Three potentially significant market-impacting stories developed over the weekend.

* Firstly, Trump’s desperation to do away with Fed chairman Jerome Powell, demolish the independence of the central bank and take personal control of US interest rate policy resulted in an obvious intimidation tactic of a criminal prosecution threat. Incredibly, a haggard-looking Powell was forced onto YouTube on Sunday, vowing to stand firm against extraordinary White House political interference.

* Secondly, the president outright told reporters “We are going to take Greenland” even though the US has precisely zero legal or historical basis for doing so. Such a move by military force could destroy NATO.

* Thirdly, an escalation in both rhetoric and violence in Iran put to the test Trump’s recent threat to react militarily to the Iranian authorities killing protesters, something that has undoubtedly already taken place.

Wall Street was understandably spooked by this avalanche of uncertainty at the opening bell on Monday. Stocks initially pulled back from record high levels, interest rates jumped and the US Dollar dived. The financial sector was particularly rattled after Trump baselessly claimed that any credit card company charging over 10% interest (the national average is currently 21%) after Monday 20th January would be “breaking the law”.

Traders eventually turned their focus from the stream of bizarre proclamations coming from the White House to upcoming Q4 earnings and the indexes recovered to score mild gains and close at yet more new record highs. Alphabet/Google became just the fourth company to ever move above a $4 trillion valuation.

After Asian stock markets reached new all-time record highs overnight amid the announcement of a snap election in Japan, the main event in the US on Tuesday was the pre-market CPI report which showed an as-expected 2.7% annualized inflation rate, but falling prices at the gas pump masked some quite significant increases elsewhere.

The data provided a brief crumb of hope for a Fed Funds Rate cut on January 28th, but it is still considered to be a very long shot (see INTEREST RATE EXPECTATIONS below). JPMorgan and Delta Airlines kicked off the earnings season but traders were unimpressed and the indexes slipped downwards, finishing near the lows of the day.

Wells Fargo, Bank of America and Citibank joined JPMorgan on Wall Street’s naughty step after earnings disappointments on Wednesday morning. We also got a pre-market PPI reading that validated the CPI inflation outlook but Retail Sales continued to hold up.

Big Tech/AI names bore the brunt of what appeared to be an intense bout of Large Cap profit-taking with S&P 500 and NASDAQ finishing the session meaningfully lower with every Magnificent Seven stock closing in the red, but at the same time the Russell 2000 Small Cap Index scored its fourth all-time record high of the young year, emphasizing the under-the-surface rotation that seems to be taking place.

On Thursday morning, a very low weekly Jobless Claims number poured cold water on any flickering hopes of a January rate cut and interest rates spiked up again to four month highs.

Goldman Sachs, Morgan Stanley and Taiwan Semiconductor all delivered solid Q4 earnings and the major indexes finished the session back in the green with a renewed spring in their step as the somewhat shaky start to the week seemed to trigger some dip-buying of the more beaten-down names.

Stocks meandered along aimlessly on a quiet Friday in advance of a three-day weekend as a volatile week came to an end with another utterly bonkers proposal, this time teased by Fed chairmanship candidate and Trump’s grinning bootlicker-in-chief Kevin Hassett, to encourage people to empty their workplace retirement plans to buy a house.

The major indexes closed on Friday pretty much where they had opened on Monday, except for Small Caps which were considerably higher following eleven consecutive days of outperforming the big boys in the S&P 500 - the longest such streak since the late 1980s.

The events of the last couple of weeks have shown that pretty much anything is on the table for this administration when it comes to short term electoral bribes between now and the midterms. Investors need to be braced for a “flood the zone” strategy of wave after wave of outlandish populist proposals in the lead-up to November 3rd, many (but not all) of which may well be just mindless rhetoric and constitutionally unachievable.

The relative lack of market reaction to all this preposterous blather, as well as to the now open warfare between the president and the central bank, seems to be emboldening Trump. So far, financial markets are treating it all as just political theater but at some point (maybe this week at the repulsive and out-of-touch orgy of self-congratulation, brown-nosing and performative b******t in Davos?), the ambiguity and recklessness of many of these Soviet-style interventionist schemes will likely take their toll with potentially damaging consequences for risk assets and, while we’re not there yet, we may well be getting closer.

I was recently interviewed by Vetta-Fi who host the annual Exchange ETF conference in Las Vegas about my practice. You can read the interview here.

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ARTICLE OF THE WEEK ..

“If the home you live in goes from $200k to $1m, you are not wealthy, because the replacement home also costs $1m. You are trapped.”

Ritholtz’s Nick Maggiulli asks, Is Home Equity Fake Wealth?

.. AND I QUOTE ..

“An unprecedented attempt to use prosecutorial attacks to undermine [Federal Reserve] independence”.

Eleven ex-Treasury Secretaries, past Fed chairs and top economists in a joint statement describing last week’s threatened criminal probe into Fed chairman Powell.

LAST WEEK BY THE NUMBERS:

Last week’s market color courtesy of finviz.com

Last week’s best performing US sector: Real Estate (two biggest holdings: Welltower, Prologis) ⬆︎ 4.2% for the week

Last week’s worst performing US sector: Communication Services (two biggest holdings: Google, Meta) ⬇︎ 2.3% for the week

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price fell 0.4% last week, is up 1.4% so far this year and ended the week 0.6% below its all-time record closing high (01/12/2026)

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price rose 2.1% last week, is up 8.0% so far this year and ended the week at its all-time record closing high.

* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by compani...