoms, and holding elections that lacked credibility.
Relations with Washington deteriorated sharply, especially under the Trump administration. U.S. officials accused Maduro’s government of involvement in drug trafficking and creating conditions that fueled migration toward the United States. They also branded elements of his regime—including the Cartel of the Suns—as a terrorist organization.
Tensions escalated in 2025 when the U.S. increased the bounty for Maduro’s arrest to $50 million and expanded military pressure in the region, including strikes on vessels the U.S. claimed were tied to drug smuggling.
On 3 January 2026, after months of military buildup and diplomatic pressure, U.S. forces launched a major operation in Venezuela—code‑named Operation Absolute Resolve—that resulted in the capture of Maduro and his wife. The U.S. government framed the intervention as a law‑enforcement action tied to longstanding criminal charges against Maduro, including narcoterrorism.
The United States claims that Venezuelan officials were engaged in government‑backed drug trafficking, asserting links with the so‑called Cartel of the Suns, which Washington has designated as a terrorist organization—a claim Maduro vehemently rejects. He argues that U.S. actions were aimed at forcing regime change and securing control over Venezuela’s vast oil riches.
Only hours before his detention, Maduro made his final public appearance as president when he hosted China’s special envoy, Qiu Xiaoqi, at the Miraflores Palace to discuss bilateral relations—an event that highlighted Caracas’s reliance on foreign partnerships for political support. Shortly after that meeting, explosions were reported across Caracas.
The event went beyond a simple arrest; it sent a broader strategic message, particularly to countries like China and Iran, undermining the belief that the U.S. would refrain from acting against governments supported by foreign adversaries.
Drill, Baby, Drill
A major strategic factor behind U.S. actions in Venezuela appears to be securing access to its vast energy resources. Venezuela sits on the largest proven oil reserves on the planet, with estimates from Wood Mackenzie suggesting roughly 241 billion barrels of recoverable crude, making it a uniquely significant player in global oil markets.
Top Countries by Proven Oil Reserves (Billion Barrels)
However, Venezuela’s track record of oil output underscores just how challenging it has been to tap into its vast reserves. In the late 1990s and early 2000s, the nation was capable of producing close to 3 million barrels per day—a level that made it one of the world’s top crude exporters. But political turmoil, labor strikes, and the restructuring of the oil sector under Hugo Chávez triggered a prolonged decline. The downturn was steepened further by U.S. sanctions starting in 2017, which restricted investment, technology, and exports, driving production down sharply. After bottoming out around 374,000–500,000 bpd during the worst of the crisis, output has only modestly recovered in recent years and remains in the range of approximately 800,000–900,000 bpd.
Historical Total Venezuelan Supply
Expectations that Venezuelan oil output could quickly rebound may overstate what’s realistically achievable. History shows that even after major disruptions, rebuilding oil production takes many years and vast investment. For example, Iraq needed almost a decade and well over $200 billion in capital to restore its output after the Iraq War, while Libya still has not returned to its pre‑2011 production levels.
Venezuela’s challenges are even more severe. Most of its reserves are extra‑heavy crude that demands upgrading and blending with diluents before it can be transported and refined, a costly and technical process. Years of underinvestment, international sanctions, the erosion of PDVSA’s workforce, and the deterioration of infrastructure have compounded these production hurdles. Pipelines, upgraders, and refineries have been left in poor condition, and limited access to modern technology continues to restrict any rapid recovery.
While PDVSA has claimed that facilities were not physically damaged in recent events—suggesting limited short‑term disruption—oil markets appear capable of absorbing this uncertainty for now. Inventories remain ample, and OPEC+ has signalled that its voluntary cuts of around 1.65 million bpd could be reversed if necessary to balance markets.
In a scenario where a pro‑U.S. government enables sanctions relief and attracts foreign investment, Venezuelan exports could gradually recover. But bringing production back to around 3 million bpd would take many years and substantial infrastructure upgrades. U.S. leadership has indicated that American oil companies would play a role in operating and developing Venezuela’s oil sector, though analysts note that the heavy crude’s technical challenges and investment risks remain significant.
Meanwhile, global oil markets are structurally tightening, with world consumption exceeding 101 million bpd driven by demand growth in the U.S., China, and India. Any short‑term impact on supply may show up as a modest increase in geopolitical risk premiums, but over time, the sidelined Venezuelan barrels—currently producing around 800,000–900,000 bpd—could eventually add supply and influence prices if output scales up gradually.
