Weekly Newsletter: January 19, 2026
The American songbook is loaded with songs about not worrying, from Stevie Wonder to Bobby McFerrin to OneRepublic. Worrying about trouble only makes it double, so be happy. The markets are indeed happy. This year is barely two weeks old, and Venezuela has a new government. In an election move, Trump has floated two proposals, from capping credit card interest rates to using 401k assets to buy a home. Last week started with the Fed Chair making a public speech refuting potential criminal charges. By the end of the week, President Trump said he had no plans to fire Powell. The financial markets have taken all the geopolitical news and tossed it aside, preferring to hang out on the sunny side of the street. The weekly data dump provided a decent mix of good news, along with a few things to worry about. Consumers remain strong as retail sales show few signs of slowing. Employment is stable, with weekly jobless claims coming in on target. Even the earnings from the banking sector were generally upbeat, although the markets wanted more. Investor sentiment is indeed happy, with bullish sentiment running at its highest in more than a few months. The worry side is populated with inflation not coming down quickly enough and retail sales growing, but at a pace below inflation. This means that consumers are spending more only due to the higher costs of the goods. Something for the back of the mind, Wall Street likes to disappoint the largest number of investors as possible. So, if everyone is happy, maybe it is time to worry!
The inflation data is not yet back to “normal” reporting, but much better than a month ago, when the statistics department essentially stuck a wet finger in the air to determine the strength of the inflationary winds. The most recent release saw medical and food costs rise, while energy prices moderated along with real estate prices. When looking inside the report, taking away the outliers on the high and low side, the median and core inflation data show a still sticky situation. Ahead of their usual quiet period that began on Saturday, Fed governors were generally leading the markets toward a potential pause at their meeting in two weeks. While everyone would love lower rates, a strong consumer, sticky inflation, and solid overall economic growth make for a tough argument to lower rates. The economic data steps aside this week for earnings season to heat up. Some insight into the consumer may be gleaned by earnings reports from DoorDash, Walmart, and Booking Holdings. The earnings may answer a few questions about whether the consumer is shifting spending habits and/or still willing to spend on travel. The past year has shown that while consumer sentiment was poor, their spending remained robust. Best to watch what they do rather than what they say.
Interest rates have been watched very closely as the Fed governors spoke this past week. Additional threats on “the independence” of the Fed getting were raised early in the week, only to get walked back by last Friday. Like the equity market, the bond market remained calm all week, although a tad higher for the 10-year bond. What has been interesting is that during 2025, 10-year bond yields rose, except for the US. Potentially a response to the jawboning of the Fed or capital flowing into the US as growth here picks up. It may be a difficult ask to have the US remain an outlier again in 2026 if rates continue to rise around the world.
Financial stocks took the lead for the earnings season as they have done over the last few years. The focus shifted quickly from their earnings (which were decent) to discussions around credit card interest rates. According to a Federal Reserve report in November, interest rates are in the 20-25% range, depending on card type or creditworthiness. Any “mandates” on interest rates would have to come from Congress, but the pressure is rising. More than their recent earnings, the shifting focus to lower rates, which will likely drop earnings, became the talk of Wall Street. What is seen as more political than financial, investor focus will shift quickly this week to the consumer via earnings from some key consumer-related companies. Signs of shifting tastes by consumers to lower-priced goods or pulling back from travel plans could have a greater impact on the overall mood of Wall Street. A typical mid-term election year is volatile, and this earnings season could provide some fuel for that volatility.
No Fed chatter this week, but earnings season shifts into high gear. Pay attention to companies that directly touch the consumer for some indication of overall consumer health.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.