Authored by Naveen Athrappully via The Epoch Times,

The IRS announced on Jan. 26 the opening of the 2026 tax filing season.

“The IRS expects about 164 million individual tax returns for tax year 2025 to be filed ahead of the Wednesday, April 15, federal deadline. Taxpayers can find a range of tools and filing options on IRS.gov to help them prepare and file their returns,” the agency said in a news release.

The IRS has various online tools and resources that taxpayers can use before, during, and after filing their federal tax returns, the agency said in a Jan. 8 statement. The One Big Beautiful Bill Act, signed into law by President Donald Trump in July, carries provisions that can help taxpayers lower their tax bills and raise their refund amounts.

“The Internal Revenue Service is ready to help taxpayers meet their tax filing and payment obligations during the 2026 filing season,” IRS Chief Executive Officer Frank Bisignano said.

“As always, the IRS workforce remains vigilant and dedicated to their mission to serve the American taxpaying public. At the same time, IRS information systems have been updated to incorporate the new tax laws and are ready to efficiently and effectively process taxpayer returns during the filing season.”

The White House said in a Jan. 26 statement that millions of Americans are poised to receive “significantly larger tax refunds” this filing season due to the One Big Beautiful Bill Act.

The legislation is set to deliver the “largest tax refund season in U.S. history,” the White House said, projecting average refunds to jump by $1,000 or more, citing various analyses.

Some of the key provisions of the bill contributing to higher refunds are no taxes on tips or overtime up to certain income thresholds, an additional deduction for seniors, and a deduction in auto loan interest payments.

An analysis made by the Tax Foundation cited by the White House expects tax refunds in 2026 to average $3,800 per taxpayer due to the legislation.

Comparatively, the refund amount was $3,052 in tax year 2024 and $3,004 in 2023.

In its latest statement, the IRS said that most refunds are issued within 21 days. However, refunds that require additional review from the agency may take longer.

Direct deposit is the fastest way for taxpayers to receive a refund, according to the agency. The IRS began phasing out paper refund checks beginning Sept. 30, in line with a March 25 executive order signed by Trump.

The order, “Modernizing Payments To and From America’s Bank Account,” stated that the use of paper-based payment systems by the federal government was imposing “unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.”

It asked all departments and agencies to comply with the directive by transitioning to an electronic funds transfer system. Paper checks were allowed for certain exceptions, such as individuals who do not have access to banking services, and emergency situations where electronic payments would cause “undue hardship” for the recipient.

Taxpayers are urged to provide their bank account and routing numbers for their refunds to be electronically deposited.

The IRS estimates most refund payments for the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) to be reflected in the bank accounts or debit cards of taxpayers by March 2. This is only applicable for taxpayers who have chosen the direct deposit option, and whose returns do not face any issues with processing.

Taxpayers can track their refund status by using the IRS Individual Online Account, IRS2Go app, or the Where’s My Refund? tool, the agency said. Where’s My Refund? is expected to offer projected deposit dates for most of the early EITC and ACTC refund filers by Feb. 21.

“As America celebrates its 250th anniversary, the IRS and its employees are excited to once again serve American taxpayers in meeting their tax filing obligations during the 2026 filing season,” Bisignano said. “The IRS encourages taxpayers to speed the processing of their returns by using e-file, instead of paper.”

IRS Readiness

Meanwhile, a Sept. 29 audit report issued by the Treasury Inspector General for Tax Administration had raised concerns about the IRS’s ability to handle the 2026 filing season.

“Several initiatives reduced the IRS workforce since January 2025,” the report said. “Key IRS functions responsible for managing the filing season have lost 17 to 19 percent of their workforce.” In addition, the IRS’s Information Technology function has faced staffing losses as well, it said.

“We expect workforce reductions to impact key processing programs and customer service going forward. We are concerned about how this will impact the 2026 Filing Season.”

However, in the Jan. 8 IRS statement, Acting IRS Commissioner Scott Bessent said that the agency had prepared for the 2026 filing season.

Even before the passage of the One Big Beautiful Bill Act, “Treasury and IRS were diligently preparing to update forms and processes for the benefit of hardworking Americans,” Bessent said.

“President Trump is committed to the taxpayers of this country and improving upon the successful tax filing season in 2025.”

A person is in critical condition following a shooting incident early Tuesday morning in Pima County, Arizona. 

Emergency responders from the Santa Rita Fire District (SRFD) and American Medical Response arrived on the scene around 7:30 a.m., where they found one individual in custody who was in critical condition, KVOA reports.

First responders provided immediate medical care before the patient was transferred to a local medical helicopter, which took the person to a regional trauma center. 

The Pima County Sheriff’s Department and the FBI are assisting in the investigation.

Stay tuned for updates…

If yesterday’s 2Y auction was stellar, today’s 5Y sale was the opposite.

Just after 1pm, the US completed the sale of $70BN in 5Y paper at a high yield of 3.823%, up from 3.747% one month ago and the highest since July. It also tailed the When Issued 3.820% by 0.3bps, the 7th tail in the last 8 auctions.

The bid to cover of 2.34 was essentially unchanged from last month’s 2.35 and just below the six auction average of 2.36.

The internals were also on the soft side: Indirects were awarded 60.7%, up from 59.5% but below the recent average of 61.0%; and with Directs right in line with expectations (28.5% vs 28.7% recent average), Dealers were left with 10.8%, up modestly from 8.8% last month and also just above the recent average of 10.4%.

Overall, this was an ugly auction, yet the market reception was just modestly chilly at best, with 10Y yields barely moving after the break. After all, the market has the Fed to worry about tomorrow, a far biggest catalyst.

At her first briefing since the Minneapolis shooting of Alex Pretti, White House Press Secretary Karoline Leavitt blamed Democratic leaders for refusing to enforce federal immigration law. She described Pretti as an armed left-wing agitator and said the administration’s message was clear: the Biden-era approach to immigration enforcement is finished.

Leavitt accused Democrats and hard-left activists of trying to obstruct the mandate voters gave President Trump, while federal immigration officers are carrying out the will of the American people. She noted that Trump has condemned the “vile” treatment of those officers and called the resistance to enforcement deadly.

She also outlined what the White House sees as the path forward in Minnesota, stressing cooperation from state and local officials who have shielded illegal aliens. Trump spoke with Gov. Tim Walz on Monday in a productive conversation, Leavitt said, noting the two were on a similar wavelength about next steps.

The administration’s demands include turning over all criminal illegal immigrants in state and local custody for immediate deportation, requiring local police to transfer all illegal aliens they arrest to federal authorities, and mandating cooperation with federal law enforcement in apprehending suspects. 

It was also announced that White House Border Czar Tom Homan has been assigned to oversee federal immigration efforts in Minnesota and will report directly to Trump. 

When a reporter questioned Homan’s assignment, that’s when Leavitt delivered the knockout punch.

She pulled up a 2016 Washington Post article with the headline:

“Meet the man the White House has honored for deporting illegal immigrants.”

The piece praised Homan’s work under Barack Obama. 

What he said https://t.co/Kpz3GRou7H

— Elon Musk (@elonmusk) January 27, 2026

Homan was serving as executive associate director of ICE Enforcement and Removal Operations. He was one of only three Department of Homeland Security career executives selected for the 2015 Presidential Rank Award for Distinguished Service.

The award is the nation’s highest civil service honor, given annually by the president to top career executives and senior professionals who demonstrate “strength, integrity and commitment to public service.” According to figures from Immigration and Customs Enforcement, between fiscal years 2013 and 2015, under Homan’s leadership, ICE’s Enforcement and Removal Operations deported more than 920,000 illegal immigrants from the United States. That figure includes 534,000 individuals with criminal convictions, setting multiple agency records. 

“Thomas Homan deports people. And he’s really good at it,” the Washington Post wrote at the time. “Homan is the Washington bureaucrat in charge of rounding up, detaining, and kicking illegal immigrants out of the country. As Americans fight over whether the next president should build a wall on the Mexico border to keep migrants out or protect millions of them from deportation, Homan is actually hunting undocumented immigrants down right now, setting strategy for 8,000 officers on the front lines.”