In addition to oil, Venezuela sits on a wealth of mineral resources. Large deposits of iron ore, bauxite, gold, nickel, copper, zinc and other metallic minerals are concentrated mainly in the southern Guayana Shield region. The country also ranks among Latin America’s largest holders of gold, and geological assessments identify significant iron and bauxite resources alongside reserves of coal, antimony, molybdenum and other base metals.
Despite this geological potential, commercial mining activity remains very limited. Most non‑oil mineral sectors contribute only a tiny fraction of Venezuela’s economic output, and substantial foreign investment has largely been absent, meaning much of the nation’s mineral wealth has yet to be developed into large‑scale production.
The Ongoing Economic Battle Between the United States and China
Competition between modern empires today is no longer about direct confrontation but about control over key inputs. Energy, metals, and critical materials form the foundation of the modern world. When leaders signal a willingness to secure these resources directly, markets should interpret this not as mere rhetoric, but as a concrete resource strategy.
The rivalry between the United States and China is fundamentally structural rather than ideological. The U.S. is rich in energy but dependent on imported metals and rare earths. China dominates metals processing but imports around 70% of its crude oil. Each side is strong where the other is vulnerable, and both seek to turn this imbalance into strategic advantage.
Control over energy flows also carries monetary implications. Influence over Venezuelan oil is not only about supply, but also about reinforcing the petrodollar and preventing the rise of the petroyuan.
There is also a regional dimension to this rivalry. China has steadily increased its presence in Latin America through infrastructure projects and commodity-backed financing. Recent U.S. moves indicate an effort to reassert dominance in the Western Hemisphere, compelling Beijing to compete on less advantageous terms. The Trump administration’s 2025 National Security Strategy elevated the region to a core priority, effectively reviving the logic of the Monroe Doctrine—rebranded as the “Donroe Doctrine.” The aim is to bring strategically important natural resources, especially critical minerals and rare earths, under U.S.-aligned corporate control while building a hemisphere-wide supply chain that reduces dependence on China.
Across much of South America, governments are edging closer to Washington, leaving Brazil increasingly isolated. This is significant given President Lula’s openly left-leaning stance and his consistent alignment with Russia, China, and Iran. Following Trump’s capture of Maduro, betting markets on Kalshi assign a 90% probability that the presidents of Colombia and Peru will be out of office before 2027. At the same time, President Trump has again stated that Greenland should become part of the United States, reinforcing a broader strategy centered on securing critical assets.
Which Assets Could Gain from “Nation Building” in Venezuela?
A political transition in Venezuela would most directly benefit assets tied to sovereign debt restructuring, energy infrastructure, and the oil supply chain.
Venezuelan bonds are currently priced at roughly 25–35 cents on the dollar, reflecting the impact of sanctions and ongoing legal uncertainty. Under a regime-change scenario, several analysts project potential recoveries in the 30–55 cent range, supported by the prospects of debt restructuring and the easing or removal of sanctions.
Ashmore continues to rank among the largest institutional holders of Venezuelan sovereign debt. Advisory firms such as Houlihan Lokey—financial adviser to the Venezuela Creditor Committee—and Lazard, a veteran of major sovereign restructurings (including Greece and Ukraine), would likely stand to gain from the sheer scale and complexity of any debt workout. In such processes, advisers typically earn success-based fees and function as the “picks and shovels” of restructuring. Venezuela’s debt structure is widely regarded as one of the most intricate ever assembled.
Reviving Venezuela’s oil industry would demand swift rehabilitation of aging infrastructure. Technip, which historically designed much of the country’s core oil facilities, is well placed to play a leading role given its proprietary expertise—particularly if emergency repairs are fast-tracked through sole-source or no-bid contracts. Graham Corporation, a supplier of vacuum ejector systems used in heavy-oil upgrading and refining, could also benefit, since Venezuela’s crude requires vacuum distillation to prevent it from solidifying into coke.
Before exports can meaningfully increase, Venezuela will need to import substantial volumes of diluent (such as naphtha or natural gasoline) to transport its heavy crude through pipelines. Targa Resources, operator of the Galena Park Marine Terminal in Houston—a major LPG and naphtha export hub—would be a natural beneficiary if Venezuela pivots back to U.S. diluent supplies, replacing current inflows from Iran.
