Bloomberg Businessweek – "S&P 500 Hits Record High as Dollar Selloff Deepens"

Date: January 27, 2026
Hosts: Carol Massar & Tim Stenovec
Guests: Carter Johnson (Bloomberg News FX & Rates Reporter), Sheila Kahyaoglu (Jefferies), Jen Delawi (Bloomberg News), Karen Vera Perry (BlackRock)

Overview

This episode dissects the forces behind the US dollar’s sharp decline, the record highs of the S&P 500, and the interconnectedness of global currency flows and equity markets. The hosts speak with market experts about the dollar’s outlook, sector-specific trends in airlines and defense, policy risks, and investor positioning ahead of the upcoming Fed meeting. Additional segments cover President Trump’s border policy maneuvers and the outlook for fixed income markets in 2026.

Main Segments & Key Insights

1. Dollar Weakness and Market Impacts

Guest: Carter Johnson, Bloomberg News FX & Rates Reporter
[01:59 – 07:13]

• Context:
  The US dollar continues to decline rapidly, prompting analysts to draw parallels with "Liberation Day" in early 2025. The selloff is notable both for its intensity and its effects across global assets.

• Key Drivers:

  • US fiscal policy uncertainty and budget concerns.
  • Recent Treasury interest in exchange rates, including direct communications with banks last week.
  • A heavily one-sided bearish positioning in options, especially in EUR and AUD.

• Fundamental Shifts:

  • While the dollar is under pressure, other global economies (Europe, Asia) are showing relatively solid growth, reinforcing the sell dollar trend.

• Equity Correlations:

  • Traditionally, a weaker dollar supports a rising stock market and US exporters. The past year, however, saw an unusual shift where stocks, treasuries, and the dollar fell together.
  • “A weaker dollar should theoretically support domestic manufacturers. It should support exporters here in the US. That’s typically what we’d see on a lag.” — Carter Johnson [04:26]

• Investor Behavior:

  • Discussion of hedging: Global investors might keep US equity exposure but hedge out dollar risk more actively than before.

• Fed’s Role:

  • The upcoming Jay Powell press conference is key for rate outlook. Higher rates could shore up the dollar; risk remains if the Fed must hike due to persistent inflation.
  • “The big risk to J.P. Morgan’s bearish dollar view is the Fed has to turn around and hike again. We might not see that, but that’s, that’s the risk.” — Carter Johnson [06:41]

2. Airline & Defense Sector Trends

Guest: Sheila Kahyaoglu, Managing Director, Jefferies
[10:09 – 20:36]

• Airlines:

  • Corporate vs. Main Cabin: Corporate travel remains robust (up 12% at major carriers), while main cabin demand shows only gradual improvement.
  • Southwest: Faces scrutiny as it departs from its no-frills brand, adding extra-legroom seating and tiered fares.
    • “Some people think [Southwest] could get to $4 or even $5 EPS as more of that extra legroom adoption comes in. But it’s their first go at it, and we’ll see how it takes off.” — Sheila Kahyaoglu [11:09]
  • Industry Preference: United is favored over Southwest due to heavier investment in premium seating and better cost discipline.

• Defense:

  • Budget Boom & Industry Shakeup: US defense budget potentially increasing by $500B, rising geopolitical tensions, and a push toward “deconsolidation” among prime contractors.
    • “This is the first time the five Primes might no longer exist as five Primes by the end of the Trump administration.” — Sheila Kahyaoglu [13:47]
  • Global Demand: International demand for defense equipment up sharply, with NATO, Japan, and Korea boosting spend; even nontraditional buyers (e.g., Serbia) placing billion-dollar orders.
  • Executive Pay & Government Pressure: White House pushing for lower executive pay and more investment/capex, leading to fewer buybacks and greater emphasis on performance and affordability.
    • “Kathy Warden, CEO of Northrop, said this was the best spending environment she’s ever seen in her career. So most of these executives are very bullish.” — Sheila Kahyaoglu [16:44]

• Defense Tech Upstarts:

  • New entrants (e.g., Anduril, Kratos) are both competing and collaborating with incumbents; massive munitions ramp-ups underway.
    • “The budget is growing overall and that’s the bottom line... But we’re not really seeing it in 2026. Northrop’s guidance is 5% growth.” — Sheila Kahyaoglu [17:45]

• Boeing Outlook:

