Authored by Dorothy Li via The Epoch Times (emphasis ours),

Texas has warned residents not to plant what it calls “mysterious seeds” that arrived in unsolicited packages from China, as authorities investigate thousands of such reports across the state.

State authorities first became aware of this issue in February last year, when a resident in Clute reported that a package from an unknown sender in China contained “unidentified seeds and a liquid container,” according to the Texas Department of Agriculture.

Since then, officials have collected 1,101 packs of unsolicited seeds delivered to 109 locations across the state, the agency said in a Jan. 5 statement. The most recent packet was collected on Dec. 29.

“At a glance, this might seem like a small problem, but this is serious business,” Texas Agriculture Commissioner Sid Miller said in the statement.

“The possible introduction of an invasive species to the state via these seeds poses real risks to Texas families and the agriculture industry.”

The issue was not limited to Texas. Officials in Ohio, New Mexico, and Alabama issued similar advisories last year after families reported receiving unsolicited packages of unknown seeds at their doorsteps.

The Alabama Department of Agriculture and Industries, in a March statement, said that the seeds sent to Alabamians were identified as tomato and onion varieties. While no harmful compounds were detected in them, state officials cautioned that such practices could still be illegal or violate regulations without proper authorization.

“We urge all residents to be on the lookout for similar packages,” Alabama Commissioner of Agriculture and Industries Rick Pate said in the statement. “These seeds may be invasive to Alabama plants or be harmful to livestock.”

This wasn’t the first time U.S. households received packages of unidentified seeds they hadn’t ordered. In 2020, officials from all 50 states issued warnings about such unsolicited seeds. Many of these packages were processed by China Post, the Chinese communist regime’s official postal service.

At the time, U.S. state officials warned residents that seeds arriving by mail could introduce invasive species into local ecosystems, while some Americans expressed concern that they could carry diseases amid the COVID-19 pandemic.

Individuals in European Union member states, the UK, Canada, and some in the Indo-Pacific, including Australia and Taiwan, also reported receiving similar unsolicited packets of seeds at the time, many of them from China.

An investigation by the U.S. Department of Agriculture determined that these seeds were likely part of a global “brushing scam.” By sending unsolicited, low-value items to residential addresses, sellers could post false-positive reviews under the name of a “verified” owner, thereby boosting sales, according to investigators.

As new reports continued to emerge, officials in Texas said they’re collaborating with the federal authorities to collect, test, and dispose of these seed packs safely.

Residents who received unsolicited packages are urged to contact their local agriculture departments immediately and are advised not to open the package, plant the unidentified seeds, or discard them in regular trash.

“Whether it’s part of an ongoing scam or something more sinister, we are determined to protect Texans,” Miller said in the Jan. 5 statement.

“Unsolicited seeds coming into our country are a risk to American agriculture, our environment, and public safety. Texas isn’t going to take chances when it comes to protecting our people and our food supply.”

A Harvard University dean has been removed after a student-run news outlet, the Yard Report, dug up old social media posts slamming whiteness, the cops, and advocating for looting and rioting. 

Gregory Davis, the former Dunster House Allston Burr resident dean, wrote the posts in question between 2019 and 2024 – mostly on X. He became dean of the dormitory in 2024.

“It’s almost like Whiteness is a self-destructive ideology that annihilates everyone around it. By design,” he said in 2019.

Meanwhile in 2020 amid the George Floyd riots, Davis slammed the police, posting “You should ask your cop friends to resign since they’re racist and evil,” he said on X. 

Davis then defended the ‘mostly peaceful’ riots that ensued, writing “Something to keep in mind: rioting and looting are parts of democracy just like voting and marching,” adding “The people WILL be heard.”

And when President Trump got COVID, Davis wrote “If he dies, he dies.”

When confronted about the posts, Davis wrote to Dunster House residents – saying: 

“Recently, some media organizations have inquired regarding comments that I made on my personal social media accounts prior to my start in the Resident Dean role,” adding “These posts do not reflect my current thinking or beliefs. I deeply appreciate the responsibility inherent in the Resident Dean role and I value the trust that individuals have placed in me. I regret if my statements have any negative impact on the Dunster community.”

“Since becoming the Allston Burr Resident Dean, I have worked hard to ensure that Dunster House is a welcoming, warm and supportive space for all of its member,” the message continued. “That continues to be the guiding force of my work today. As events outside of Harvard have affected our House and me personally, my commitment to each of you, our students, has not wavered. In my role, I have enjoyed the opportunity to work collaboratively with members of HUPD and other colleagues across campus. I respect the work they do to support our community.”