The clearest corporate beneficiary of regime change and nation-building in Venezuela is Chevron (NYSE: CVX). Unlike other U.S. energy majors that exited the country, Chevron has maintained an on-the-ground presence. It retains the workforce, regulatory approvals (through OFAC), and operational assets—most notably Petroboscan and Petropiar—that position it to scale up production quickly. Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP), both of which hold legacy claims and arbitration awards stemming from past expropriations, could also regain market access or pursue compensation under a revised legal and political framework.
Refiners along the U.S. Gulf Coast—such as Valero Energy (NYSE: VLO), Phillips 66 (NYSE: PSX), and Marathon Petroleum (NYSE: MPC)—were purpose-built to handle heavy, sour crude like that produced in Venezuela. Since the imposition of sanctions, these companies have had to rely on costlier substitute feedstocks. A resumption of Venezuelan supply would reduce input costs and support refining margins, assuming end-product demand remains stable.
At the sector level, a significant increase in Venezuelan output would likely weigh on oil prices, which would be negative for crude producers but positive for consumer-oriented equities. Lower energy prices are inherently deflationary and could translate into lower bond yields—conditions that are generally supportive of risk assets, all else equal.
Note: This section is for analytical purposes only and does not constitute investment advice.
Venezuela: What Comes Next for the Economy and Markets?
In a characteristically Trump-like approach, President Trump initially stated that the United States would “administer” Venezuela during the transition period. U.S. officials later confirmed that approximately 15,000 troops would remain stationed in the Caribbean, with the option of further intervention if the interim authorities in Caracas failed to comply with Washington’s demands.
Venezuela’s Supreme Court subsequently named Vice President Delcy Rodríguez as interim president. A close ally of Maduro since 2018, Rodríguez previously oversaw much of the oil-dependent economy and the country’s intelligence structures, placing her firmly within the existing power framework. She signaled a willingness “to cooperate” with the Trump administration, hinting at a potentially dramatic reset in relations between the two long-hostile governments.
International observers, including the United Nations and the Carter Center, have concluded that Venezuela’s 2024 elections lacked legitimacy and fell short of international standards. Independently verified tally sheets reviewed by analysts indicated that opposition candidate Edmundo González secured around 67% of the vote, compared with roughly 30% for Maduro.
At the same time, María Corina Machado—Nobel Peace Prize laureate and a leading figure in Venezuela’s opposition—is expected to return to the country later this month and has said the opposition is ready to take power. President Trump, however, has publicly cast doubt on the breadth of her support among the Venezuelan population.
In this context, three potential scenarios appear likely, as outlined by Gavekal Research:
“Soft” Military Rule
In the near term, the most probable outcome is the continuation of the current power structure under Rodríguez and the armed forces. For this arrangement to endure, it would likely require a pragmatic shift toward U.S. priorities—embracing a more business-friendly approach and loosening ties with traditional partners such as Russia, China, and Iran. Washington may be willing to accept this scenario if it ensures political stability and reliable access to energy supplies.
Democratic Transition
A negotiated move toward civilian governance would hinge largely on how new elections are structured. Allowing participation from the Venezuelan diaspora could significantly reshape the results, whereas restricting voting to residents inside the country would be more likely to benefit factions linked to the existing regime.
“Libya Redux” (State Breakdown)
The most destabilizing scenario would involve the collapse of central authority, triggering internal military conflict and the proliferation of armed groups. Such an outcome would heighten the risk of civil strife, renewed migration pressures, and severe disruptions to oil production and global energy markets.
After a sharp decline, three insiders stepped in to buy shares of U.S. apparel giant Nike.
On December 19, 2025, Nike experienced its steepest drop in some time, with shares tumbling 10.5% following the release of its latest earnings report. The results were mixed—highlighted by strong growth in running products but disappointing performance in China. Despite some positives, the market’s reaction indicated a notable decrease in investor confidence regarding Nike’s recovery prospects.
In this article, we examine the recent insider purchases, including buys from Nike’s CEO Elliott Hill and Apple CEO Tim Cook. Their actions suggest a bullish outlook on the stock, signaling a potential opportunity. But should investors follow their lead or approach Nike stock with caution?
Nike gains $3.5 million buy-in from independent directors, boosting investor confidence
Following Nike’s earnings report, the stock fell sharply below $60 per share— a level not seen since May 2025. On December 22, Tim Cook made a notable move, purchasing approximately $2.95 million worth of Nike shares at an average price near $59 each. Cook has been closely involved with Nike for many years.