The article continued:

He was honored last week with the government’s highest civil service award, bestowed on federal leaders whose work gets “extraordinary” results. According to his bosses at the Department of Homeland Security, not only did Homan successfully handle an unexpected surge of unaccompanied children and families who have streamed here from Central America across the Southwest border, but last year his operations set records for the share of illegal immigrants expelled from the U.S. who had criminal records.

Many of President Obama’s immigration policies have been unpopular with immigration advocates who say he has not done enough to overhaul a system that relies on deportations. But Homeland Security officials were intent on plugging Homan’s success.

Leavitt held up a printout of the article for the media to see, with the headline, “Meet the man the White House has honored for deporting illegal immigrants.”

“And I would remind everyone in this room that it was former President Barack Hussein Obama who awarded a medal to Mr. Homan. So he’s obviously very qualified. He has the full trust and faith of the president. He will continue to have these meetings in the hopes that ICE and local law enforcement can cooperate and work together to have successful immigration enforcement, as we’ve seen in almost every other state across the country.”

🚨BARACK OBAMA HONORED TOM HOMAN!

Washington Post headline from 2016L “Meet the man the White House has honored for deporting illegal immigrants”

“It was former President Barack Hussein Obama who awarded a medal to Mr. Homan.”

Same deportation policies, new Trump Derangement. pic.twitter.com/gPfBXORT37

— Townhall.com (@townhallcom) January 26, 2026

 Homan did the same work under Obama that he’s doing under Trump. The difference is that Obama gave him a medal, and the left cheered. Now, under Trump, the same deportation-focused approach draws outrage from Democrats and breathless condemnation from the media. The only thing that changed was the man in the Oval Office.

By Michael Every of Rabobank

As Axios puts it, ‘Wall Street’s playbook for 2026 already needs to be rewritten’. Many players’ do.

Gold is through $5,000 and silver up 5.5% at over $109 – it was even higher intraday. You might not trade either, and I remain sceptical that we are moving back to a gold or silver standard, even for limited international trade. Yet besides the notable industrial implications from silver (and copper), this is hoarding, and a vote of no confidence in the entire global financial architecture. Wall Street is calling it “the Debasement Trade.’ That fails to see that, in time, it can lead to Wall Street being put in a basement, or up against a wall. Plenty to think about there.

The IMF head warned the world to ‘prepare for a global run on the US dollar’, adding the EU should issue more common debt to provide investors with an alternative safe asset to gold and US Treasuries. There are vast structural changes implied in every part of that sentence.

In Japan, 10-year yields are +4.5bps, reversing the recent JGB rally. As the WSJ notes, ‘Wall Street Is Fixated on a Possible Yen Intervention.’ After all, Japanese CPI is 2.1%, 30-year yields are 3.66%, the BOJ can’t do too much because public debt is so high, the country has run five annual trade deficits in a row, removing its protective shield, and a weak JPY isn’t helping, just feeding inflation. Some see Japan needing a US bailout before these JGB problems flow back to US Treasuries… even as markets are wondering who is going to bail the US out.

There, note that, the US is breaking the global architecture to bail itself out. That starts with geopolitics and geoeconomics, then flows back to markets:

PM Takaichi just underlined her country’s alliance with the US would ‘collapse’ if Japan fled a Taiwan crisis. As a result, the US-Japan trade deal –which isn’t an FTA because time is too short for technocratic politesse– is logically likely to hold; Japan’s industry will be worked into US military supply chains; and the US could logically extend its still-powerful fiat largesse to Tokyo. What other options do Japan or the US have? “Because markets”?

Yet South Korea has seen Trump threaten to increase US tariffs back to 25% because Seoul is “not living up to” the trade deal struck last year. As another stick there, the latest US National Defence Strategy makes clear South Korea, as others, is expected to do far more for its own defense under the US umbrella: but the implication could be that umbrellas can be closed if those under them don’t contribute to holding tightly against strong geopolitical winds.

On which, China’s Xi just purged most of his senior generals on a scale unseen since Mao: the WSJ states one was accused of selling nuclear secrets to the US. It certainly appears all power over the PLA is now in Xi’s hands; but all else is far less certain.

In Europe, the EU parliament delayed its decision to unfreeze the EU-US trade deal after the Greenland crisis, while an FTA with India is on the cards. However, NATO chief Rutte warned Europe can’t defend itself without the US, and “The EU should stop dreaming of creating a European pillar for NATO and continue to build ties with the US despite Trump.” The New York Times adds, ‘As Europe’s reliance on natural gas grows, so does Trump’s leverage’, noting concern that “Trump could turn the strong position that the US has gained in the oil and gas industry into a weapon to try to coerce other countries…” So, what is the ultimate EU decision to be?

UK PM Starmer stated the UK doesn’t have to choose between the US and China and is heading to Beijing to strike deals. Note that as with Canadian PM Carney, such trips are planned well in advance. Indeed, Politico claims behind closed doors, ministers have pushed for closer economic collaboration with Beijing for a year, even as they signed a US deal that runs the other way – and as it’s reported that China hacked the Downing Street phones for years. Will the US express the same unhappiness to the UK here as it did to PM Carney, and to PM Starmer over his proposed Chagos Islands deal. If so, does he have to choose?

Carney’s retort that he has no intention of signing an FTA with China (which allows the US to dissolve the USMCA), leaves one wondering what exactly a “strategic partnership” with Beijing, as part of a “New World Order”, involves: the political or military sphere? Meanwhile, in the geoeconomic one, again as predicted, the Canadian press notes the US has broached the idea of “something approaching a North American customs union… The partners would apply a common trade policy to other countries, even globally.” And the US would set it. That would, as its press also notes, render Canada’s status akin to that of Hong Kong within China. Meanwhile, Canada, like the EU, is looking to India for more trade – but that ‘Hong Kong’ issue is in the background.

Not as extreme a case, but still notable, Australia’s financial press underlines that it can expect to be next to be told to make a choice and to spend at least 3.5% of GDP on defence.

Meanwhile, as middle powers talk about propping up the liberal world order without the US, the USS Lincoln Carrier Strike Group has arrived in Middle East, showing what real power is. On one hand, Trump says ‘Iran wants to make a deal,’ yet we may see US strikes against regime targets to trigger new mass protests, and there are suggestions it may impose a Venezuela-style blockade on Iranian oil exports – the kind of upstream disruption of commodity supply chains to China we flagged last year as a trump card vs. Beijing’s control of rare earths (where Japan-China tensions are driving high-tech mineral prices to record highs). Markets will be watching closely.

In the broader region, the Houthis said they may close the Red Sea and Suez Canal again if the US strikes Iran; Hezbollah also said, “we are not neutral,” but it remains to be seen if it is still lethal or not. More broadly, key players are realigning on the expectation that in near future Iran will be less of a threat and the US will be less involved: we see an emerging Saudi-Qatar-Egypt-Turkey-Somalia-Sudan-Yemen-Pakistan alignment vs. the UAE-Israel-Somaliland-South Sudan-South Yemen-India. How will the liberal middle powers tread those waters?

Against this backdrop, it’s reported that a ‘Record number of people in UK live in ‘very deep poverty’, analysis shows’; ‘Health Insurance Is Now More Expensive Than the Mortgage for These Americans’; and ‘Carney unveils hike to GST credit, other measures targeting affordability.’ Moreover, ‘The Wait List for a Birkin or Rolex Is Getting Shorter’ says the WSJ, while “Falling resale values show that even makers of the world’s most popular luxury goods are feeling a slowdown.” Oh, the humanity!

In short, expect domestic politics to stay as ‘interesting’ as geopolitics – and the two are inextricably linked. Indeed, even as Trump appears to be taking a more conciliatory stance over ICE in Minnesota for now, hedge fund star Ray Dalio warns of ‘a more clear civil war.’ Is a Birkin or a Rolex much help in one of those? I’m asking for a friend.