How are we feeling about this? Discuss… 

Authored by Evgenia Filimianova via The Epoch Times (emphasis ours),

The Lebanese armed forces said on Jan. 8 that their plan to restrict weapons to official security agencies had entered an “advanced stage,” after expanding their presence across southern Lebanon.

The army said that it has secured vital areas and extended control over territories under its authority in the South Litani sector, excluding areas that remain under Israeli occupation.

The announcement follows the Lebanese government’s August 2025 decision to authorize the army to prepare a plan to limit all weapons in the country to six recognized security agencies by the end of 2025. That decision came after a visit by U.S. envoy Tom Barrack, who pressed Lebanese officials to consolidate state authority over all armed entities.

Military activity between Israel and Lebanon has persisted despite a cease-fire agreement reached in 2024 and mediated by the United States and France.

Under that agreement, Lebanon committed to expanding its army’s control over southern areas and restricting the operations of the terrorist group Hezbollah near the border with Israel.

Israel continues to hold positions in southern Lebanon and has carried out repeated airstrikes that it says are aimed at preventing Hezbollah from rearming and planning new attacks.

Israeli Prime Minister Benjamin Netanyahu’s office said in a statement on Jan. 8 that the U.S.-brokered cease-fire agreement “states clearly, Hezbollah must be fully disarmed.”

The statement added that this was “imperative for Israel’s security and Lebanon’s future.”

While welcoming Lebanese efforts, Netanyahu’s office described them as “an encouraging beginning, but they are far from sufficient,” citing what it described as Hezbollah’s attempts to rebuild its “terror infrastructure with Iranian support.”

Lebanese Leadership Backs Army

Lebanese President Joseph Aoun, who met Prime Minister Nawaf Salam on Jan. 8 just before convening a Cabinet session at Baabda Palace in Beirut, publicly endorsed the army’s statement.

“I also emphasize that the deployment of the Lebanese armed forces south of the Litani River falls under a comprehensive national decision grounded in the Constitution, state resolutions, and relevant international commitments,” Aoun said in a statement issued by the presidency on Jan. 8.

He said the move was aimed at “consolidating the exclusivity of arms in the hands of the state.”

Aoun, Salam, and Lebanese army commander General Joseph Haykal met with U.N. Undersecretary-General for Peace Operations Jean-Pierre Lacroix on Jan. 7.

The talks focused on the U.N. Interim Force in Lebanon’s (UNIFIL’s) support for Lebanese authorities in sustaining the cessation of hostilities and advancing U.N. Security Council Resolution 1701, which bars armed groups from operating near the border with Israel.

The Lebanese army said on Jan. 8 that it continues to coordinate closely with UNIFIL and the U.S.-backed cease-fire monitoring mechanism. It thanked the U.S. and French teams involved in monitoring the truce, as well as the countries contributing troops to the mission.

Ongoing Operations and Israeli Strikes

Operations in the South Litani sector remain ongoing until unexploded ordnance and tunnels are cleared, the Lebanese army also said in its statement. These steps, it added, were necessary to consolidate control and prevent armed groups from rebuilding their capabilities.

Lebanese armed forces condemned continued Israeli attacks on Lebanese territory, saying they negatively impact their ability to complete the restoration of control over southern areas.

Israel carried out airstrikes on multiple targets in Lebanon on Jan. 5 that it said were linked to Hezbollah and Hamas, according to the Israeli military.

On Jan. 6, the Israel Defense Forces said it struck weapons storage facilities and military structures used by Hezbollah in attacks against Israeli troops and territory. The military also said it hit Hamas weapons production sites in southern Lebanon that it described as critical to the group’s military buildup.

Aoun condemned the strikes on Jan. 6, saying they had hit towns in the Bekaa Valley and southern Lebanon, reaching as far north as Sidon.

Authored by Ross Pomeroy via RealClearScience,

Dr. Benjamin Spock is remembered as one of the foremost authorities on raising children. His influential and prolific books, first published in the mid-1940s, advised parents to be more affectionate and flexible with their young kids, countering what was then the entrenched norm of being rigid and aloof.

Though most parents today are probably more familiar with a different, pointy-eared Spock, in his heyday during the 1950s and 60s, Dr. Spock was one of the most recognizable and respected public figures in the world. When he spoke or wrote, people – and particularly parents – listened intently.