He joined Nike’s Board of Directors in 2005 and currently serves as the Lead Independent Director. While independent directors are not company employees nor have other business ties beyond their board roles, they provide crucial oversight by advising management and balancing executive power.
As Lead Independent Director, Cook plays a key role in holding Nike’s management accountable and assessing their performance to ensure they act in shareholders’ best interests.
Notably, independent director Robert Swan also bought $500,000 worth of Nike shares on December 22, 2025. The purchases by Cook and Swan demonstrate that Nike’s independent directors remain confident in the company’s future direction.
Nike insiders Hill, Cook, and Swan signal confidence through recent share buys
These two purchases become even more significant when viewed alongside a recent insider buy by Nike CEO Elliott Hill. On December 29, 2025, Hill acquired just over $1 million worth of shares at an average price of approximately $61.
While Hill’s purchase alone is a bullish indicator, the combined activity of these three insiders strengthens the overall positive outlook. It indicates that both Nike’s management and its independent directors share confidence in the stock’s potential recovery.
Typically, management and independent directors serve as checks and balances to each other, so this consensus is a promising sign. It suggests that Hill’s optimism is supported by those tasked with scrutinizing his strategies. However, there remains the possibility that these insider buys were aimed at bolstering investor sentiment, making it somewhat challenging to gauge their true conviction.
Following a dip to just above $57 on December 22, 2025, Nike’s shares have surged nearly 13% to around $64.50. The stock climbed more than 4% on two occasions, largely driven by the impact of these insider purchases.
Limited short-term upside seen by analysts, with strong long-term growth prospects
Despite the optimism shown by Hill, Cook, and Swan, market consensus remains uncertain. The average price target for Nike stands just below $76, suggesting about an 18% potential gain.
However, MarketBeat’s data reveals that over 15 analysts lowered their price targets following Nike’s December 18, 2025 earnings report. The revised average target is around $69, indicating a more modest upside of approximately 7%.
For Nike to succeed moving forward, increasing sales growth while minimizing discounting is critical. Achieving this would boost profit margins and help reverse the recent decline in free cash flow.
Though progress in this area has been limited so far, Nike’s strong brand recognition offers significant leverage to improve these metrics. Currently, shares trade about 47% above their 10-year low but would need to climb roughly 158% to match their 10-year high.
While the long-term outlook appears generally positive, the possibility of short-term declines persists as long as investors remain unconvinced by Nike’s progress.
Australian CPI inflation slowed more than expected in November as electricity prices eased, though core inflation remained sticky and above the Reserve Bank of Australia’s target band. Data from the Australian Bureau of Statistics released Wednesday showed annual CPI rising 3.4%, below forecasts of 3.6% and down from 3.8% in October.
The slowdown in inflation was mainly driven by electricity prices rising at a softer pace than in the previous month, while housing, food, and transport costs continued to climb. Core inflation remained persistent, with the trimmed mean CPI at 3.2% in November, easing slightly from 3.3% in October but still above the RBA’s 2%–3% target range. Goods inflation cooled to 3.3% from 3.8%, largely due to slower electricity price growth, while services inflation also eased to 3.6% from 3.9%, mainly reflecting seasonal factors. The ABS said Black Friday had minimal impact on prices. Although headline CPI softened, it remains uncertain whether the decline is enough to shift the RBA’s hawkish outlook, as the central bank paused its rate-cut cycle in late 2025 and signaled rates will stay unchanged amid stubborn inflation.
ANZ analysts said the November CPI figures suggest the RBA is likely to keep rates unchanged in February, while potentially debating a rate hike later in the year. They added that inflation pressures are expected to ease as 2026 progresses, with the cash rate forecast to remain at 3.60% over their outlook period. Meanwhile, Australian inflation unexpectedly accelerated in late 2025, driven by higher housing and food costs, while the gradual removal of Canberra’s electricity subsidies also pushed prices higher.
Gold and silver prices rose as investors sought safe-haven metals amid heightened geopolitical tensions following the U.S. capture of Venezuelan leader Nicolás Maduro.
The capture of Venezuela’s President Maduro has raised concerns about how quickly the country can increase oil production, with analysts skeptical about major oil companies committing new investments amid the ongoing uncertainty.