Lastly, as markets wait for the Fed this week while wondering about political pressure on the central bank, Indonesian President Prabowo’s nephew is now a step closer to securing a position as Bank Indonesia’s Deputy Governor. Yes, playbooks are being rewritten – with some very old plays.

On the one hand there are reports that the Trump administration “is open for business” when it comes to negotiations with Iran. “If they want to talk, and they know our terms, we are open to have a conversation,” a senior US official has told Axios. But on the other, amid this ‘openness’ toward cutting a deal (presumably on the nuclear and ballistic missile fronts), President Trump is said to be weighing a menu of escalation options aimed squarely at forcing regime change in the Islamic Republic, according to fresh regional and US reporting.

Middle East Eye, citing Arab officials, reports that Washington is actively considering direct strikes on senior targets in Tehran. “The US is weighing precision strikes on ‘high-value’ Iranian officials and commanders who it deems responsible for the deaths of protesters, a Gulf official familiar with the discussions told Middle East Eye.”

The Jerusalem Post reports that another option under discussion is a full blockade of Iranian oil exports – a replay of last year’s Venezuela playbook. That campaign saw Washington impose an embargo, seize oil tankers, and ultimately kidnap Venezuelan President Nicolás Maduro in the Jan.3rd military raid on Caracas.

Treasury Secretary Scott Bessent has emerged as a leading advocate of economic warfare, arguing that collapsing Iran’s economy would create conditions severe enough to trigger an internal uprising against the government, or starve the system until it breaks (as also happened in Iran’s ally Syria). US Treasury days ago began hitting Tehran officials with new protest-related sanctions.

Other senior officials are pushing for a more kinetic approach. Members of Trump’s Cabinet have urged targeted military strikes against Iranian government and military assets, but say these could be limited in scope akin to military action in the June 12-day war involving Israel.

Earlier this month, Trump reportedly held back from striking Iran, citing concerns that the Pentagon lacked sufficient forces in the region to decisively topple the government, also at a moment the US Navy strike force was built up on the southern Caribbean. 

But a former US official told Middle East Eye that the odds of a strike are now higher than they were just weeks ago. Currently there’s a major military buildup ensuing across the Middle East, including the deployment of an aircraft carrier strike group (the USS Abraham Lincoln strike group), additional fighter jets, and advanced air defense systems – signaling ‘all options’ are indeed on the table.

Protests is in Iran have long gone quiet, but what has changed? The NY Times reports Tuesday:

President Trump has received multiple U.S. intelligence reports indicating that the Iranian government’s position is weakening, according to several people familiar with the information.

The reports signal that the Iranian government’s hold on power is at its weakest point since the shah was overthrown in the 1979 revolution.

But the dilemma remains as hawks in the administration urge action: “Mr. Trump warned that he could strike Iran as the government’s bloody crackdown on the protests expanded. Still, his advisers have been divided on the benefits of strikes, particularly if they were simply symbolic strikes against elements of the government involved in the crackdown,” The NY Times report adds.

Washington logic: Give them an ultimatum that they’ll never accept anyway and consequently you have the perfect reason to start bombing them…

The Americans are basically asking the Iranians to abandon their entire defense strategy. It’s completely untenable for the regime. https://t.co/oGRDn1dDLh

— Woofers (@NotWoofers) January 26, 2026

One anti-Iran think tank hawk, Jason Brodsky, who is Policy Director at United Against Nuclear Iran (UANI), writes that “Iran’s regime wants a JCPOA-like deal. It is highly unlikely Khamenei will agree to the terms America is demanding because it would basically amount to a form of regime change. But the Islamic Republic will try and lead the U.S. on to think it will negotiate meaningfully to avoid an attack and entrap the U.S. in endless negotiations.”

But we should note that Tehran also has little reason to ever trust Washington, given the original JCPOA was collapsed when the first Trump administration unilaterally pulled out of it.

Authored by Aaron Gifford via The Epoch Times,

Federal officials have referred Minnesota to the Justice Department (DOJ) over alleged civil rights violations stemming from the state’s refusal to halt male participation in female sports.

The referral came from the Education Department (ED) and Department of Health and Human Services (HHS), which concluded in September that the state violated Title IX’s prohibition on sex-based discrimination in federally funded education.

In a news release on Monday, Education Secretary Linda McMahon accused state officials of failing to uphold federal law.

“Despite repeated opportunities to comply with Title IX, Minnesota has chosen defiance—continuing to jeopardize the safety of women and girls, deny them fair competition, and erode their right to equal access in educational programs and activities,” McMahon said. “The Trump Administration will not stop until accountability is delivered for Minnesota’s students.”

HHS Secretary Robert F. Kennedy said the federal government “will not look the other way” on this matter.

“When states allow males to compete in girls’ sports, they deny young women and girls the protections the law guarantees,” he said in the release.

The referral came amid escalating tensions between the Minnesota officials and the Trump administration, which has taken a number of recent executive actions in response to concerns about the fraudulent use of federal money in the state.

“Today’s letter notifies Minnesota that ED and HHS will refer the matter to DOJ for proceedings, which could result in termination of Minnesota’s Federal funding from ED and HHS,” the news release states.

Last year, an investigation by the administration determined that Minnesota’s education department and its official high school athletic league violated Title IX by allowing males to both compete in multiple female sports programs and occupy female-only bathrooms and locker rooms as well.

The Epoch Times reached out to the Minnesota Department of Education and the Minnesota High School State League for comment.

A proposed resolution agreement was provided to the state agencies to voluntarily resolve this issue, but the state agencies initially ignored the request and later announced that they would not accept the resolution agreement or engage in negotiations, McMahon said in the news release.

The investigations, which were opened in June, determined that a biological male had competed on the Champlin High School girls’ varsity fastpitch softball team since 2023, leading the squad to a winning record against all-girl opponents all three seasons. It also found that other districts had male athletes competing on girls’ lacrosse, volleyball, track and field, and ski (alpine and Nordic) teams.

According to a “toolkit“ on the Minnesota Department of Education website, “Title IX requires schools provide transgender students with the right to participate in such activities, including athletics, in a manner consistent with their gender identity.”

“The Minnesota State High School League allows participation for all students regardless of their gender identity or expression in an environment free from discrimination with an equal opportunity for participation in athletics and fine arts,” the document says.

The U.S. Supreme Court recently heard oral arguments from state leaders in West Virginia and Idaho asking justices to uphold their state laws preventing males from participating in female sports.

Authored by Rob Sabo via The Epoch Times,

Southwest Airlines’ era of offering passengers open seating is officially ending, as the passenger carrier transitions its seating policy to a reservation-based system common with other airlines starting on Jan. 27.

Southwest announced last summer that it would end its open seating policy to offer customers a wider range of seating options. The airline’s new booking model includes three seating options: standard seating at the back of the aircraft; preferred seating near the front; and extra legroom seats in the front of the cabin and at the exit rows.

Southwest said it will also initiate a new group-based boarding process to replace its old “A,” “B,” and “C” boarding system that encouraged travelers to check in 24 hours prior to departure to secure the coveted “A” boarding option. The new boarding system will be skewed toward passengers who book premium seating options, while customers who choose basic seating will board last. Southwest will need to make physical changes to its departure gates to accommodate the new system, which could take months to complete.

Tony Roach, Southwest Airlines’ executive vice president of customer and brand, said the changes allow customers more choice and control over their flying experience.

“Assigned seating unlocks new opportunities for our customers—including the ability to select extra legroom seats—and removes the uncertainty of not knowing where they will sit in the cabin,” Roach said in a statement announcing the booking shakeup.

“This is an important step in our evolution, and we’re excited to pair these enhancements with our legendary customer service.”

The airline’s new “basic” fare option—formerly called Wanna Get Away—is nonrefundable and does not allow any changes in travel dates or times unless passengers upgrade to a higher tier. Choice Extra is the new name for its former business select option and includes two free checked bags along with priority boarding.

Southwest said on its website that the new booking policy for the extra legroom seats may clash with existing corporate business accounts, which offered priority boarding so business travelers could get first dibs on seats in the front of the plane or those with extra legroom.