Unfortunately, much of Spock’s guidance wasn’t grounded in scientific research, but rather his extensive clinical experience. While this generally produced helpful, or at least harmless, advice, in one major instance, it resulted in grave harm. 

Starting with the 1958 edition of his bestselling tome, The Common Sense Book of Baby and Child Care, Spock recommended to parents that they put their babies to sleep on their front, rather than on their backs. “If he vomits, he’s more likely to choke on the vomitus,” Spock reasoned. “Also, he tends to keep his head turned to the same side—usually toward the centre of the room. This may flatten the side of his head.”

At the time, there was an active debate about whether front-sleeping or back-sleeping was healthier for infants, so Spock’s recommendation – which we now know to be dead wrong – could be excused. However, in the dozen years since Spock urged prone-sleeping, scientific studies made clear that the practice markedly raised the risk of sudden infant death syndrome (SIDS) compared to back sleeping. A 2005 historical analysis conducted by researchers with the Centre for Evidence-based Child Health in London showed that by 1970, the scientific literature indicated that front-sleeping tripled the risk of SIDS compared to back-sleeping.

Spock, however, neglected to consult this gathered scientific evidence and didn’t update his book Baby and Child Care to reflect the new reality for some time. As Marit L. Bovbjerg, an Associate Professor at Oregon State University focusing on maternity care in the U.S., wrote in 2011:

“Dr. Spock’s book was not the only popular book to advocate prone sleeping at the time, but further revisions continued to make the recommendation nine years after solid epidemiological evidence had accumulated regarding the increased risk of SIDS for babies being placed on their stomachs for sleep.”

Spock’s book was by far and away the most read parenting guide to advocate prone sleeping. According to the New York Times, for a half-century since its publication, Baby and Child Care was the second-best-selling book, behind only the Bible.

The researchers behind the aforementioned 2005 scientific review estimated that the collective failure, led by Dr. Spock, to alter the advice on safe-sleep for infants in a timely fashion, resulted in an extra 10,000 infant deaths in the UK and at least 50,000 in Europe, the USA, and Australasia after 1970.

With great influence comes great responsibility. In failing to change his mind on infant safe-sleep in the face of overwhelming scientific evidence, Dr. Spock showed that he was not worthy of the standing he garnered and the trust he earned from the world’s parents.

Authored by Matthew Vadum via The Epoch Times (emphasis ours),

The U.S. Department of Justice (DOJ) said on Jan. 6 that it is suing Arizona and Connecticut for allegedly failing to turn over their full voter registration rolls for federal inspection.

The two new federal lawsuits, which say the two states are hindering federal oversight that is intended to stop election fraud and ensure voter lists accuracy, bring the department’s nationwide total to 23 states plus the District of Columbia.

Before the most recent lawsuits were filed, the DOJ on Dec. 18, 2025, filed lawsuits against Georgia, Illinois, Wisconsin, and the District of Columbia, alleging they failed to produce voter registration lists upon request. Earlier the same month, the DOJ filed similar lawsuits against Delaware, Maryland, New Mexico, Rhode Island, Vermont, and Washington state, also for allegedly not producing the lists upon request.

U.S. Attorney General Pamela Bondi said on Jan. 6 that the DOJ will continue to file lawsuits “to protect American elections.”

“Accurate voter rolls are the foundation of election integrity, and any state that fails to meet this basic obligation of transparency can expect to see us in court,” Bondi said in a statement.

Assistant U.S. Attorney General Harmeet Dhillon of the DOJ’s Civil Rights Division added the department “is committed to safeguarding fair and free elections, and will hold states accountable when they refuse to respect our federal elections laws.”

The lawsuits state that the U.S. attorney general is responsible for enforcing the National Voter Registration Act and the Help America Vote Act, which Congress passed to make sure states have effective voter registration and voter list maintenance programs. The U.S. attorney general also enforces the Civil Rights Act of 1960, which allows her to demand that states produce statewide voter registration lists.

The Arizona lawsuit states that Bondi asked Arizona Secretary of State Adrian Fontes in July 2025 to produce a copy of his state’s voter registration list within 14 days.

Fontes responded, saying he could not comply with the 14-day deadline, and Bondi gave him an extension to September 2025. Two weeks before the new deadline, Fontes informed Bondi that he could not comply because doing so would violate state and federal privacy laws, according to the lawsuit.

