General Market News

Finnish central bank Governor Olli Rehn warned that any undermining of U.S. Federal Reserve independence would cause a structural rise in inflation and potentially threaten financial stability. Rehn, who is running to become the European Central Bank's next vice president, expressed solidarity with the Fed and emphasized the importance of maintaining central bank independence for U.S. bond markets and financial stability.

• Loss of Fed independence could lead to a 'structural rise of inflation' according to Rehn
• Threats to central bank independence may undermine credibility of financial markets and bond markets
• Rehn is currently running to become the ECB's next vice president while serving as Finnish central bank Governor

The World Economic Forum's survey of 1,300 experts identifies geoeconomic confrontation between major powers as the greatest short-term global risk, cited by 18% of respondents, followed by state-based armed conflict at 14%. Over a 10-year horizon, climate-related threats dominate, with extreme weather events and biodiversity loss identified as the most severe risks facing the world.

• Economic sanctions and trade conflicts have intensified, including Western sanctions on Russia after Ukraine's invasion and growing concerns over China's control of rare earth metals critical to technology supply chains
• The WEF warns that 'rules and institutions that have long underpinned stability are under siege' as trade, finance, and technology are increasingly weaponized for geopolitical influence
• Next week's Davos summit will host over 60 heads of state under the theme 'a spirit of dialogue,' though tensions are high as the US president continues trade conflicts and has withdrawn from the Paris climate agreement

The World Economic Forum's 2026 Global Risks Report identifies geoeconomic confrontation, including tariffs and trade tensions, as the top near-term business risk, while adverse AI outcomes have surged from 30th to 5th place among long-term concerns. Half of surveyed business leaders expect turbulent conditions over the next two years, with only 1% anticipating calm periods.

• Geoeconomic confrontation leads short-term risks as countries weaponize economic tools like tariffs, regulations, and supply chains, potentially causing substantial global trade contraction
• AI-related risks have risen faster than any other concern, with warnings that labor displacement could trigger massive income inequality, reduced consumer spending, and potential loss of human control over machine learning systems
• Extreme weather remains the top 10-year concern, with global insured catastrophe losses estimated at $107 billion in 2025, continuing a steep upward trend from the early 2000s

U.S. markets declined as President Trump canceled meetings with Iranian officials amid major protests, raising concerns about Middle East stability and oil markets. Trump's renewed attacks on Fed Chair Jerome Powell, calling him a 'jerk' and 'crooked,' heightened investor worries about central bank independence. Oil prices jumped during U.S. trading hours while major stock indexes retreated despite cooler-than-expected inflation data.

• Trump's diplomatic pullback on Iran threatens oil market stability, as the country is a major producer with influence over the Strait of Hormuz, causing oil prices to rise during U.S. trading
• JPMorgan CEO Jamie Dimon warned that undermining Fed independence 'will raise inflation expectations and probably increase rates over time,' while global central bankers defended Powell
• China's 2025 trade surplus hit a record $1.19 trillion (up 20% year-over-year) with exports growing 5.5%, though U.S.-bound exports fell 20% amid ongoing trade tensions

European markets are expected to open mixed on Wednesday as investors focus on high-stakes talks between U.S. Secretary of State Marco Rubio and Danish and Greenlandic officials regarding Greenland's future. The meeting comes amid repeated statements by President Donald Trump about 'acquiring' the mineral-rich Arctic territory, despite Denmark and Greenland insisting it is not for sale.

• U.K. and French markets expected to open slightly higher (0.1% and 0.17% respectively), while German and Italian indices seen flat to slightly lower
• Trump has suggested the possibility of using military force to seize Greenland, which is a semi-autonomous Danish territory rich in minerals
• No major earnings or data releases scheduled in Europe on Wednesday; Asian markets showed mixed performance overnight with Japanese stocks hitting record highs

U.S. stocks declined and oil prices jumped as President Trump cancelled meetings with Iranian officials amid protests, raising concerns about diplomatic solutions and potential oil market disruption. Markets also reacted to Trump's renewed attacks on Federal Reserve Chair Jerome Powell, with concerns that undermining Fed independence could raise inflation expectations and interest rates over time.

