It was a year of “resilience.” After a negative (0.6%) Q1 print, GDP growth had surged to 4.3% by Q3 – with the Atlanta Fed GDPNow forecast currently registering a blistering 5.3% for Q4. Labor markets were similarly resilient. After beginning the year at 217,000, weekly initial unemployment claims hit 250,000 during June and spiked to 264,000 in September. But claims were back down to a historically low 200,000 by the end of the year. The unemployment rate increased a modest three-tenths in 2025 to 4.4%. This compares to a 5.7% average over the period 1990 through 2025.
A Credit system anchored by a $1.8 TN federal deficit and unprecedented speculative leverage can work wonders.
Inflation was persistent. Year-over-year CPI ended 2024 at 2.9%. It was at 3.0% this past September, before ending the year at 2.7%. At 60.4 in January, the ISM Services Prices component was up to 70 in October, before concluding 2025 at a still elevated 64.3.
Financial markets were resilient. The S&P500 returned 17.86%. The Semiconductor Index returned 43.46%, with the Nasdaq100 returning 21.02%. The Nasdaq Biotech Index returned 33.44%, the Nasdaq Computer Index 29.17%, and the small cap Russell 2000 12.79%.
It was a phenomenal year for financial stocks. The KBW Bank Index returned 32.57%, with the Broker/Dealers returning 29.21%. The NYSE Financial Index returned 22.7%. Spectacular 2025 returns include Citigroup (65.78%), Goldman Sachs (53.5%), Bank of New York Mellon (51.10%), Morgan Stanley (41.21%), Capital One (35.91%), JPMorgan (34.42%) and Wells Fargo (32.69%). Quite a year for parts of “fin tech.” Robinhood returned 203.54%, Dave Inc. 154.73%, Lemonade 94.06%, Sofi Technologies 70.00%, Shopify 68.59%, and Interactive Brokers 45.60%.
Combined Assets of JPMorgan, Bank of America, Citigroup, and Goldman Sachs expanded $1.009 TN (9%) during 2025 to $12.302 TN.
January 15 – Bloomberg (Silla Brush): “BlackRock Inc. pulled in $342 billion of total client cash in the fourth quarter, pushing the firm to a record $14 trillion of assets… Investors added $268 billion on a net basis to its long-term investment funds, including $181 billion to its exchange-traded fund business that now has $5.5 trillion overall… The tally in the last three months of the year pushed the total annual haul, including money-market and cash-management funds, to $698 billion, setting a new record.”
January 15 – Wall Street Journal (Spencer Jakab): “It’s the circle of life, but for your money. Exchange-traded funds, which have existed for just 35 years, are booming… More than 1,000 ETFs launched in the U.S. last year with the industry’s assets reaching $13.5 trillion… December saw record inflows and launches. Their invention was like dropping a new apex predator into the investment habitat—an unfair fight. A cumulative $3 trillion flowed out of traditional mutual funds between 2015 and 2024 with a similar sum moving to ETFs, according to the Investment Company Institute.”
There’s no mystery surrounding economic and market resilience. Financial conditions entered 2025 exceptionally loose and concluded the year looser. After slashing rates 100 bps in 2024, the Fed was back with 25 bps cuts in September, October, and December. Importantly, the Fed loosened monetary policy despite liquidity overabundance, unprecedented leveraged speculation, and blow-off financial excess, including a historic AI mania/arms race.
Late-cycle Bubble Dynamics create enormous challenges for managing monetary policy. For one, there’s a fine line between deleveraging/bursting Bubbles and ongoing parabolic growth in speculative excess – a fine line between a problematic tightening of conditions and further loosening, only exacerbating destabilizing speculation and high-risk lending. Moreover, the greater the intensity of late-cycle Bubble excess and the more acute systemic fragilities; the clearer the policymaker focus on sustaining the boom.
The Fed’s overarching responsibility to safeguard financial stability demanded laser focus on loose conditions and destabilizing speculative excess. With the President breathing down their necks, Fed officials failed to hold the line. They, for another fateful year, accommodated historic Bubble excess.