The lawsuit alleges Fontes’s refusal to produce the requested records violates the information-production provisions of the Civil Rights Act. The lawsuit asks the court to order Fontes to produce the records.

Arizona Attorney General Kris Mayes told The Epoch Times that “Arizonans’ private voter registration information is not up for grabs.”

“Both state and federal law prohibit the unrestricted release of Arizona’s complete voter registration database to the DOJ,” she said. “My office will continue to work with the Secretary of State to defend the private data of Arizona voters and safeguard our independent election systems.”

Fontes said in a statement on Dec. 19, 2025, that he declined to hand over the voter rolls to the DOJ out of voter privacy concerns.

“Arizona voters also have important privacy rights that cannot be infringed because they choose to exercise their constitutionally protected voting rights,” he said.

The Connecticut lawsuit states that in August 2025 Bondi asked Secretary of State Stephanie Thomas to produce the state’s voter registration list. Thomas handed over some of the requested data and said more data would follow, but she did not send more information.

Bondi sent a letter in December 2025 demanding the list. Later that month, Thomas responded, saying that she could not comply because Connecticut law forbids her from releasing the information sought.

The lawsuit says that Thomas’s failure to hand over the list violates the information-production provisions of the Civil Rights Act, and asks the court to compel Thomas to do so.

Thomas said she was not surprised that Connecticut has been “added to the long list of states being sued on these grounds.”

She told The Epoch Times that as secretary of state, her “foremost responsibility” is to Connecticut voters “who entrust the state and their local election officials with sensitive data so they can participate in our representative democracy without fear that their information will be misused or exposed.”

Connecticut Attorney General William Tong said that Connecticut obeys federal laws and that he was disappointed that his state is being sued.

“We tried to work cooperatively with DOJ to understand the basis for their request for our voters’ sensitive personal information. Rather than communicating productively with us, they rushed to sue,” Tong told The Epoch Times.

Going all the back to November 7, when Japanese Prime Minister Sanae Takaichi first provoked outrage in China by suggesting that Japanese Defense Forces could militarily defend Taiwan in the event of a Chinese invasion, there’s been a steady spiraling in relations between Tokyo and Beijing. First, China’s punitive measures took place merely on the tourism, culture, and diplomatic fronts – also with some limited economic measures such as halting its exports of seafood from Japan. 

New action was also unveiled at not more than a weekly pace, or even monthly – but now after it’s been several months with no retraction and formal apology by Takaichi (demanded by Beijing), the screws are tightening on a daily basis. After this week barring Japan from dual use items (anything with military-civilian application), China has begun depriving Japan of rare earth minerals and rare earth magnets – which could have immediate impact on Japanese companies involved in components for global chip makers, and also hitting the defense and auto sectors. It will be felt by Japanese companies involved in advanced electronics, aviation components, drones and nuclear-related tech.

This sends a resoundingly clear signal to the US as well, after Beijing already moved to cut off rare-earth exports to American companies last year – and Trump blinked first by backing off his trade war with China, and now Beijing is ready and willing to apply the same leverage to close US regional ally Japan.

Referencing Tuesday’s move to ban exports to Japan of dual-use goods, The Wall Street Journal is confirming Thursday:

Then, in the days since, China began restricting exports to Japanese companies of scarce and expensive “heavy” rare earths, as well as the powerful magnets containing them, according to two exporters in China.

Another person familiar with Chinese government decisions said the review of applications for export licenses to Japan has been halted. The licensing restrictions extend across Japanese industry, the people said, and don’t only target Japanese defense companies. 

Japan is the world’s second-largest producer of rare-earth magnets after China, but is hugely dependent on Chinese raw materials for their manufacture. According to 2024 data, Japan relied on China for 63% of its rare earth imports.

For well over a decade Japan has struggled reduce its dependence on China, following significant supply disruptions related to clashing with China over contested islands – maritime and fishing disputes which are still ongoing. While at the time Beijing denied it was singling out Japan, this latest spiral in ties and punitive measures have been made much clearer. Beijing is now overt about these muscular trade measures as being due to Takaichi’s “erroneous” comments which constitutes a “crude interference in China’s internal affairs”.

What’s bad for Tokyo has been perhaps an immediate or short-term benefit for American companies, ironically enough, as WSJ observes:

Since then, some American companies say they have had an easier time getting licenses. Rare-earth magnet exports to Japan had also returned to normal levels even before the October deal between the U.S. and China, according to Chinese trade data.