• Trump's decision to cancel Iranian meetings suggests diplomatic approaches to curb Tehran's nuclear program may be off the table, pushing West Texas Intermediate and Brent crude oil prices higher during U.S. trading hours
• December core CPI rose 0.2% monthly, coming in 0.1 percentage points below expectations, though strategists note inflation remains above target levels
• JPMorgan CEO Jamie Dimon warned that anything undermining Fed independence 'will raise inflation expectations and probably increase rates over time' as Trump called Powell 'crooked' and 'a jerk'

The Bureau of Labor Statistics divides consumer spending into eight categories to calculate the Consumer Price Index, with food, shelter, and clothing comprising over 60% of the index. Since 2000, Medical Care, Housing, and Food/Beverage have each grown over 100%, while college tuition has surged nearly 200%. As of December 2025, headline CPI shows 2.68% annualized inflation with 92.5% cumulative growth since 2000, though inflation impact varies dramatically across households based on their spending patterns.

• Energy costs (6.2% of expenditures) are distributed across Housing and Transportation rather than tracked as a standalone category, with high volatility significantly impacting the Transportation index
• Core inflation (excluding food and energy) stands at 2.64% annualized versus 2.68% for headline CPI, with cumulative growth since 2000 of 85.5% and 92.5% respectively
• Lower-income households, those on fixed incomes, and families with high tuition, transportation, or medical expenses face disproportionate inflation pain, while BLS college tuition calculations may overstate costs by ignoring financial aid

The January CPI report showed inflation at 2.7% year-over-year, slightly below expectations, reinforcing the Fed's 'wait-and-see' approach. The Fed is expected to hold rates steady at its January 28 meeting with 97% certainty, though markets price in potential rate cuts starting in June. Elevated market valuations (CAPE ratio at 40) suggest potential for negative real returns over the next decade, prompting analysts to recommend selective stock-picking strategies over broad index approaches.

• Core CPI rose 0.2% monthly and 2.6% annually, both 0.1 percentage point below forecasts, giving the Fed cover to remain patient on rate policy
• CME FedWatch Tool shows 97.2% odds of no rate change in January, but 47% probability of at least one 25-basis-point cut by June 2026
• U.S. CAPE ratio ended 2025 at 40, a level historically associated with negative 10-year real returns and potential for a 'Lost Decade' similar to 2000-2009

President Trump publicly criticized Federal Reserve Chair Jerome Powell, calling him a 'jerk' and demanding interest rate cuts following December's inflation data showing 2.7% headline inflation and 2.6% core inflation. The comments come amid a DOJ criminal probe into Powell regarding Fed renovation expenses, which Powell claims is a pretext to pressure rate cuts. Markets show a 97.2% probability the Fed will hold rates steady at its next meeting.

• December CPI showed headline inflation at 2.7% and core inflation at 2.6%, both above the Fed's 2% target but in line with or slightly below economist expectations
• Trump intensified criticism of Powell during a Detroit speech, stating 'that jerk will be gone soon' while calling for 'meaningful' rate cuts despite inflation remaining elevated
• Markets indicate 97.2% probability the Fed will maintain rates at 3.5%-3.75% range at the next meeting, up from 82.3% probability last week

JPMorgan Chase CEO Jamie Dimon warned that Justice Department grand jury subpoenas issued to Federal Reserve Chairman Jerome Powell risk undermining the central bank's independence and could raise inflation expectations. The subpoenas relate to a multi-year, $2.5 billion renovation project for two Federal Reserve office buildings. Several Republican lawmakers have expressed concern about the investigation's potential impact on financial markets.

• Dimon stated that actions chipping away at Fed independence will 'probably have reverse consequences' and 'raise inflation expectations'
• The DOJ investigation focuses on a $2.5 billion renovation project for the Marriner S. Eccles Federal Reserve Board Building and the 1951 Constitution Avenue Building
• Republican Senators including Thom Tillis and Lisa Murkowski have criticized the probe, with Murkowski warning that 'if the Federal Reserve loses its independence, the stability of our markets and the broader economy will suffer'

The Supreme Court will hear arguments on January 21, 2026, regarding President Trump's attempt to fire Federal Reserve Governor Lisa Cook over alleged housing subsidy fraud. The ruling could set a precedent for Trump's efforts to remove Fed Chair Jerome Powell, who is under a Justice Department investigation for allegedly lying about a headquarters renovation project. The case represents a critical test of Federal Reserve independence from presidential interference.