I’ll assume the Fed harbored market accident fears. With the institution under attack and its independence in jeopardy, there was understandable trepidation that market problems would be blamed on the Fed’s misguided “restrictive” rate policy. Markets were at the cusp of an accident during the April “liberation day” panic. In particular, the AI/Credit nexus was under significant stress.
Private credit was at the cusp. Leveraged loan prices were under intense pressure, as high-risk lending markets seized up. Not coincidently, AI and technology stocks were in free fall. The MAG7 Index was clobbered 12% in just two sessions. From the April 2nd close to April 7th intraday lows, NVIDIA collapsed almost 19%, and the Semiconductor Index sank 17%. As goes loose conditions, so goes the AI arms race.
But it wasn’t just vulnerable AI and private Credit Bubbles that had the Fed and global central bank community on edge in April. In an extraordinary development, Treasury yields spiked 50 bps during the week of April 11th. Global markets were hit with intense instability, yet the standard safe haven demand for Treasuries and the dollar failed to materialize. Market talk was of hedge fund “basis trade” unwinds, along with fears of China Treasury liquidations. The big unwind was unfolding.
President Trump staged a hasty retreat. Placing his tariff regime on “pause,” “TACO” entered common parlance. What then unfolded is for the history books: a powerful short squeeze and unwind of hedges triggered a disorderly upside reversal across global risk markets.
Short squeezes are themselves liquidity generators. But this squeeze combined with a major upsurge in leveraged speculation globally - highly levered hedge fund Treasury “basis trades,” “carry trades” throughout international bond markets, and myriad levered strategies in equities, crypto (including “basis trades”), derivatives and elsewhere. In late-cycle speculative Bubble fashion, “buy the dip” and FOMO were locked and loaded.
With the “Trump put” confirmed, ebullient markets concluded that the administration and Fed had coalesced into the most powerful backstop to have ever buoyed financial markets. Leveraged speculation and resulting liquidity overabundance went to precarious excess. More specifically, with Scott Bessent (and the administration) fixated on Treasuries - and the Fed always obsessed with Treasury and repo market liquidity – risk embracing hedge funds were more than comfortable piling on highly levered “basis trades.”
January 13 – Bloomberg (Alexandra Harris): “The basis trade has swelled to roughly $1.5 trillion, underscoring the need to closely monitor its size to avoid a repeat of the market eruption seen in 2020, according to Morgan Stanley strategists. The bank estimates the size of the strategy — employed by hedge funds to take advantage of small price gaps between Treasury cash markets and futures — has grown 75% since its 2019 peak. The size of the notional trade has outpaced the growth in Treasury bond issuance in recent years… The trade contributed to volatility in the markets in 2020 when cash bonds underperformed futures… imposing significant losses on hedge funds. That forced the Fed to buy trillions of dollars’ worth of bonds to keep markets running smoothly… At the time, the trade was roughly $500 billion in total — just a third of what it is today.”
“Liberation day” deleveraging caused a two-week $150 billion contraction in money market fund assets (MMFA). But the squeeze that morphed into feverish “risk on” leveraging unleashed a $923 billion, 19% annualized, surge in MMFA over the subsequent 37 weeks. It was nothing short of a dislocation in “repos,” securities funding markets, and marketplace liquidity more generally.
The liquidity tsunami thrust the AI mania/arms race completely off the rails. From April lows to October highs, Nvidia spiked 145%, Oracle 190%, Alphabet 105%, Meta Platforms 65%, Microsoft 60%, and Amazon.com 60%. From April lows to December highs, the Semiconductor index surged 116%. The Goldman Sachs Most Short Index spiked 122%.
January 12 – Bloomberg (Emily Graffeo): “At least $3 trillion is set to flow into data-center-related investments over the next five years, capital that will rely on the might of multiple areas of the credit markets to provide, according to Moody’s… Trillions of dollars will need to be invested across servers, computing equipment, data center facilities and new power capacity, and support the boom in artificial intelligence and cloud computing, the ratings firm said… Much of that capital will come directly from big tech companies, which are facing rising demand for data centers and the power needed to operate them. Six US hyperscalers — Microsoft Corp., Amazon.com Inc., Alphabet Inc., Oracle Corp., Meta Platforms Inc. and CoreWeave Inc. — are on track to hit $500 billion in data center investments this year, as capacity growth continues, said Moody’s.”