If maintained, Chinese restrictions on rare earths could cause the equivalent of about $17 billion in economic losses over the course of the year, according to Nomura Research Institute.

The publication further cites rare-earths analyst David S. Abraham, who described that industrial disruptions in Japan would be felt across global supply chains. “That will filter down,” he assured.

China has announced new export restrictions targeting Japan—
including a ban on rare earth exports.

In response, Minister Onoda stated:

“We are developing rare-earth technologies,
magnets that do not rely on rare earths,
and heat-resistant superalloys that use fewer rare… pic.twitter.com/jUXp2xg6Jy

— Rutaso.Japan🇯🇵🐶 (@rutasosabu) January 7, 2026

Masaaki Kanai, secretary general of the Japanese Foreign Ministry’s Asian and Oceanian Affairs Bureau, has “strongly protested and demanded the withdrawal of these measures.” And Japan’s Chief Cabinet Secretary Minoru Kihara said, “A measure such as this, targeting only our country, differs significantly from international practice, is absolutely unacceptable and deeply regrettable” – among other condemnations out of Tokyo.

Authored by Michael Lebowitz via RealInvestmentAdevice.com,

It’s that time of year when every Wall Street analyst posts their forecast for where the S&P 500 will close at the end of 2026. This year, as in every other, Wall Street expects the S&P 500 to post positive returns. As shown below, Bank of America is the most cautious, with a 3% gain, while Deutsche Bank and Capital Economics are the most bullish. On average, the analysts shown below forecast a 10.5% return in 2026, below last year’s 16% but slightly above the longer-term average.

Like Wall Street, we could spitball a 2026 price forecast for the S&P 500, but why? It’s a fruitless endeavor. No one has enough insight into the countless events that will unfold in 2026 and their potential economic, fiscal, and monetary consequences to make a meaningful forecast. Furthermore, even if we had a crystal ball that predicted how the year’s events would unfold, gauging their impact on investor sentiment and, ultimately, on markets would be nearly impossible. 

Instead of offering a forecast for 2026, let us consider the potential events and factors that could influence investor sentiment and move markets this year. Inevitably, no matter how many events we and others are considering today, there will be market-moving ones that are not on anyone’s radar currently.

Perspective Matters

Before we focus on potential events in 2026, let’s review historical returns since 1970 to gain perspective.

The graph below shows annual returns (gold diamonds) and the range between the minimum and maximum returns for each respective year. The average annual return since 1970 has been 9.43%, with an average yearly drawdown of 11.12%. Moreover, the average annual maximum gain was 16.35%, approximately 7% higher than the average closing price. Thus, the market, on average, closes at the 65th percentile of its range.

The second graph below is courtesy of one of our clients. His graph helps us assess whether we can expect a fourth consecutive year of positive returns. As shown, eight straight years is the record, with two four- and five-year winning streaks.

The odds are stacked against positive. Since 1928, there have only been five times that a four-year gains streak occurred.

Beware Of Valuations

Valuations are stretched! The first graphic below, courtesy of Goldman Sachs, shows that 12-month forward P/E ratios are significantly elevated globally. The second from Crestmont indicates that the average of four widely used valuation techniques is at a record high.

Current valuations should serve as a constant reminder throughout 2026 to avoid complacency. While caution may be rewarded this year, we must also bear in mind that valuations make poor short-term timing tools.

The first graph below shows the extent to which the CAPE10 valuation at 39 is stretched. Based on historical correlations between valuations and returns, we should expect negative real returns over the next 10 years. However, the second graph indicates that returns of +/- 25% are possible in 2026.

2026 may be the year that valuations normalize, thus resulting in a down year. Even if that is the case, we must recognize that market valuations and those of individual stocks and sectors can differ significantly.  Some sectors are less expensive than others and may perform better in a down market. For example, the graph below, courtesy of Dimensional, shows that large-cap price-to-book ratios are at record highs, whereas those for small-cap value companies are at the midpoint of their range over the last 25 years.

Might 2026 be the year where value comes back into vogue, or will valuations, especially for the largest of stocks, get even more extreme?