• Trump's term as Fed Chair expires in May 2026, but his Board of Governors term runs until 2028, allowing him to potentially remain as an obstacle to Trump's push for rate cuts
• If the Supreme Court rules in Trump's favor against Cook, it would 'significantly raise the probability' that Powell could also be removed, according to Bank of America economists
• Markets are pricing in no Fed action at the January meeting, with the next rate cut not expected until June 2026, as traders assess the implications of the political battle

Global central bank leaders issued a joint statement supporting Federal Reserve Chair Jerome Powell amid a DOJ criminal investigation into perjury allegations related to his Senate testimony about the Fed's renovation project. Powell has characterized the probe as a pretext for political pressure to lower interest rates, while the Trump administration denies improper influence. The controversy centers on cost overruns in a Fed building renovation and broader tensions over monetary policy independence.

• International central bank leaders including those from the European Central Bank, Bank of England, and central banks of Australia, Canada, Sweden, Denmark, Norway, Switzerland, South Korea, Brazil and South Africa signed the solidarity statement emphasizing that central bank independence is 'a cornerstone of price, financial and economic stability'
• The Fed renovation project's estimated cost rose from $1.9 billion in 2019 to nearly $2.5 billion in 2025 due to increased construction material costs and asbestos/lead remediation, though Trump has claimed costs exceed $4 billion
• U.S. Attorney for D.C. Jeanine Pirro stated the Fed 'repeatedly failed to respond' to outreach from her office regarding alleged cost overruns, saying the legal process 'is not a threat' despite Powell's concerns about political intimidation

US consumer inflation data for December showed continued moderation, with core CPI rising 2.6% year-over-year, the slowest pace since March 2021. Headline inflation increased 2.7% annually, matching expectations, though shelter costs remain a significant contributor to price pressures. Analysts welcomed the report but cautioned that the economy has not yet achieved a clear disinflationary trend.

• Core CPI rose 0.2% month-over-month and 2.6% year-over-year, while headline inflation increased 2.7% annually, unchanged from November
• Shelter costs were the largest monthly contributor, rising 0.4%, with food prices up 0.7% and energy prices increasing 0.3%
• Wells Fargo expressed optimism about continued progress toward the Fed's 2% inflation target in 2026, while other analysts noted elevated shelter and food costs justify the Fed's cautious stance on rate cuts

The Motley Fool predicts the Dow Jones Industrial Average will outperform the Nasdaq and S&P 500 in 2026, despite underperforming the Nasdaq in 8 of the last 10 years. The Dow returned 14.9% in 2025 versus the Nasdaq's 21.1%, continuing a decade-long trend where the Nasdaq produced 408.3% total returns compared to the Dow's 242.6%.

• The Dow's price-weighted structure and heavy financial sector exposure (28.3% vs 34.4% tech in S&P 500) could drive outperformance if cyclical sectors lead in 2026
• The Dow trades at a P/E ratio of 23.9 compared to 29.2 for the S&P 500 and 33.5 for the Nasdaq-100, positioning it better for potential multiple compression
• Recommended Dow dividend stocks include Coca-Cola and Procter & Gamble (both with 60+ years of dividend increases), plus Chevron, McDonald's, and Home Depot for portfolio diversification

JPMorgan Chase CEO Jamie Dimon criticized the DOJ investigation into Fed Chair Jerome Powell over a $2.5 billion headquarters renovation project that is $700 million over budget. Dimon and other Wall Street leaders warn that undermining Federal Reserve independence could increase inflation expectations and raise interest rates. The controversy has prompted rare international support for Powell from 12 global central bankers.