I don’t think we can overstate ramifications from 2025’s liquidity dislocation and AI market euphoria. For sure, the all-encompassing Credit market boom has only intensified.
January 13 – Bloomberg (Tasos Vossos): “Global bond borrowers are carrying off the busiest-ever start to a year with barely a hitch. Buyers are so flush with cash that a wave of new supply has left spreads tighter and valuations higher. Despite a cascade of more than $424 billion of supply across currencies so far this year, issuers have seen their borrowing costs drop slightly in the first week of 2026… Cash creation in the US could reach $2 trillion or more in 2026, approaching the fastest pace in five years and injecting liquidity into markets, according to JPMorgan...”
January 16 – Bloomberg (Finbarr Flynn and Ronan Martin): “Global credit markets are running at their hottest in two decades, prompting some of the world’s biggest money managers… to warn against complacency. Yield premiums on corporate debt have narrowed to 103 bps, the least since June 2007 amid a resilient economic outlook, a Bloomberg index of bonds across currencies and ratings shows. That all presents a paradox. Money managers don’t want to miss out. But they also must accept a smaller amount of compensation against risks that are increasingly swirling — unpredictable US policy, geopolitical tensions and hidden debts sparking sudden corporate collapses. ‘Complacency should be the scariest word in risk markets right now,’ said Luke Hickmore, an investment director for fixed income at Aberdeen Investments. ‘All you can do is not lean too hard into high-risk areas’.”
Epic Complacency. It’s not as if 2025 didn’t have alarming moments. Indeed, there was ample evidence of a historic Credit Cycle long in the tooth. First Brands and Tricolor were textbook examples of end-of-cycle lending and intermediation nonsense. There was a flurry of concern about substandard loan underwriting, inflated bond ratings, insurance company risk-taking, off-balance sheet financing, and structured finance more generally – the type of focus that leads to tightened Credit conditions. And there was a meaningful tightening in leveraged lending and “private Credit.” The stocks of Blackstone, KKR, Apollo, Blue Owl and Areas Management were all under notable 4th quarter selling pressure.
The AI Bubble sprung its own leaks. There was some initial Credit market fretting about the massive scope of future funding requirements. Oracle CDS prices spiked to highs since 2009. CoreWeave bonds were clocked. OpenAI financial arrangements elicited some market skepticism. And future electricity shortfalls became a more pressing issue.
A harbinger of more systemic issues, the cryptocurrencies suffered an acute bout of de-risking/deleveraging. After rallying from about 75,000 (April lows) to October’s record high of 126,000, bitcoin then sank 35% to November 21st lows. Many of the scores of cryptocurrencies suffered larger losses. Trading to a $457 high on July 16th, Strategy’s stock price ended the year at $151.95.
Yet at the end of the day (year), the historic liquidity onslaught masked myriad issues, including festering Credit and AI problems. Conspicuous excess, however, caught the attention of global financial regulators, including the Bank of International Settlements (BIS), the Bank of England (BOE), and the Financial Stability Board (FSB). Focus turned to Non-Bank Financial Intermediation (NBFI), including hedge funds and speculative leverage – “global assets in the sprawling shadow banking sector have crossed the $250 trillion mark for the first time.” While we’ll wait to see 2025 tabulations, the FSB provided remarkable commentary on 2024: “Hedge fund assets increased 19.2% globally, and the increase in Cayman Islands hedge fund assets accounted for 90.7% of the aggregate increase.”
January 14 – Bloomberg (Greg Ritchie and Tom Rees): “The UK needs to take action on how much leverage has been accumulated by hedge funds in the gilt market, said Bank of England deputy governor Dave Ramsden, sending a clear signal that officials want to enforce greater oversight. The BOE’s concerns center on gilt repurchase agreements, or repos, which can be used by investors to borrow sterling against bonds. Such repos allows hedge funds to use leveraged trading strategies, which officials are concerned pose risks to financial stability if traders unwind their positions simultaneously. ‘Hedge funds play a critical role in the gilt repo market, an essential role, but we’ve got to make sure that their role there is safe,’ Ramsden said… ‘We don’t think the status quo here is an option. Something needs to be done’.”