QE And Liquidity

Last December, the Fed reintroduced QE under the guise of Reserve Management Purchases (RMP). The action is intended to supply the market with liquidity. Per the Fed’s Statement Regarding RMP:

The Desk plans to release the first schedule on December 11, 2025, with a total amount of RMPs of approximately $40 billion in Treasury bills; purchases will start on December 12, 2025. The Desk anticipates that the pace of RMPs will remain elevated for a few months to offset expected large increases in non-reserve liabilities in April. After that, the pace of total purchases will likely be significantly reduced in line with expected seasonal patterns in Federal Reserve liabilities.

Simply put, liquidity in the banking system was becoming scarce as reserves declined. To avoid worsening liquidity conditions, the Federal Reserve is injecting reserves into the banking system.

The question for investors is whether the $40 billion in monthly reserves, intended to last “a few months,” is sufficient to offset the expected decline in liquidity over that period.

If it’s not, then the markets may come under pressure as liquidity wanes.  

Conversely, if you think the Federal Reserve’s actions will boost reserves meaningfully, our article “QE Is Back” may offer a practical trading blueprint for the first few months of 2026. The article identifies which stock market indexes, sectors, and factors are strongly correlated with bank reserves. The table below, from the article, indicates that transportation, materials, consumer-discretionary, financial, and technology stocks could benefit most from a reserve increase. Conversely, the utilities, energy, and staple sectors offer little correlation.

Will QE once again prove to be a driving force for the stock market?

Powell Exits

Jerome Powell’s term as Fed Chair ends in May 2026, and Trump’s appointment of a new Chair is being closely watched. The new Chair’s stance on the trade-offs between inflation and labor-market weakness could significantly alter investor sentiment.

The two front-runners for Powell’s chair are Kevin Warsh and Kevin Hassett. We compared the two potential nominees in our Daily Commentary on December 17th–

Warsh is viewed as more hawkish than Hassett. He has frequently mentioned the inflation risk associated with dovish monetary policy. Moreover, as we noted above, he has expressed skepticism about aggressive QE. Conversely, Hassett, viewed as dovish, actively advocates deeper rate cuts to stimulate growth.

Kevin Warsh adheres to a Milton Friedman-style logic: inflation is a function of excessive money-supply growth. Based on recent speeches, Hassett is focused on growth-oriented easing and is not overly concerned with inflation.

Hassett likely appeals more to President Trump because of his dovish views. However, Kevin Warsh lends greater credibility to the Federal Reserve’s promise to reduce inflation. Additionally, Warsh is more likely to improve sentiment in the bond market, thereby lowering long-term yields.

Initially, the bond market is likely to be more affected than the stock market by President Trump’s decision regarding the next Federal Reserve chair. However, said changes in interest rates could readily impact the stock market.

To assess potential market reaction, we should monitor changes in inflation expectations. As noted below, 1-year inflation expectations are falling rapidly, despite the more dovish Kevin Hassett expected to replace Powell. Thus, at the moment, the market is not expressing concerns about a dovish Fed Chair.

Will it be the dovish Kevin Hassett or the hawkish Kevin Warsh running the Federal Reserve in 2026?

Midterm Elections and Fiscal Policy

The November midterm elections will determine the balance of power in the U.S. Congress. As shown below, the Polymarket betting site assigns a 79% probability to the Democrats taking control of the House and a 66% chance that the Republicans will maintain Senate leadership.

If one or both houses of Congress change hands, the administration will find it much more challenging to pursue its domestic and foreign policy objectives. From a market perspective, this may limit the President’s ability to manage fiscal spending and further change the tax code. Accordingly, changes in Congressional power and budgetary implications could significantly affect growth and inflation, as well as individual stocks and sectors.

As the year progresses, investors will likely pay closer attention to the betting markets and traditional polls for insight into the midterm elections.

While investors wait for the elections, it is worth noting that Americans will get a “gigantic” tax refund next year. The tax provisions in the Big Beautiful Bill should, in practice, result in larger-than-normal refunds this year. Per Treasury Secretary Scott Bessent via FoxBusiness:

I can see that we’re gonna have a gigantic refund year in the first quarter because working Americans did not change their withholdings,” Bessent told the “All-In Podcast” hosts. “I think households could see, depending on the number of workers, $1,000- $2,000 refunds.”

The AI Infrastructure Boom and Productivity Gains

The massive capital expenditure (CapEx) cycle for AI infrastructure, including data centers, the power grid, and supercomputing, is expected to continue into 2026 and beyond. As we saw in 2025, the spending will boost GDP growth and profits for many companies involved. However, toward the end of 2025, investors began to question whether some companies were spending and borrowing more than they would ever recoup.