Crude oil prices fluctuated as traders weighed the impact of Maduro’s capture on global supply and Venezuela’s energy sector. Brent crude dropped up to 1.2% before bouncing back near $61 per barrel, while WTI stayed above $57. Despite the instability, Venezuela remains a relatively small supplier in an already oversupplied market.
U.S. airlines are resuming Caribbean routes after a U.S. military operation in Venezuela caused regional airspace closures, which stranded thousands of travelers. Airlines like American and Delta responded by adding extra flights and larger planes, with American alone providing nearly 5,000 additional seats.
Upcoming jobs data, particularly the January 9 report, is set to influence markets. Labor market softness prompted the Fed to cut rates in its last three meetings in 2025, supporting stocks, but the potential for further rate cuts in 2026 remains uncertain.
The S&P 500 slipped toward the end of the year but still posted a strong 16% gain for 2025. January promises to be busy, with Q4 earnings and crucial inflation figures scheduled for release.
Dow Jones futures dipped slightly Sunday night, while S&P 500 and Nasdaq futures edged up. Over the weekend, former President Donald Trump claimed that the U.S. would “run” Venezuela following the capture of President Nicolás Maduro, though Maduro’s government remains intact.
The annual CES technology conference officially begins Tuesday in Las Vegas, with artificial intelligence expected to take center stage. CES 2026 will showcase major presentations from AI chip leaders Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD), highlighting AI’s tangible applications across devices—from smart glasses and wearable life-loggers to robotaxis and humanoid robots.
Industrial technology will also receive attention, with keynote speeches from the CEOs of Caterpillar (NYSE: CAT) and Siemens (SIEGY). The four-day event will run through Friday.
Nvidia, AMD, and Taiwan Semiconductor Manufacturing (NYSE: TSM) will be key players at CES 2026 in Las Vegas.
$NVDA – Jensen Huang’s keynote: January 5 at 4:00 PM ET
$AMD – Lisa Su’s keynote: January 5 at 9:30 PM ET
$MRVL – Matt Murphy’s fireside chat: January 6 at 12:00 PM ET
$TSM – Monthly sales data release: January 9
Stocks dropped in the final trading session of 2025, causing the S&P 500 to register a loss for December. However, the index still posted a strong gain of over 16% for the year, marking its third consecutive year with double-digit growth, while the VIX remained near yearly lows.
After a quiet year-end, 2026 is expected to start actively with important economic reports, a Supreme Court decision on President Trump’s tariffs, his nominee for the next Federal Reserve chair, and the beginning of earnings season. Although next week’s earnings calendar is relatively light, a few companies such as AAR (NYSE: AIR), Commercial Metals (NYSE: CMC), and Acuity (NYSE: AYI) are scheduled to report.
US Economic Data
A series of key economic reports will be released during the first full week of January. Scheduled releases include the ISM manufacturing and services indexes, Commerce Department data on housing starts and building permits, and the Labor Department’s JOLTS report. The highlight will be Friday’s release of December payrolls.
On December 30, the Chicago Fed reported that its labor market model indicated only minor shifts in layoffs, quits, and hiring of unemployed workers for the month, projecting the unemployment rate to remain steady at 4.56%.
The tech boom and onshoring efforts are set to trigger a significant surge in capital spending. The majority of this investment is expected from the “Big Four” tech giants—Microsoft, Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), and Meta (NASDAQ: META)—all of which have indicated their 2026 capital expenditures will likely surpass those of 2025.
The “Magnificent 7” — which includes Microsoft, Amazon, Alphabet, Meta, Apple (NASDAQ: AAPL), Nvidia, and Tesla (NASDAQ: TSLA) — are projected to collectively invest over $500 billion in capital expenditures in 2026. Although not officially committed to this amount, their guidance in late 2025 suggests an acceleration of substantial AI infrastructure spending in the coming year.
Onshoring also plays a crucial role in driving capital investment, as the Trump administration’s tariff team has secured commitments from foreign governments and companies to establish manufacturing facilities in the U.S. in return for reduced tariff rates.
Technical Analysis
DJIA Index
The DJIA continues to trade within an upward channel that began from the lows in August 2025. On Friday, December 26, 2025, the index was unable to move above the channel’s midpoint. Support is found near the lower boundary of the channel, around 47,900. A decisive move either above or below this 47,900 level will likely determine the next direction for the index.
Nasdaq 100 Index
The NDX continues to face resistance in the 25,870–25,900 range. As long as this resistance holds, the index is expected to trade within a range between 25,900 and 24,645. A clear break below the 25,000 level could pave the way for a decline toward 24,645.