• The Fed headquarters renovation, initially budgeted at $1.9 billion, has run $700 million over budget and is being subsidized by taxpayers since the Fed has been unprofitable since 2022
• Dimon warned that 'anything that chips away' at central bank independence 'will raise inflation expectations and probably increase rates over time'
• A group of 12 global central bankers, including ECB President Christine Lagarde, issued an extraordinary joint statement expressing 'full solidarity' with Powell, a coordinated action typically reserved for major crises

JPMorgan Chase CEO Jamie Dimon warned that markets are underappreciating economic risks despite calling the U.S. economy 'resilient' in a statement accompanying the bank's Q4 earnings. He highlighted concerns including complex geopolitical conditions, sticky inflation risks, and elevated asset prices. His comments come as major U.S. banks kick off earnings season, with investors closely watching bank leaders' economic outlook statements.

• JPMorgan reported higher Q4 net revenue but a year-over-year decline in net income, setting the tone for big bank earnings season
• Dimon noted positive near-term factors including softening but stable labor markets, continued consumer spending, ongoing fiscal stimulus, deregulation benefits, and recent Fed monetary policy
• Other major banks including Bank of America and Goldman Sachs are set to report results this week, with bank stocks under pressure after President Trump suggested a national cap on credit card interest rates

President Donald Trump publicly criticized Federal Reserve Chair Jerome Powell, calling him either 'incompetent' or 'crooked' amid an ongoing Department of Justice criminal investigation into the Fed leader. The attacks heighten concerns about threats to the Federal Reserve's traditional independence from the executive branch.

• Trump's comments came in response to questions about whether the DOJ's unprecedented criminal probe of Powell undermines confidence in the central bank
• The investigation represents an extraordinary challenge to the Fed's long-standing independence from executive branch interference
• The DOJ probe is facing growing opposition as concerns mount over potential political pressure on monetary policy decisions

US inflation held steady at 2.7% year-over-year in December 2024, unchanged from November and above the Federal Reserve's 2% target. The persistent inflation puts pressure on President Trump, who promised to lower costs but faces growing consumer blame as polls show twice as many Americans believe affordability is worsening rather than improving. The data comes amid Trump's extraordinary battle with the Federal Reserve over interest rate policy and central bank independence.

• Month-over-month CPI rose 0.3% in December, with food prices and housing costs driving the increase, while core inflation (excluding food and energy) increased 0.2%
• Trump claimed credit for 'LOW' inflation numbers despite his tariff policies, which economists warn could drive prices higher, and blamed the Biden administration for lingering inflation that peaked at 9.1% in June 2022
• The inflation report was released as the Justice Department served the Federal Reserve with grand jury subpoenas, escalating concerns about threats to the central bank's independence after it resisted Trump's demands for deeper interest rate cuts

Wall Street analysts expect S&P 500 companies to report strong fourth-quarter earnings growth of 8.8% year-over-year, driven by a resilient U.S. economy, Federal Reserve rate cuts, and broadening profit expansion beyond technology. Technology firms are still expected to lead, fueled by AI strength, but the earnings gap between the 'Magnificent Seven' tech giants and the rest of the market is narrowing. Nine of eleven sectors are forecast to post positive growth, up from six in Q3.

• Nine of 11 S&P 500 sectors expected to show positive Q4 growth (up from 6 in Q3 and 2 in Q2), with industrials, financials, and cyclical value stocks showing improving earnings alongside tech
• The earnings gap between the 'Magnificent Seven' tech giants and broader market continues to narrow as profit growth broadens across industries
• Consumer discretionary sector expected to be the biggest laggard as cost-sensitive shoppers tighten spending amid economic pressures

US stocks traded near flat on Tuesday as investors digested a cooler-than-expected December inflation report while assessing early fourth-quarter corporate earnings. The S&P 500 edged up 0.1% and the Nasdaq hovered around the flatline, following record highs on Monday. Core CPI rose 0.2% monthly and 2.6% annually, below economist forecasts, supporting expectations that the Federal Reserve will maintain current rates in the near term.

• Core CPI increased 0.2% in December (vs. 0.3% expected) and 2.6% year-over-year (vs. 2.8% expected), suggesting gradual easing of inflation pressures though still above the Fed's 2% target
• Markets are pricing in two quarter-point Fed rate cuts in 2026 beginning in June, with policymakers expected to hold rates steady at the January meeting pending more evidence of sustained inflation decline
• Fourth-quarter earnings season began with JPMorgan beating expectations while Delta Air Lines fell over 1% on mixed results, with major banks including Bank of America, Citigroup, and Morgan Stanley reporting later this week