“We recognize these changes may impact how business customers interact with Southwest Business,” the airline said. “We are actively working through details on how best to offer updated contractual benefits into future corporate travel agreements, and we will strive to keep you informed on any updates.”

The airline also announced it would change its policy regarding larger travelers who require more room. Starting Jan. 27, passengers who don’t fit within a seat’s armrests will be required to purchase an additional seat. Previously, the airline offered larger passengers the option to purchase a fully-refundable seat or ask for a free one at the gate.

Southwest Airlines’ final flight featuring open seating departed from Honolulu on Jan. 26 and arrived in Los Angeles this morning.

Southwest Airlines has offered open seating since its first flights to Houston and San Antonio from Love Field in Dallas in the summer of 1971. The company went public on the New York Stock Exchange in 1977.

US futures are higher, led by Tech, and approaching record levels from earlier this month as geopolitical and headline risk subsides while the market focuses on looming Mag 7 earnings and Wednesday’s Fed decision is expected to be a non-event. Equities are poised for another attempt at 7k. As of 8:00am ET, S&P futures are up 0.2% and set for a fifth day of gains; Nasdaq futures lead gains, up 0.6% with all Mag7 members higher while Healthcare stocks hammered on headlines related to Medicare pricing. Micron jumped 5% in premarket trading on plans to expand its memory-chip capacity. Big tech has started to wake up, with Apple having its best day in three months yesterday and Meta also strong. Both are due to report later this week. So far, the earnings season has been good but not great, according to strategists at BofA. The dollar hit the lowest level since March 2022, while the yen fluctuated as jitters over intervention lingered, before rising to session highs. The yield curve is twisting steeper as JGB-induced vol subsides; In commodities, precious metals continue to move vertically with gold +1.5% and silver +8%, though PGMs are being sold. Today’s macro focus is on the weekly ADP print, home price data, Consumer Confidence, and regional Fed activity indicators.

In premarket trading, Mag 7 stocks are all higher (Microsoft +0.6%, Apple +1.2%, Tesla +0.4%, Nvidia +0.4%, Alphabet +1.1%, Amazon +0.5%, Meta +0.3%).

• Health insurers including Humana (HUM), UnitedHealth (UNH) and CVS (CVS) slide after the US proposed holding payments to private
• Medicare plans flat next year. Analyst note that investors are disappointed as they expected mid-single digit-percentage rises. Humana -15%, UnitedHealth -16%, CVS -13%.
• UnitedHealth also forecast a decline in 2026 revenue, the first annual contraction in more than three decades
• Agilysys Inc. (AGYS) falls 12% after the hospitality software firm posted fiscal third quarter adjusted earnings per share that fell short of expectations.
• American Airlines Group Inc. (AAL) rises 3% after reporting fourth-quarter results.
• CoreWeave (CRWV) gains 4%, set to extend Monday’s 5.7% rally, after Nvidia invested an additional $2 billion in the cloud computing firm. Following the latest investment announcement, Deutsche Bank raised the recommendation on the stock to buy.
• General Motors Co. (GM) climbs 4% as the company expects profits to grow as much as $2 billion this year and plans to return more of that to shareholders with a higher dividend and buybacks.
• JetBlue Airways Corp. (JBLU) falls 3% after reporting a wider loss than expected last quarter, highlighting challenges in its strategy to win over higher-paying customers.
• Northrop Grumman (NOC) slips 1% after the military contractor gave a forecast for full-year adjusted earnings per share below what analysts had expected.
• Redwire Corp. (RDW) climbs 15% after being awarded a contract for the Missile Defense Agency Scalable Homeland Innovative Enterprise Layered Defense contract.
• RTX Corp. (RTX) gains 3% after the maker of aircraft engines and missiles reported fourth-quarter adjusted earnings per share above what analysts expected.
• Sanmina (SANM) falls 8% after the electronics manufacturing services provider gave a revenue outlook for the second quarter that fell short of the consensus estimate.
• United Parcel Service Inc. (UPS) gains 3% as the courier forecast full-year sales above Wall Street’s expectations as it forges ahead with plans to cut less-profitable package volume out of its network.

Even as stocks are set to make new record highs, there are still numerous reasons to be cautious: Trump and Senate Democrats are hurtling toward another government shutdown, while North Korea fired what appeared to be ballistic missiles off its east coast days after the US released a new defense strategy for the region. While the Greenland drama has died down, there are still some tariff headlines. The EU and India concluded a free-trade agreement after almost two decades of negotiations, part of an effort to deepen economic ties amid Trump’s aggressive trade policies. And Trump threatened to hike tariffs on South Korea to 25%.

Citigroup said that short-covering dominated the latest weekly US large-cap futures flows, while new long risk was added to the Russell 2000. Goldman Sachs strategists, meanwhile, said that a proprietary measure of risk appetite hit the highest level since 2021 last week despite elevated policy and geopolitical uncertainty.

“In the US, while very elevated valuations and the dollar weakness make us more cautious than in Europe, there’s possibly still one or two interest-rate cuts lined up for this year,” said Laurent Chaudeurge, an investment committee member at BDL Capital Management in Paris. “Investors are still chasing the AI trade, and at the moment this is done through semiconductors.”

Precious metals rallied again after gold and silver erased much of their advance in the previous session, with bullion trading near $5,080 an ounce. 

“Gold prices could potentially exceed $7,000 by the end of the year,” said Frederique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia. “The main drivers that were there last year — trade tensions, geopolitical instabilities — are still very much there.”

In earnings, of the 69 S&P 500 companies to have reported so far this earnings season, about 77% have beaten analysts’ forecasts, while nearly 15% have missed. American Airlines, Boeing, General Motors and UPS are among companies scheduled to report before the market open. Texas Instruments is among those due after the close.

In Europe, the Stoxx 600 is up 0.4%, with banks and insurance names leading gains after India and the European Union reached a free trade agreement, with a raft of upbeat earnings also lifting sentiment. Banks and telecoms outperform, while miners and carmakers are the biggest laggards. Here are the biggest movers Tuesday:

• Puma shares rise as much as 21%, before quickly paring gains, after China’s Anta Sports Products agreed to buy a ~29% stake for €1.5 billion, becoming the biggest shareholder in the German company
• Siegfried shares rise as much as 15%, the most in over three years, after the contract development and manufacturing organization serving the pharmaceutical industry bought two new sites in the US and one in Australia
• HSBC shares gain as much as 3.1% in London, to the highest on record, taking the bank’s market capitalization above $300 billion for the first time, as Citigroup (buy) lifts its price target
• Comet shares rise as much as 7.7% to the highest since October 2024 after ZKB said the Swiss technology firm’s share price doesn’t reflect the benefits it will likely see from the upcoming investment cycle in memory chips
• HMS Networks surges as much as 14% after releasing its fourth-quarter results, which DNB Carnegie says came in “better-than-feared”
• Spirax rises as much as 3.7% after analysts at Barclays raised their price target on the maker of pumps and steam management systems. Analysts say the stock has lagged the broader capital goods sector and is now trading at a discount
• Getinge shares drop as much as 7.2%, the most in more than six months, after the Swedish health-care equipment firm reported weaker-than-expected sales and earnings for the fourth quarter
• Amplifon shares drop as much as 3.7%, second-worst performer in the Stoxx 600 Health Care Index on Tuesday morning, after Kepler Cheuvreux cut its earning estimates for the hearing-aid retailer and decreased its price target
• Demant shares slip as much as 3.4%, among the worst performers in the Stoxx 600 Health Care Index on Tuesday morning, after Bank of America decreased its price target on the stock to the lowest among analysts tracked by Bloomberg
• Capgemini shares fall as much as 3.3%, with traders citing a TV report that highlighted a contract between the IT group and the US’s Immigration and Customs Enforcement
• Aker BP shares fall as much as 3.2% after Danske Bank cut its recommendation on the Norwegian oil and gas exploration firm to sell from hold on high valuation and the outlook for commodity prices

Earlier in the session, Asian equities extended gains, lifted by a continued rally in technology stocks in Taiwan and South Korea. The MSCI Asia Pacific Index gained as much as 0.9%, with Samsung, SK Hynix and TSMC offering the biggest boost. South Korea’s Kospi led advances in the region with a nearly 3% gain, as investors bought the dip spurred by President Donald Trump’s latest tariff threat. Markets were mostly in the green, with benchmarks in Hong Kong, Singapore, Malaysia and Thailand rising more than 1%. Traders are awaiting mega-cap tech earnings, which will shape expectations for the sustainability of the AI-driven rally. The Federal Reserve’s rate decision on Wednesday will also hold sway over rate-sensitive stocks.