  • Despite recent accounting charges, Boeing’s free cash flow prospects are improving, and a potential China order in April could be a positive catalyst.
    • “If this company could actually earn $10B of free cash flow, then it’s quite compelling at current valuation.” — Sheila Kahyaoglu [19:40]

3. Politics: Trump Administration & Deportation Policy

Guest: Jen Delawi, Bloomberg News Senior Reporter
[21:27 – 27:47]

• What’s Happening:

  • President Trump is making high-profile visits to Iowa and Minnesota, aiming to support embattled Homeland Security Secretary Kristi Noem amid controversy over a recent deportation and use-of-force incident.
  • Trump projecting support for Noem; senior adviser Stephen Miller is on the trip, both having been criticized for initial responses to the shooting.

• Internal Dynamics:

  • Despite rumors, Noem remains in her post; White House narrative is shifting to maintain public support for aggressive deportation, but there are signs of internal frustration at losing control of the message.

• State Pushback:

  • Minnesota’s governor and Minneapolis’ mayor are working to “turn down the temperature,” which could set a precedent for other local governments refusing federal deportation operations.
    • “If we see that kind of refocusing back on more conventional deportation efforts, that could be a de-escalation and a roadmap for other states and cities concerned about immigration enforcement in their backyards.” — Jen Delawi [26:51]

• Wider Political Context:

  • Polls show softening support for the immigration crackdown—even among its prior supporters—following controversial incidents and negative publicity.

4. Fixed Income Market Trends for 2026

Guest: Karen Vera Perry, Head of US iShares Fixed Income Strategy, BlackRock
[30:54 – 37:22]

• Where are Flows Going?

  • Positive infusions into flexible income funds and international bonds (especially as the dollar drops); growing popularity of actively managed bond ETFs.
    • “With the dollar being off this year, we’re continuing to see more interest inflows coming back to international fixed income. So think EM bonds or even European high yield.” — Karen Vera Perry [31:25]

• US Dollar Decline and Bond Markets:

  • Most US investors unaffected directly (since most bonds are in dollars), but more are seeking global diversification.
  • European fears of large-scale US treasury sales are overblown—US assets are still seen as safe and liquid.

• Sentiment on US Investability:

  • No evidence yet of global investors viewing the US as "uninvestable"—in fact, high rates and strong corporate balance sheets maintain attractiveness.

• Top Trends:

  • Strong flows into IG (investment grade) credit, long-duration muni bonds (with high tax-equivalent yields), and popular bond ladder ETFs.
    • “Our 2029 IBDU [ETF] yielding over 4% with only a three-year duration— we’re seeing people stepping out of the front end go into more of that intermediate exposure.” — Karen Vera Perry [35:30]

• Fed Outlook:

  • General expectation the Fed stays on hold; market watching closely for any sign of dissension or hawkish-inflation commentary at the meeting.

Notable Quotes & Moments

• On Market Sentiment:
  “We’re seeing more people saying, you know what, maybe I want to take advantage of some of the dollar dropping. And one of the easiest way to do that is with international-based fixed income ETFs.”
  — Karen Vera Perry [33:09]

• On Trump's Deportation Messaging:
  “The president in particular takes ownership of his policies… it's something he campaigned on so vigorous and in office, has really claimed as a source of pride that he’s accomplishing his goal of deporting illegal immigrants.”
  — Jen Delawi [24:51]

• On the S&P 500 and Defense:
  “Aerospace, defense, just the S&P broad index, up about 9% year to date, up about 46% last year. Is it just because defense spending all around the globe is just happening and, and everybody’s amping it up?”
  — Carol Massar [14:44]

Key Timestamps

• 01:59 – 07:13: Dollar selloff deep dive with Carter Johnson
• 10:09 – 20:36: Airlines, defense, and Boeing sector analysis with Sheila Kahyaoglu
• 21:27 – 27:47: Trump’s immigration policy, political narratives, and local resistance with Jen Delawi
• 30:54 – 37:22: Fixed income flows, global bonds, and Fed outlook with Karen Vera Perry

Episode Tone

• Analytical, data-driven, cautious optimism amid uncertainty and volatility.
  Expert guests speak in accessible, confident—but measured—terms about the current cross-currents in global finance, politics, and sector trends, as hosts push for implications that matter to investors and business leaders.

For Listeners:

If you missed the episode, this summary captures the interplay between currency moves, sector rotations, geopolitics, and evolving investor behavior—illuminating why 2026 is already shaping up as a year to watch across global markets.