We pose a few questions to help you consider what 2026 may bring.

• Will the AI-led bull market continue to charge ahead like last year on the belief and hope that massive CapEx spending will translate into enormous profits?

• Will the rapidly growing debt requirements needed to fund CapEx be a drag on the market?

• Given that technological change is occurring rapidly, might there be a new development to shake up the AI industry? Think about Deep Seek roiling the market last January.

• Might investors start to question whether the productivity benefits of AI are worth the cost?

• Is AI in a bubble like the dotcom bubble? If so, will 2026 be the year it surges, as in 1999, or the year it peaks, as in 2000?  

Tariffs and Trade

The Supreme Court has heard oral arguments in the tariff legality case and will announce its findings on January 9, 2026. According to Polymarket, the odds of a favorable ruling for Donald Trump are low at 29%.

If the Supreme Court strikes down the tariffs, the economic impact could be substantial. To begin with, the prices of some goods that are no longer subject to tariffs may fall, and trade flows will adjust accordingly.

However, it’s not wise to go down that road too far. The President reportedly has a Plan B ready. Tariffs or some other similar measure will most certainly be implemented if the Supreme Court rules against tariffs. But these measures may also be subject to judicial review. 

Whatever the final trade policy is, there will be supply chain realignments that could significantly affect import costs, profit margins, and global trade patterns.

The question is not the Supreme Court ruling itself, but the mechanism the administration will ultimately use to implement tariffs, taxes, or trade restrictions. Moreover, we should consider how investors will handle a period of uncertainty.

Miscellaneous

Geopolitical Hotspots: Ongoing conflicts and tensions in Ukraine, Venezuela, and the Middle East, along with increased provocations between the US, China, Iran, and Russia, pose persistent headline risks. Many of these tensions can cause sudden changes in energy prices and economic activity, and disrupt supply chains and consumer sentiment.

Debt Levels and Sovereign Risk: 2025 began with higher bond yields, driven by the “bond vigilantes” and their grave concerns about the U.S. fiscal situation.  With the U.S. government continuing to run massive fiscal deficits, the ability to finance these debts and manage interest costs will remain a concern. Renewed signs of bond market stress or investor concerns about a government’s ability to meet its debt obligations could trigger significant volatility, particularly in the U.S. Treasury market. Such volatility would quickly filter through to the stock markets. Will the bond vigilantes regain their voice?

Bear in mind, there is a risk of another government shutdown by the end of the month.

Monetary Policy: The ECB is considering raising interest rates. Might we find that the Fed reaches a similar conclusion later in 2026? Or might rates and inflation be heading much lower? As shown below, the Fed Funds futures market forecasts only one rate cut in 2026. The Fed has enough trouble predicting the next three to six months; what makes anyone think Wall Street is any better?

Yen Carry Trade: A depreciating yen strengthens the carry trade, supporting many US financial assets. At the same time, a depreciating yen heightens affordability issues and the popularity of its political leaders. This is primarily because Japan is heavily dependent on imports of energy and raw materials, whose prices rise when the yen depreciates.

Given domestic economic and political pressures, along with US persuasion, we expect the Japanese government to take steps to strengthen the yen. If any upward adjustment is done gradually, the impact on financial markets should be minimal. However, if it occurs suddenly, such as in August 2024, financial market volatility could spike.

Summary

There are 14 questions in this article, and we could easily have doubled or tripled that number. There are far more questions than answers about what the new year may hold. More importantly, there will be additional events that are not known today.  

Thus, instead of forecasting where the S&P will close in 2026 with zero confidence, we would rather take the market and news as they come. We suspect that QE will provide initial support to the market through the winter. Valuations should keep us on guard throughout the year. Many of the other items we discuss pose a constant risk and or the potential for better returns throughout the year.

As you consider your forecast for 2026, we leave you with a thought to ponder from Arthur Zeikel:

Most investors tend to cling to the course to which they are currently committed, especially at turning points.

Another foreign leader and strident Trump critic has had a rapid about-face after coming under ‘threat’. And this in turn has caused President Trump to cool his own condemnations and rhetoric. Colombia’s president Gustavo Petro has long been among the fiercest opponents of the US President’s Venezuela policy, and especially his weekend military action which ousted Nicolás Maduro. They’ve frequently clashed over several months of the American military build-up in the southern Caribbean, with Petro being the butt plenty of colorful Truth Social posts by Trump, including labeling Petro “sick”.