In FX,the Bloomberg Dollar Spot Index drops to the lowest level since March 2022 as the greenback loses ground against almost all its G-10 peers. USD/JPY is down 0.6% near 153.35 after another bout of choppy price action. The pair dropped ~130 pips in relatively short order before recovering, a move that looked similar to price action observed during the European morning session on Friday. There did not appear to be a obvious catalyst for the move.

In rates, treasuries dip following limited price action during Asia session and London morning, similar to European bonds.10-year yields are 4.23%, about 2bps higher on the day and slightly outperforming bunds and gilts in the sector. Focal points of US include consumer confidence data and a 5-year note auction. 

In commodities, spot silver rises 8% and is closing in on Monday’s record high. US crude futures rise 0.5% to around $61 a barrel.

US economic calendar includes weekly ADP employment change (8:15am), November FHFA house price index and S&P Cotality home prices (9am), January Richmond Fed manufacturing index and consumer confidence (10am) and Dallas Fed services activity (10:30am)

Market Snapshot

• S&P 500 mini +0.3%
• Nasdaq 100 mini +0.6%
• Russell 2000 mini +0.4%
• Stoxx Europe 600 +0.3%
• DAX little changed, CAC 40 little changed
• 10-year Treasury yield +1 basis point at 4.22%
• VIX -0.2 points at 16
• Bloomberg Dollar Index little changed at 1187.28
• euro unchanged at $1.188
• WTI crude +0.3% at $60.83/barrel

Top Overnight News

• President Trump has received multiple U.S. intelligence reports indicating that the Iranian government’s position is weakening, according to several people familiar with the information. The reports signal that the Iranian government’s hold on power is at its weakest point since the shah was overthrown in the 1979 revolution. WSJ
• South Korea scrambled on Tuesday to assure the U.S. it remained committed to implementing a trade deal after U.S. President Donald Trump said he would hike tariffs on autos and other imports from its ally, blaming a delay in enacting the pact agreed last year. RTRS
• India and the European Union said Tuesday they have reached a free-trade agreement that will open a new market for European cars and other products, showing how the world’s middle powers are expanding alliances in response to President Trump’s tariffs. WSJ
• The Trump administration has indicated to Ukraine that US security guarantees are contingent on Kyiv first agreeing a peace deal that would likely involve ceding the Donbas region to Russia. FT
• China’s industrial enterprises had their first annual gain in profits since 2021, as producer deflation showed signs of easing in the wake of government efforts to curb excess competition and cut capacity. Profits climbed 5.3% in December from a year earlier, rising for the first time in three months and recovering from a plunge of more than 13% in November. BBG
• Japan’s bond meltdown sparked speculation that the $1.8 trillion GPIF might shift its portfolio allocation to JGBs while reducing foreign bond holdings, particularly Treasuries. BBG
• Trump said he will increase the tariff rate on South Korean imports from 15% to 25% unless the South Korean National Assembly approved the trade deal struck back in July. NYT
• US natural gas fell, with traders taking profits after prices shot up almost 30% on Monday amid freezing temperatures that pushed up heating demand. BBG
• Republicans and President Trump designed their tax cuts for this moment, creating a refund bonanza that will land in Americans’ bank accounts well ahead of the midterm elections. The annual tax-filing season that opened Monday will produce a cash surge estimated at $100 billion beyond last year’s $329 billion total. WSJ
• Philippines said they conducted joint military exercises with the US in the South China Sea: Al Arabiya.
• US ambassador to China Perdue said in Bloomberg TV interview that China and the US completed most agreements made in Busan, South Korea.

Trade/Tariffs

• US President Trump announces he is “increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%”.
• South Korea Legislature Trade Committee head said that passages of such trade bills usually take six to seven months.
• South Korea’s ruling party said it aims to pass special act on US trade deal by end of February, according to Yonhap Infomax.
• South Korean ruling party official said bills to enact US investment have been introduced and will soon be reviewed.
• South Korean Industry Ministry said Minister is to visit the US soon and meet with Commerce Secretary Lutnick.
• EU Commission begins 2 set of proceeding on Google under the DMA; Google is designated as a core platform service, requiring interoperability with third-party services.
• China reportedly signs deals to buy at least 8 cargoes or approximately 520k tonnes of Canadian Canola following PM Carney’s visit, according to sources.
• Chinese Foreign Minister said UK PM Starmer will visit China between January 28-31st.
• European Commission President von der Leyen said EU and India finalised a trade deal, and called it “the mother of all deals”.
• Japan and the US are reportedly to announce several projects in a first batch under the USD 550bln scheme.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly higher following on from the rebound on Wall Street, but with some of the gains capped ahead of key events and big tech earnings stateside, while participants also digested Trump’s latest tariff salvo against South Korea. ASX 200 rallied on return from the long weekend, with risk appetite also facilitated by M&A-related headlines and improved business sentiment. Nikkei 225 gained despite the initial indecision following recent currency moves and after Services PPI cooled but remained above the BoJ’s price  target. KOSPI sold off at the open following US President Trump’s announcement to raise tariffs on South Korean autos, lumber, pharma, and all other reciprocal tariffs to 25% from 15% due to its legislature not yet enacting the US-Korea trade deal. However, the index then clawed back its losses and more, with the TACO trade likely in play and with South Korean officials attempting to appease Trump. Hang Seng and Shanghai Comp traded somewhat mixed with firm gains in Hong Kong led by Zijin Mining, which is to buy Canada’s Allied Gold for USD 4bln, while the mainland index lagged despite an acceleration in Chinese Industrial Profits and the PBoC’s liquidity efforts.

Top Asian News

• China is to roll out policy document on boosting jobs amid AI impact, according to Xinhua. China will roll out policies to support employment amid AI shift and will boost support for employment among key groups.

European bourses (STOXX 600 +0.3%) are broadly in the green this morning, following a similar theme seen in the APAC session. The DAX 40 (-0.2%) is mildly pressured whilst the FTSE 100 (+0.4%) outperforms slightly, benefitting from strength in Banking names. European sectors are mixed; Banks lead followed closely by Insurance names whilst Basic Resources lags given the broader losses seen in underlying metal prices. In terms of key movers, Puma (+4%) opened higher by 20%, but has since pared much of that move – Jefferies highlighted that ANTA may find it hard to boost Puma’s brand in China, given it already has high presence in the region.

Top European News

• China’s Industry Ministry announces that they have renewed the cooperation MOU regarding green maritime tech and shipbuilding with Denmark.
• India to sign a security and defence partnership with EU today in addition to advancing the free trade agreement at the 16th India-EU Summit, according to The Print.
• UK government plans to tighten scrutiny of Chinese influence in the UK, with PM Starmer seeking to bolster the registration scheme while still deepening Sino-British ties, according to FT.