SPX Index
Last week, the SPX fell below the 6,896 resistance zone. As long as it remains under this level, a decline toward 6,820 seems probable. A strong and sustained break below 6,820 would suggest further downside potential toward the 6,740–6,720 range. Otherwise, the SPX is likely to trade sideways within the 6,890 to 6,820 range.
Weekly US Indices Probability Map
The U.S. weekly market probability map for January 5–9, 2026 indicates a week characterized by mixed trading patterns. These maps are based on historical seasonality trends, with sentiment readings generated using a seasonality-driven scoring system.
This week’s highlights include the U.S. jobs report, ISM PMI surveys, and the CES Conference.
AMD is a recommended buy, driven by expected AI innovations presented in CEO Lisa Su’s CES keynote.
Cal-Maine Foods is a sell candidate ahead of a potentially disappointing earnings report and a weak outlook.
Wall Street’s major indexes closed mostly higher on Friday, the first trading day of 2026, boosted by gains in semiconductor and AI-related stocks. However, all three indexes still recorded slight declines for the week.
The Dow Jones Industrial Average slipped 0.7%, the S&P 500 dropped 1%, the tech-focused Nasdaq Composite fell 1.5%, and the small-cap Russell 2000 declined 1%.
The first full trading week of 2026 promises to be busy, with monthly jobs data taking center stage. Economists forecast nonfarm job growth of 54,000 for January, down from 67,000 in December, while the unemployment rate is expected to decrease to 4.5% from 4.6%. Additionally, the ISM manufacturing and services PMIs will be closely monitored by investors.
On the earnings front, only a few companies are scheduled to report this week, including Constellation Brands, Cal-Maine Foods, Jefferies Financial Group, Albertsons, and Applied Digital.
Meanwhile, investors in the tech and consumer sectors will be closely watching the CES conference in Las Vegas. Key companies to watch for product launches, strategic updates, and AI developments include Nvidia, AMD, Intel, Qualcomm, Meta Platforms, Samsung, LG, Sony, and Motorola.
No matter how the market moves, below I highlight one stock expected to gain interest and another that may face further declines. Keep in mind, my outlook is limited to the upcoming week, Monday, January 5 through Friday, January 9.
Stock to Buy: Advanced Micro Devices
AMD stands out as a strong buy this week, with the 2026 Consumer Electronics Show (CES) acting as a key catalyst. The highlight will be CEO Dr. Lisa Su’s opening keynote on Monday at 6:30 PM PT (9:30 PM ET).
Su is expected to present AMD’s vision for AI solutions across cloud, enterprise, edge, and devices, potentially unveiling new advancements in AI chips and related technologies. Historically, AMD shares tend to rally during the week of its major product announcements, often followed by multiple analyst upgrades.
Analysts remain optimistic, with a consensus Strong Buy rating supported by 40 Buy and 11 Hold recommendations, suggesting a 26.5% upside potential for 2026. TD Cowen recently named AMD among its top AI picks, setting a price target of $290.
Fundamentally, AMD’s growth is driven by its AI product portfolio, including the MI300 series accelerators, which are gaining ground against rivals like Nvidia.
AMD shares closed Friday at $223.47. From a technical standpoint, the stock has demonstrated resilience, recovering from mid-2025 lows near $150 to its current level, supported by strong trading volume. If the upcoming keynote meets expectations with announcements like new partnerships or product roadmaps, AMD could soon challenge its 52-week high around $270.
AMD holds a Financial Health Score of 2.98 (“GOOD”), indicating a solid balance sheet and strong operating momentum driven by excitement around its next-generation AI products.
Stock to Sell: Cal-Maine Foods
Cal-Maine Foods starts the week at $78.47, hovering near its 52-week low, as Wall Street anticipates a weak earnings report and a bleak outlook. The company faces headwinds including rising feed costs, supply chain challenges, and variable demand.
The largest U.S. producer and distributor of shell eggs is set to release its fiscal second-quarter results before the market opens on Wednesday at 6:00 AM ET, followed by a conference call at 9:00 AM ET.
Cal-Maine is projected to report earnings of $2.08 per share, a sharp 53.5% decline from $4.47 a year ago, driven by higher input costs and fluctuating demand. Revenue is expected to drop 14.7% year-over-year to $814.2 million, amid ongoing egg price volatility and potential disruptions from recent avian flu outbreaks that have affected supply chains.
