Weekly Recap:

by Michael Reinking, CFA & Eric Criscuolo

Published on 1/23/26

It’s been a long, holiday-shortened week of trading with the first, short-lived, gut check of 2026. Over the weekend President Trump broke out the trade war playbook again souring the mood in Davos ahead of the World Economic Forum but on a lighter note there was plenty of entertaining playoff football. That was capped off on Monday night with the Indiana Hoosiers winning their first National Championship, and the third straight for the Big 10 Conference (I thought this was my year instead it’s a full-fledged rebuild). After a late night of football, US markets paid homage to that victory with a deep sea of red on Tuesday as traders returned to their stations.

The headline blamed for much of that weakness was President Trump’s threat to enact 10% tariffs, potentially moving to 25%, against European countries that didn’t go along with his plans to acquire Greenland. The Greenland headlines captured a lot of the attention but the other factor driving the weakness was a surge in long dated yields in Japan amidst concerns related to consumption tax cuts and increased fiscal spending ahead of snap elections in early February. This pushed global yields higher with the long end of the Treasury curve breaking above some key technical levels and hitting the highest level since the summer.

On Tuesday US equity markets closed sharply lower. The S&P 500 fell <2%, the biggest one-day decline since October with the index breaking below its 50d moving average and giving up all of the YTD gains. The losses were broad based, but mega-cap tech bore the brunt of the selling while there was some outperformance in defensive sectors like consumer staples, healthcare and energy with the looming geopolitical risks. Declines in small and mid-cap indices were a little more subdued.  Markets closed near session lows with President Trump’s Davos address scheduled before the open on Wednesday. 

 There was a tepid bounce in futures overnight, but those gains had evaporated before President Trump approached the podium. The speech was rather long and included something for everyone: a victory lap of his accomplishments in his first year of office, plans for his big Golden Dome, a review of Europe’s socioeconomic situation, mentions of Denmark’s short appearance in WWII, NATO, French President Macron’s sunglasses, which for the record were pretty cool and even projections for election results if he ran against the pairing of George Washington and Abraham Lincoln. As you can tell it was a wide-ranging speech but the headline that caught the market’s attention was when he said he wouldn’t take over Greenland with the “excessive force”. This “sort of” olive branch helped equities bounce back at the open.

Those gains faded during the session before President Trump appeared on the airwaves again saying a framework for deal involving Greenland had been worked out after a meeting with NATO Secretary-General Mark Rutte and proceeded to cancel the previously threatened tariffs. This quick about face helped equities bounce back, recouping pretty much all of the losses to start the week with small and midcap indices, hitting new all-time highs. Details of the framework remain scant.

If the MAC Desk were geopolitical strategic bankers, which we are clearly not, before another activist investor gets involved, we’d push Denmark to announce that they are exploring “strategic alternatives” which could include a tax-free spinoff of Greenland or an outright sale. That could lead to a bidding war that accrues significant value to stakeholders and unlock value that is not being rewarded by the market currently. We think the US would be in a strong position to be a stalking horse bidder in such a process. And if nothing else Denmark should check in with the Dodgers before signing any deal. The only thing their roster is missing is an arctic territory. As legendary WWF Wrestler Ted DiBiase aka “The Million Dollar Man” said, “Everyone has a price.” 

Equities extended gains in yesterday’s session before pulling back today with geopolitical headlines quieting down. Throughout the volatility this week the rotation/broadening remained intact until today’s session, breaking a streak of 15 consecutive sessions where the Russell 2k outperformed the S&P 500 (Chart 1). According to Bloomberg this was the longest streak since 1996. For the week major indices closed slightly lower.

The volatility swell on Tuesday was very short-lived with the VIX pulling back quickly from ~20 to the mid-teens. Bond volatility also quickly reversed

Outside of all the geopolitical headlines, which have kept us on our toes, it has been a reasonably quiet week. The Supreme Court had another opinion day without a ruling on IEEPA tariffs. The court is set to go on a four-week recess which suggests a decision won’t be made until at least late February. The court also heard oral arguments in Lisa Cook’s case with Fed Chair Powell in attendance and seemed to express skepticism that the President had the authority to fire her.

Markets continue to wait on President Trump’s nominee for the next Fed Chair with Treasury Secretary Bessent suggesting that could come next week. There have been big swings on Polymarket over the last week with Kevin Warsh moving into a commanding lead after Mr. Trump signaled that the other Kevin would likely stay in his current role. However, the odds for Blackrock’s Rick Rieder are quickly moving higher after the President said he was “very impressive” in recent meetings.  