FX

• G10s were initially broadly lower against the USD, but following recent JPY strength, G10s are now broadly higher. JPY leads the pile (vs initially underperforming), whilst the NZD and CAD hold around the unchanged mark. EUR/USD is mildly lower, and ultimately within a narrow 1.1850-1.1899 range. Earlier, the EU and India announced an FTA, which cut circa EUR 4bln of tariffs on the bloc’s exports.
• Delving into USD/JPY, the pair fell from 154.49 to a session low of 153.16 within a few minutes, but has since pared back towards 153.90. This drove the pair below the prior day’s low, and also below its 100 DMA at 153.61. A move that also weighed on the Dollar index, which fell from 97.10 to a session low of 96.90. Nothing fresh behind that move, with participants ultimately mindful of potential intervention risks, or further rate checks being carried out by the US and/or Japan. Note, the JPY move occurred alongside reports of an explosion near Iran’s Parchin site, a development that potentially influenced the JPY; however, the lack of follow-through to other assets, particularly crude, diminishes this narrative.
• DXY is flat this morning and trades within a 96.90 to 97.28 range, and currently holding within the prior day’s ranges. On the trade front, US President Trump said South Korea had delayed its trade agreement with the US and imposed a 25% tariffs on various Korean sectors – the Korean Industry Minister is to visit the US, and aims to pass a special act on the deal by end-February. The Korean Won was initially pressured at the reopen of trading, but has pared about half of the move. Back to the US, markets await ADP Weekly Average figures, Richmond Fed and Consumer Confidence. Participants also count down to the FOMC tomorrow. Barring any surprises in the data, the DXY may find itself relatively rangebound into the confab.

Fixed Income

• A modestly bearish start for fixed income. Action driven by the mostly constructive risk tone, though there are some pockets of weakness in Equities.
• USTs a tick or two softer in a 111-23 to 111-26+ band, within Monday’s 111-22+ to 111-30 parameters. Aside from supply, which follows a solid 2yr auction last night, the US docket is headlined by ADP.
• Bunds are also lower, with magnitudes slightly larger to losses of 15 ticks at most. No follow through to Bunds or EGBs generally from the morning’s German and Italian supply, taps that were unremarkable but robust enough.
• Gilts gapped lower by 15 ticks, acknowledging the pressure seen in peers overnight from the constructive risk tone. Since, the benchmark has stabilised slightly off lows and trades broadly in line with European benchmarks. The morning’s 2033 UK auction was well received, with a b/c above the 3x mark, though this did not spur any move in Gilts.
• Italy sold EUR 3bln vs exp. EUR 2.5–3bln 2.20% 2028 BTP & EUR 2bln vs exp. EUR 1.5–2bln 1.10% 2031, 2.55% 2056 BTPei.
• UK sold GBP 3.25bln 4.125% 2033 Gilt: b/c 3.18x (prev. 3.04x), average yield 4.296% (prev. 4.191%), tail 0.2bps (prev. 0.3bps).
• Germany sells EUR 4.633bln vs exp. EUR 6bln 2.10% 2028 Schatz: b/c 2.1x, average yield 2.14%, retention 22.8%.
• Germany opens books to sell EUR-denominated 20-year Bund via syndicate; guidance seen +3bps to DBR.
• EIB to sell EUR-denominated 5-year bonds, guidance seen +9bps vs mid-swaps.
• Australia sold AUD 1bln 1.50% June 2031 bonds, b/c 3.46, avg. yield 4.4382%.

Commodities

• Crude benchmarks softened in the earlier hours of the Asia-Pac session. WTI futures fell from USD 60.85/bbl to a trough of USD 60.17/bbl following the report, but have since rebounded slightly as the European session gets underway, but remains just shy of the USD 61/bbl figure. It was recently reported that explosions were heard near Iran’s Parchin nuclear site, but no damage was reported. Some reports suggest it could have been a routine missile test – no move in crude benchmarks on the initial or subsequent reports.
• Nat Gas prices remain elevated, Dutch TTF holds above EUR 40/MWh while Henry Hub futures hover near USD 7/MMBtu, as the Arctic storm provides a short-term shock to gas production.
• Precious metals continue to rise, despite selling off late in the US session, which was seemingly led by profit-taking in silver. Spot XAU found support at USD 5,000/oz and is currently trading just shy of USD 5,100/oz. Spot silver returns above USD 112/oz after a USD 15/oz selloff from its ATH of USD 117.70/oz on Monday.
• 3M LME Copper re-opened lower, as it reacted from the selloff in the precious metals space, but found support at USD 13k/t before oscillating in a USD 13k-13.15k/t band.
• Explosions have reportedly been heard near Iran’s Parchin nuclear site, no damage has been reported – details light, awaiting verification.
• Largest US power grid PJM Interconnection has issued alerts amid storm bolstering energy demand.
• Deutsche Bank expects a quarterly peak of USD 13k/t in Q2, with price moderation onwards as production recovers at several major mines. Threat of US tariffs on refined copper should lead to continued metal flows to the US in H1’26. On aluminium, they assume some moderation from current levels in H2 (2026 Avg. of USD 2.9k/t, peak of USD 3.1k/t in Q2).
• German’s Economic Minister said they will move forward with the wind power tenders to expand capacity.
• Deutsche Bank thinks USD 6,000/oz for spot gold is achievable this year due to a weaker dollar; in alternative scenarios, USD 6,900/oz would be in line with the past 2-year outperformance. An eventual moderation of XAU/XAG ratio may result in higher absolute silver prices.
• ADNOC Gas (ADNOC) CEO said they’re investing more than USD 20bln to increase processing capacity by approximately 30% by 2029.
• DTEK Power Company said the Russian attack damaged an energy facility in Ukraine’s Odesa region.
• UAE’s ADNOC chief revises forecast and sees oil demand above 100mln barrels per day until 2040.
• US President Trump is said to be mulling a cap on California state fuel tax and vowed to drive down the state’s gas prices, according to NY Post.

Geopolitics: Ukraine

• DTEK Power Company said the Russian attack damaged an energy facility in Ukraine’s Odesa region.
• Infrastructure facilities in the Lviv region of western Ukraine were hit by a Russian strike, according to the regional governor.
• US President Trump’s administration has signalled to Ukraine that US security guarantees are contingent on Kyiv first agreeing a peace deal that would likely involve ceding the Donbas region to Russia, according to sources cited by FT.

Geopolitics: Middle East

• Intensive diplomatic efforts are currently underway between Iran and the US across multiple channels, Kann news reported; efforts aimed at reducing the level of “escalation” between parties. However, no significant breakthrough reported at this stage.
• Explosions have reportedly been heard near Iran’s Parchin nuclear site, no damage has been reported – details light, awaiting verification.
• Palestinian media reported Israeli artillery shelling targeting areas in Khan Yunis in the southern Gaza Strip, according to Sky News Arabia.
• The Rafah crossing is estimated to be opened on Wednesday or Thursday, Israeli media reported.
• The explosions heard on the outskirts of Tehran are a routine missile test, Al Hadath reported citing Iranian TV.

Geopolitics: Other

• South Korea’s National Security Office reportedly urges North Korea to immediately stop its launches of ballistic missiles.
• North Korea reportedly fired several ballistic missiles, according to the South Korea military.
• North Korean missile appears to have landed outside of Japan’s Exclusive Economic Zone (EEZ), according to NTV.
• Japan’s Coast Guard sends second notice that a possible North Korean ballistic missile has already fallen.
• Projectile believed to be North Korean-fired ballistic missile has already fallen, according to the Japanese Coast Guard.
• Japanese Coast Guard issues second notice regarding North Korean projectile.
• North Korea fires projectile towards sea, according to Yonhap; details light.
• China said US-Philippines patrol in South China Sea undermines regional peace, while China’s military vows to safeguard sovereignty and maritime rights, uphold regional peace amid US-Philippines patrol.
• US President Trump said he is pleased to report that Venezuela is releasing its political prisoners at a rapid rate, which rate will be increasing over the coming short period of time. Full post: “I am pleased to report that Venezuela is releasing its Political Prisoners at a rapid rate, which rate will be increasing over the coming short period of time. I’d like to thank the leadership of Venezuela for agreeing to this powerful humanitarian gesture! PRESIDENT DONALD J. TRUMP”.