Looking forward, the company’s guidance is likely to reflect continued uncertainty around production normalization and cost control, posing further challenges for investor confidence and stock performance.
Technically, CALM has slipped below key support levels, accompanied by declining volume that indicates weakening investor interest. Its one-year target price of $95.50 offers limited upside, but the risks from a disappointing earnings report outweigh potential gains.
With the likelihood of underwhelming results and cautious guidance, CALM is a sell this week to avoid volatility driven by these events.
Whether you’re a beginner investor or an experienced trader, using InvestingPro can help you uncover investment opportunities while managing risks in this challenging market environment.
Shares of auto giant Tesla Inc. closed lower for the fourth consecutive session on December 29, signaling a notable shift in momentum just days after the stock reached a fresh all-time high. Since that peak just before Christmas, Tesla shares have declined nearly 8%, marking a sharp reversal after a hard-fought rally.
The timing of Tesla’s recent pullback makes it particularly notable. In a market hovering near record highs, Tesla’s sudden loss of momentum just as it enters blue sky territory raises a critical question: is this a healthy pause or an early sign that the rally is losing steam?
Let’s explore the arguments on both sides.
A Pullback Was Always Possible Amid Tesla’s Rapid Rally
Tesla has surged more than 100% since April, with its longer-term uptrend remaining firmly intact. Even after the recent decline, the stock has not broken any major trend structures—it simply looks more pronounced coming off a record high. Many investors had anticipated the rally to accelerate after Tesla finally cleared long-term resistance, rather than pull back.
From a technical perspective, a pullback of this magnitude is normal and consistent with previous corrections the stock has experienced this year. The latest rally phase was largely one-directional, making profit-taking after major milestones expected.
Tesla’s shares could fall another 8% and still remain within the rising trend channel that has supported the stock since spring. Viewed this way, the recent selloff represents a period of digestion rather than a breakdown. Healthy uptrends rarely move in straight lines—something Tesla investors are all too familiar with.
This outlook is further supported by Tradesmith’s Health Indicator, a volatility-based measure of stock price strength. According to this indicator, Tesla (TSLA) stock has remained in the green zone for four consecutive months, signaling a healthy underlying trend despite recent pullbacks.
A Change in Tone Marks Shift in Market Sentiment Around Tesla Stock
While a pullback is normal after reaching an all-time high, four consecutive lower closes suggest there is more at play than just short-term profit-taking. The sustained selling pressure indicates that bears have firmly taken control from the bulls, with little defense visible so far.
The critical question now is whether buyers will quickly re-enter the market. If they do, this pullback may be seen as a buying opportunity for long-term investors. If not, the market could begin to reassess the remaining upside potential ahead of the next major catalyst—January’s earnings report.
Analyst Support Remains Strong as Tesla Navigates Recent Price Decline
Despite recent weakness, analyst conviction in Tesla remains firm. Over the past week, both RBC and Canaccord Genuity reaffirmed their Buy ratings on the stock. Canaccord Genuity even raised its price target to $551, implying roughly 20% upside from current levels.
These positive calls suggest that the recent selloff is a minor pullback within a larger, ongoing uptrend that still has significant room to grow, even if near-term price action appears uncomfortable. While Sell ratings, such as one from UBS Group last week, persist, they remain rare exceptions in an otherwise solid analyst consensus.
This broader trend of sustained analyst support is particularly important during periods of market uncertainty like the current one.
Why the Next Few Trading Sessions Are Crucial for Tesla Stock
Despite the ongoing pullback, it would be a mistake to dismiss the recent price action entirely. Runs of consecutive red days like this are rare for Tesla, especially so soon after hitting new highs. The fact that this is occurring while the broader market remains strong adds an extra layer of concern.
Tesla’s high valuation intensifies this tension. Trading with a price-to-earnings ratio above 300, the stock leaves little margin for error. Any sign of disappointment in the company’s upcoming earnings report at the end of January could lead to a swift selloff. Confidence, not just momentum, is now a crucial factor.
This makes the upcoming sessions particularly important. How Tesla performs through the remainder of the holiday week and into early January will provide vital clues about the health of the rally. Stabilization or a quick rebound would suggest the pullback is routine. Continued weakness, however, would encourage bearish sentiment and shift the narrative from consolidation to growing doubt.
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