Suddenly the Colombian leader has made nice after Trump went so far as to hint that his country could be among those facing potential anti-narco trafficking military action, with the NY Times now reporting, “The two leaders spoke for about an hour late Wednesday afternoon in a call facilitated by the US Embassy in Colombia, according to the Colombian presidency.” It noted that “A US official also said the call lasted about an hour, which is unusually long for a call between Mr. Trump and another leader.” The Colombian side had a similarly positive assessment, with the Foreign Ministry calling it a “good meeting”.

And it hasn’t taken long, following Trump saying he appreciates Petro’s “call and tone” – for him to even get a White House invite. Trump said Petro had “called to explain the situation of drugs and other disagreements that we have had.”

Now a future meeting to further advance relations and cooperation is being arranged by Secretary of State Marco Rubio and Colombia’s foreign minister, Trump confirmed, which he said he is looking forward to. “I appreciated his call and tone, and look forward to meeting him in the near future,” Trump said in a fresh Truth Social post. The meeting will take place at the White House.

A mere days ago Trump had denounced Petro as heading up a “very sick” cartel infested country which he accused of “making cocaine and selling it to the United States” – and then this not very veiled threat and warning: “He’s not going to be doing it very long, let me tell you.” Trump even ominously responded to a reporter’s question about potential military intervention in Colombia with, “Sounds good to me.” He earlier said Petro must “watch his ass”.

Petro himself is a former member of a guerrilla group and Colombia’s first leftist leader in decades but he has sworn to “never to touch a weapon again” – but “for the homeland I would take up arms that I don’t want.”

Quick change of heart…

El Presidente de Columbia, Gustavo Petro, had a change of heart?! https://t.co/kOKbeALmkZ

— Pat Gray Unleashed (@PatUnleashed) January 7, 2026

Now, Petro is pledging cooperation and blaming the cartels for causing the severely strained relations between Bogota and Washington. Singing a different tune amid the ratcheting Trump pressure he had said as follows:

“I talked about two things: Venezuela and the issue of drug trafficking,” he told the crowd in downtown Bogotá, where demonstrators had just minutes earlier chanted slogans against the United States at Petro’s behest. Petro explained to the audience that Colombian politicians allegedly linked to narco-trafficking misled the U.S. president about Petro’s record to turn Trump against him.

“Those (people) are responsible for this crisis — let’s call it diplomatic for now, verbal for now — that has erupted between the U.S. and Colombia,” he added. 

Trump had earlier this week issued veiled warnings of muscular action against Cuba and Mexico as well, with Mexico likely being the next to try and mend ties with this unpredictable White House.

Top on our market radar this morning: a Bloomberg News report says China is preparing to approve limited imports of Nvidia’s H200 AI chips as soon as this quarter, restoring partial access to a massive market after years of restrictions.

If Bloomberg’s report proves accurate, you can imagine how Jensen Huang is feeling right now.

Sources told the outlet that H200 approval would be limited to select commercial uses. The chip, which is used to train large AI models, would remain barred from the military, sensitive government agencies, critical infrastructure, and state-owned enterprises, with some limited exceptions.

For context, the H200 is an older-generation Hopper chip that the Trump administration has permitted for export to China, unlike the newer Blackwell or future Rubin processors, which remain restricted on national security grounds.

Last week, Reuters reported that major Chinese tech firms, including Alibaba Group and ByteDance, have signaled interest in the H200 as they race to compete with Western tech companies.

Reuters added that Nvidia plans to deliver roughly 5,000 to 10,000 chip modules, equivalent to about 40,000 to 80,000 H200 AI chips, to China in the coming months.

Beijing’s move to reopen the Chinese market to limited H200 access would still represent a major win for Nvidia. Huang has recently estimated that China’s AI chip market could reach $50 billion within just a few years.

Bloomberg also cited comments from Nvidia executives at the Consumer Electronics Show earlier this week:

Nvidia executives said there is strong demand from Chinese customers for the H200, but noted that the company has not spoken directly with Beijing about approval and does not know when China may greenlight the sale. They added that license applications have been submitted to Washington and that final approval details from the US government are being finalized.

Related:

• Nvidia Prepares to Ship H200 AI Chips to China by Mid-February

• ByteDance Plans $14 Billion Nvidia H200 AI Chip Buying Spree as Computing Demand Soars

In New York, Nvidia shares in premarket trading are marginally higher on the news.