US Event Calendar

• 9:00 am: Nov FHFA House Price Index MoM, est. 0.26%, prior 0.4%
• 9:00 am: Nov S&P Cotality CS 20-City YoY NSA, est. 1.2%, prior 1.31%
• 9:00 am: Nov S&P Cotality CS U.S. HPI YoY NSA, est. 1.3%, prior 1.36%
• 10:00 am: Jan Richmond Fed Manufact. Index, est. -5, prior -7
• 10:00 am: Jan Conf. Board Consumer Confidence, est. 91, prior 89.1

DB’s Jim Reid concludes the overnight wrap

The post-Greenland rally has continued over the last 24 hours, with the S&P 500 (+0.50%) posting a fourth consecutive advance that left the index within half a per cent of its record high. For 2026 standards it was a quiet but solid day for bonds and equities ahead of the FOMC tomorrow and four out of the Mag-7 reporting tomorrow and Thursday. However, we did see some extreme moves in precious metals, with gold prices (+0.43%) closing above $5,000/oz for the first time ever, while silver (+0.57%) gave up almost all of its +14% intra-day gain before rallying again this morning in the Asia session.

That precious metal pullback began shortly after the European close yesterday but it’s proving short-lived, with gold back up +1.23% to $5,070oz as I type, with silver up +5.39% to $109.38/oz. And even though it’s still January, gold had already seen a YTD return of +16% as of yesterday’s close, whilst silver has surged +45% since the start of the year. Silver prices are up over +260% since the start of 2025, although unlike gold they still haven’t exceeded their real terms peak back in 1980. My CoTD yesterday (link here) showed the 235 year history for both gold and silver in real terms. The fascinating thing is that on January 9th this year (ie 2.5 weeks ago) silver in real terms was no higher than it was at the start of 1790! So while I’ve generally been a precious metal bug in recent years given my belief that fiat money is inherently inflationary, over the medium to longer-term precious metals are unlikely to compete with equities, especially from this starting point. It doesn’t mean you shouldn’t hold in a diversified portfolio but some realism of future long-term returns should be factored at these levels.

The volatility in precious metals came as the US dollar lost further ground, with the dollar index (-0.55%) closing less than half a percent from the post-2022 lows it reached back in September. In part, that was driven by the Japanese Yen’s strength, which moved up +0.99% against the US Dollar yesterday, making it the strongest-performing G10 currency. That followed the weekend comments from PM Takaichi that the government was prepared to “take all necessary measures to address speculative and highly abnormal movements”. But on top of that, investors also had to grapple with the prospect of a fresh government shutdown this week, which is now considered a 79% probability on Polymarket, not long after the longest-ever government shutdown back in Q4. Those odds did decline a couple of percent age points from earlier yesterday as we saw some de-escalation of the tensions between the White House and local officials over the recent events in Minnesota. Our economists note that a shutdown could delay the big refund cheques about to go out so there are incentives to compromise and avoid any lasting disruption.

Looking at the equity moves in more detail, as mentioned at the top, the S&P 500 (+0.50%) posted a 4th consecutive advance. The NASDAQ (+0.43%) and Mag-7 (+0.46%) saw similar gains, while blue chip names helped a slight outperformance for the Dow Jones (+0.64%). By contrast, the small cap Russell 2000 (-0.36%) lost ground for a second session running. The index is still up +7.16% YTD compared to a +1.53% gain for the S&P 500, having outperformed the S&P for fourteen consecutive sessions at the start of the year prior to Friday.

Those equity gains were bolstered by another batch of stronger-than-expected US data which added to the buoyancy of risk assets there. For instance, the Dallas Fed’s manufacturing activity hit a six-month high of -1.2 in January (vs. -8.5 expected). And the durable goods orders for November were up +5.3% (vs. +4.0% expected). So that cemented the optimistic view around Q4 growth, with the Atlanta Fed’s GDPNow estimate remaining at an annualised pace of +5.4%.

Earlier in Europe, the performance was a bit more subdued by comparison to the US, with the STOXX 600 only up +0.20%. That followed an underwhelming set of data, with the Ifo’s business climate indicator in Germany remaining at 87.6 in January (vs. 88.2 expected). Plus the expectations component unexpectedly fell to an 8-month low of 89.5 (vs. 90.3 expected). So that dampened sentiment a bit, with investors dialling up the probability of an ECB rate cut this year. And in turn, sovereign bonds rallied across Europe, with yields on 10yr bunds (-3.9bps), OATs (-5.8bps) and BTPs (-4.7bps) all falling back. US Treasuries also rallied a bit, with the 10yr yield (-1.3bps) falling to 4.21%.
Elsewhere, the Canadian dollar was the worst performing of the G10 currencies yesterday after Trump’s weekend threat of 100% tariffs against Canada if it strikes a trade deal with China. In response, Canada’s trade minister LeBlanc said he had reassured US Trade Representative Greer that the recent pact with China was a “narrow arrangement”. We saw further tariff headlines just after the US close, as Trump posted that he was raising tariffs on South Korea from 15% to 25% in response to South Korea’s legislature not yet enacting the trade agreement reached last year. So tariff threats remain an active policy tool for the White House, even if last week’s episode over Greenland shows that the resulting tensions can also decline quickly.

Asian equities are mostly higher this morning. The KOSPI (+2.43%) is higher after dipping at the open following the tariff news. However, sentiment improved when South Korea’s presidential office clarified that it had not received prior notification of any tariff increase plans. Additionally, it was noted that Trade Minister Kim Jung-kwan, who is currently in Canada, would travel to Washington for discussions with US Commerce Secretary Howard Lutnick. In other markets, the CSI (+0.34%), Shanghai Composite (+0.25%), the Nikkei (+0.69%), the ASX (+0.92%) and the Hang Seng (+1.01%) are all higher. S&P 500 (+0.28%) and NASDAQ 100 (+0.55%) futures are both higher. Meanwhile, 10yr USTs are +1.6bps higher standing at 4.23% as we go to print.

The Japanese yen (-0.18%) is experiencing a small decline after two days of gains, with 10 and 30yr JGB yields back up +5.3bps and +4.8bps respectively. In terms of data, China’s industrial profits have returned to growth, ending a two-month contraction with a rise of +5.3% year-on-year in December, significantly surpassing expectations of a -13.1% decline.

Looking at the day ahead, US data releases include the Conference Board’s consumer confidence for January and the Richmond Fed’s manufacturing index for January. Otherwise, central bank speakers include the ECB’s Nagel, and earnings releases include Boeing, UnitedHealth, UPS and General Motors.

Authored by Lance Roberts via RealInvestmentAdvice.com,

The year ahead presents both a bullish and bearish case for investors. Will 2026 be another year of above-average returns, or will it be a year of disappointment? The bulls argue that the key ingredients for a sustained rally are in place. A powerful technology cycle, aggressive corporate spending, and supportive policy measures all point to further gains. Conversely, the bears argue that key drivers are weakening, market leadership is dangerously narrow, and signs of economic strain are becoming increasingly visible beneath the surface.

Following a strong 2025, many investors are now facing a different market regime. Liquidity remains ample, but concerns around valuation, employment pressure, and consumer health are rising. The outcome depends on how long optimism can prevail over reality, and whether the hoped-for gains from artificial intelligence and capital expenditures materialize in time to offset the economic drag from debt, interest rates, and inequality.

Sentiment indeed remains positive, although not universally so. Equity strategists are divided, and bond markets are pricing in both rate cuts and the risk of a recession. Furthermore, while fiscal stimulus could delay any downturn, it also adds to long-term imbalances. The challenge for investors is staying objective. While both the bull and bear cases have merit, the timing of outcomes will be critical, and the reality is that in 2026, both the bullish and bearish cases could be correct. Therefore, the right strategy will be the one that adapts.

Let’s break down both the bullish and bearish scenarios for 2026 and examine the arguments on each side. By assessing the macro and market drivers that shape each outlook, we can lay out clear, practical tactics to prepare your portfolio for either path. Whether the bullish or bearish case prevails in 2026, your edge will come from disciplined risk management, not from guessing the future.

The Bullish Case

The bullish case thesis is built on a few key pillars: a new wave of tech-driven investment, supportive fiscal policy, renewed liquidity, and the resilience of corporate and retail behavior. Combined, these forces have helped push markets higher, and bulls believe they will continue to do so well into 2026.