Geopolitics and central banks will be in focus again next week, but earnings season will start to garner some more attention with the pace and scope of earnings announcements picking up. It is still early days but thus far the results have been mixed. According to FactSet Earnings Insight 13% of the companies in the S&P 500 have reported thus far with 75% beating EPS estimates by an average of 5.3% both metrics are below the trailing 5yr averages of 78% and 7.7%, respectively. The blended growth rate for the quarter has ticked down slightly to 8.2%. Next week about 20% of companies in the S&P 500 are expected to report. Tech will come into focus with both hyperscalers and suppliers which should help to improve some of the metrics mentioned above.  

Select commentary from earnings calls:

Sector level performance this week was mixed. Energy and materials sectors were both up >2% the best performing sectors this week and year as the commodity complex continues to move higher. On the downside, yield oriented sectors REITS and Utilities both fell >2%. Financials fell 2.5% this week and is now down 3.5% YTD. Large cap banks, credit card companies, payment processors and private equity firms have led to the downside. Insurance and regional banks outperformed though the latter sold off >3% today to end the week slightly lower.

Info tech ended modestly lower this week with quite a bit of dispersion beneath the surface. Software has been a big underperformer this year but snapped back today as there have been multiple analysts and respected investors suggesting that the AI displacement story is overdone. Below is a ratio chart comparing the software and semiconductor ETFs.

Intel fell sharply today as Q1 guidance disappointed due to lack of CPU supply to meet demand after inventories were drawn down, along with no 14A (their new manufacturing process) customer announcements. The company also warned that high memory costs could also hurt demand, those stocks continue to moon as the kids like to say. The NYSE FANG+ is down ~3% YTD and has now been pulling back since hitting an all-time high on Halloween. The index tagged its 200d ma this week before bouncing. This is a very different setup heading into earnings next week than we've seen in previous quarters.

Global Markets - Europe, Asia lower, Emerging Markets Higher 

Commodities & Crypto - Natural gas surges ahead of Winter Storm Fern; Metals continue heading toward Pluto

SCOTUS once again didn’t issue an opinion on the IEEPA tariff case, likely putting the next potential day for one around February 20, after a court recess. The justices did hear arguments in the Lisa Cook firing case, which analysts said did not go particularly well for the administration.

Pending Home Sales disappointed, falling 9.3% in December from November. However MBA mortgage purchase applications rose 5% from the prior week, which itself was 16%. Refinances continued to be strong, growing 20% against a 40% gain the prior week. President Trump officially signed an executive order limiting institutional ownership of single-family homes, which had been telegraphed over the last week, though significant details need to be worked out.

Labor market data continues to show low firing rates. Initial jobless claims were essentially unchanged from last week at 200k and came in below the 212k estimate. Initial claims also fell from last week.

Despite its headline nature November PCE was a non-event, essentially inline with expectations (+2.8% y/y and 0.2% m/m). Core also rose 0.2%. Inflation remains stable but stubbornly above the Fed’s 2% target.  Personal Income rose 0.3% sequentially in November and Spending rose 0.5%, both roughly inline. Flash PMIs for January were also largely inline (Manufacturing 51.9 vs 52.0, Services 52.5 vs 52.8). Manufacturing has been on uptrend since early 2025. 

Treasury yields rose slightly this week and significantly less than global yields, triggered by the sharp rise in long-dated JGBs. The 10yr reached 4.30%, the highest since September, before pulling back in the back half of the week. The 30yr approached 5.0%. Gilt yields also saw a jump at the long-end, with several causes cited- hotter inflation, strong retail sales, recent strength and emerging political tensions.   

The US Dollar Index was down about 1% for the week before weaking further Friday afternoon. Rumors began to make the social media rounds- later reported on by the Nikkei- that a “rate check” was conducted by the Federal Reserve on behalf of the US Treasury. In a rate check, governments survey financial institutions on what price they would quote a currency at in the event of an intervention. The Dollar Index steadily rose from 97.50 at Christmas to 99.30 on Tuesday before the renewed tariff threats and Greenland tensions triggered a weakening at the start of the week.

The Fed rate decision will be the main event next week, with a lot more earnings as well including the mega cap tech names reporting. We may also get a new Fed chair nominee, finally. We'll also know who's heading to the Super Bowl with the NFL conference championships on Sunday. Have a nice weekend and good luck with the snow. Stay safe.  

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