At the heart of the bull case is the emergence of a transformational technology cycle, anchored by artificial intelligence and infrastructure upgrades. Unlike past hype-driven tech cycles, this one is already producing real capital expenditure. The “Magnificent Seven” mega-cap firms have committed more than $600 billion toward data centers, semiconductors, and AI services. This spending has knock-on effects through software, energy, and industrial supply chains. If productivity gains follow, as many expect, earnings will expand and justify higher valuations.

Fiscal policy is also aligned with growth. Under a Trump-led government, tax cuts and direct payments are expected to stimulate both corporate and consumer sectors. The promise of $2,000 stimulus checks may not sound radical, but it boosts near-term consumption and supports small business revenues. Combined with income tax reductions, these measures provide a tailwind for GDP and investor sentiment. As shown, since the 2022 market correction and recession calls, fiscal stimulus has continued to provide steady support for economic growth.

The monetary backdrop is also shifting in favor of the bulls. Quantitative tightening ended in December 2025, and the Federal Reserve is now engaging in “Quantitative Easing Lite” as they continue to cut interest rates and buy $40 billion in short-dated Treasuries. The stated goal is “reserve management,” which is Fed-speak for ensuring there is ample liquidity in the financial system. As the Federal Reserve cuts rates, credit markets should ease, providing risk assets with a tailwind, and liquidity is expected to increase. This dynamic has historically driven higher equity multiples, particularly in technology and growth names.

Corporate behavior reinforces the trend. Share buyback authorizations are set to hit a new record of more than $1.2 trillion in 2026. While often quoted as a “capital return strategy,” which it isn’t, there is a clear correlation between buybacks and stock market performance. Particularly, since 2000, corporate buybacks have comprised nearly 100% of all net equity purchases.

Notably, the narrative that buybacks represent a confidence in future earnings is false; buybacks are being aggressively used to manipulate earnings to exceed Wall Street estimates. Financial engineering is set to expand further in 2026, providing additional support to operating earnings growth and the bullish case.

Lastly, there’s deregulation coming from the “Big Beautiful Bill,” which will ease capital rules on banks, allowing them to hold more collateral. While this provides a tailwind for the Treasury bond market, it also means more lending capacity will be available. Such lending capacity will find its way into leverage for hedge funds and Wall Street trading desks, as looser constraints will translate into an expansion of risk-taking.

The bullish case hinges on a tight feedback loop: innovation drives capital expenditures, which in turn boost earnings, policy injects liquidity, and investors respond with increased risk exposure. So long as each part holds, the trend can continue.

The Bearish Case

The bearish case begins with a critical point: many of the forces that drove 2025’s rally are either fading or already fully priced in. Notably, whether it is valuations, weakening economic indicators, or building speculative risks, the current market momentum may be blinding market participants to deeper structural cracks. However, let’s dig into a few of the issues.

Yes, one of the most obvious concerns is market concentration. Most of the gains in 2025 came from just 10 companies, on a market capitalization-weighted basis, which the massive shift into passive ETF investing fuels.

“Passive investing has grown from a niche strategy into the dominant force in equity markets. Index funds and ETFs now account for over half of U.S. equity ownership. These vehicles allocate capital based on market capitalization, not valuation, fundamentals, or business quality. As more money flows into these funds, the largest companies receive the lion’s share of new capital. That’s created a powerful feedback loop, where price drives flows, and flows drive price.“

This narrow leadership is inherently unsustainable. If something occurs that causes investor flows into ETFs to reverse, every dollar sold will pull 40% out of those same 10 companies. History shows that when markets rely on a few names for returns, volatility rises, and drawdowns can be severe.

Valuations are another warning sign. Price-to-earnings ratios on the S&P 500 remain near cycle highs. Growth expectations are lofty, and any disappointment could lead to repricing. AI enthusiasm has fueled a massive wave of investment, but much of it is circular, meaning that firms are spending on AI tools to sell AI products. That feedback loop may eventually hit limits, especially if demand softens or costs outpace returns.

Much of the current investment cycle is also debt-funded as companies borrow to invest, buy back shares, and maintain dividend levels. If rates stay elevated or credit conditions tighten, the cost of that debt could overwhelm earnings gains.

The larger economic concern is that the shift in capital allocation toward tech and automation may leave significant portions of the labor force behind. Yes, during the construction of “data centers,” we may see 5000 people employed, but only 500 are needed post-construction to operate the center. The long-term drag on employment growth will exert upward pressure on demand destruction, and we may already be seeing early signs of that.

Of course, this is the entire basis of the “K-shaped economy.“ In the current economy, high-income consumers and asset owners are doing well, but lower-income households are under pressure. As a result, consumption patterns are diverging, as lower-tier consumers reduce their spending. That leaves the top 20% of income earners to drive nearly 50% of current consumption. Already, defaults on auto loans and credit cards are rising, and real wages for many workers remain stagnant, even as housing and essential goods continue to be expensive.

Finally, there’s a growing risk in the credit system, especially in the private markets. Private credit has experienced significant growth in recent years, but the lack of transparency hinders its assessment of systemic risk. Regulators have begun to scrutinize this segment, and default rates in middle-market lending are rising. If defaults spread, the ripple effects could hit banks, hedge funds, and pension portfolios alike.

The bear case is not about imminent collapse. It’s about fragility. Beneath the headline gains lies a market vulnerable to earnings misses, credit tightening, and consumer weakness.

Here is the real catch: in 2026, we could see both the bullish and bearish cases. So, being prepared will be key.

Navigating Whatever Comes Our Way

Investors should approach 2026 as a year where both the bullish and bearish cases are proven correct. In the first half, bullish momentum is likely to continue driving gains. Sentiment remains strong, liquidity is ample, and corporate spending continues to ramp up. AI optimism, fiscal stimulus, and a potential pause in tightening may push indexes higher. However, by the second half, cracks could emerge. Valuation pressures are a concern as the risk of an earnings disappointment increases. Economic inequality puts pressure on future outlooks, particularly for corporate revenues. If that happens, sentiment could shift quickly.

To navigate a split-year effectively, investors need to be tactical. The focus will be on capturing early-year upside without overexposing ourselves to potential second-half risks.

Early 2026: Ride Momentum, but Watch Position Size

• Tilt toward sectors benefiting from capex and liquidity, such as technology, industrials, and energy.

• Focus on high-quality growth stocks with strong earnings and cash flows, not hype.

• Use trailing stop-losses to lock in gains if sentiment reverses.

• Take advantage of short-term dislocations by adding during volatility, but reduce sizing as valuations expand.

• Avoid overconcentration in AI names, even during rallies — dispersion risk rises with crowding.

Mid-to-Late 2026: Shift Toward Defense and Cash Flow Stability

• Gradually rotate into value-oriented sectors such as healthcare, consumer staples, and utilities.

• Increase exposure to dividend-paying companies with strong balance sheets.

• Raise cash levels or short-duration Treasuries to maintain flexibility.

• Allocate selectively to high-quality credit, while reducing exposure to private or high-yield debt.

• Monitor consumer credit, employment trends, and bank earnings for early signs of stress.

Throughout the Year: Stay Disciplined and Objective

• Stick to valuation rules regardless of narrative shifts.

• Maintain a diversified portfolio that can absorb both volatility and rotation.

• Use data, not headlines, to guide allocations.

• Rebalance regularly, primarily if the first half produces substantial gains that overweight specific sectors.

Tactical flexibility, risk awareness, and discipline will matter more in 2026 than simple bullish or bearish positioning. It is a year where potentially both bulls and bears could be wrong. Historically, markets may not follow a straight line, but your management process should.

2026 will test investors in terms of increased volatility as both the bullish and bearish cases have substance. Yes, a new technology cycle creates real economic momentum, but it also brings risks associated with overstretched valuations, debt-driven growth, and growing social inequality. Markets are pricing in perfection, and historically speaking, such rarely ends as expected.

Whether the year brings another rally or a sharp correction, your results will depend on how well you manage risk. Don’t anchor to either narrative; watch the data, follow your signals, and adjust as needed.

Remember, your investment goal isn’t to chase market returns, but rather to survive and prosper over the range of market cycles.

Trade accordingly.