While the Federal Reserve remained mum on “basis trades” and hedge fund leverage, there was a notable October staff report highlighting the momentous growth in offshore Treasury holdings (popular domains for levered speculation). “Hedge funds in the Cayman Islands held more Treasuries at end-2024 than US official data show, with their ownership likely to be $1.4 trillion higher than reported… The funds’ holdings had increased by $1 trillion since 2022 to reach $1.85 trillion by end-December…” (from Bloomberg)
Bouts of trepidation notwithstanding, 2025 proved another banner year for levered speculation.
January 13 – Bloomberg (Nishant Kumar and Liza Tetley): “Hedge fund investors haven’t had it this good since the aftermath of the global financial crisis. The $5 trillion industry posted its best returns since 2009 with gains of about 12.6% last year… Funds run by industry giants D.E. Shaw & Co., Millennium Management, Citadel, Point72 Asset Management and Qube Research & Technologies posted double-digit returns. Bridgewater Associates, the half-a-century-old investment firm, scored the best-ever gain of 34% in its flagship Pure Alpha II fund.”
Whether it was a hedge fund operator or retail online trader, it became absolutely clear that geopolitical developments and risk must be disregarded. The worsening Ukraine war and unsuccessful peace negotiations didn’t matter to the markets. The Israel/Iran/US “twelve day war” was basically irrelevant. Tariffs and trade war risks could be ignored. More generally, President Trump’s impulsiveness and folly posed minimal market risk.
Under extraordinary attack, our democracy proved resilient. According to Pew Research, the President issued at least 221 executive orders. It was a power grab unlike anything in U.S. history. And for much of the year, the Trump power onslaught went unchallenged. ABC and CBS bowed. Some major law firms and Ivy League universities capitulated. District judges pushed back, but the Supreme Court largely fell in line. State and local governments did their best to fend off the blitzkrieg. It was an incredible demonstration of power and brute force, one that dissipated over the course of the year.
“The resistance” seemed to gather significant momentum following FCC threats and ABC’s Jimmy Kimmel benching. We Americans cherish our freedom of speech. The specter of Donald Trump and Brendan Carr censoring our comedians and television hosts was a wake-up call that our constitutional rights were at risk. The “No Kings” and other rallies attracted millions of peaceful protesters.
A striking incongruity took shape. There are President Trump’s cravings for unchecked power, the type he seemingly admires from the likes of Putin, Xi, Viktor Orban, and Kim Jong Un. Yet his made-for-comedy persona is strikingly at odds with the world’s dictator contingent. There’s this powerful man, whose behavior makes it difficult to take him seriously. It’s unimaginable that Putin, Xi, Orban or Kim would be the butt of endless jokes in their respective homelands. And especially after the “Epstein files” fiasco, cracks emerged in his façade of unbridled power.
Americans are pushing back, with less than 10 months until midterms. The clock is ticking. And while the jury is out, it increasingly appears the Trump administration’s strategy of a Victor Orban-style power blitzkrieg is falling short. Perhaps this is a factor in the President’s recent global ambitions, including Venezuela, Greenland, “the hemisphere,” and Iran.
Military adventurism. Chaos and corruption. Besmirching the Constitution. A weaponized Department of Justice. Comey, James, Bolton, Slotkin, Kelly… Incredibly, Fed Governor Lisa Cook and even Chair Powell. And, this evening, Minnesota Governor Tim Walz and Minneapolis Mayor Jacob Frey. Intimidation and coercion as the modus operandi. Appalled, most Americans see the administration’s approach as despicably un-American.
How the President responds to waning power is a major issue 2026. Does he double-down on ICE and deportations, despite the intensifying public outcry? Could it get to the point where our malcontent President says F… you and flips the midterms the bird? Might his scorched earth instincts elicit an insurrection act gambit? Following the 2024 election, I referred to a deeply divided nation – half “nation saved” and the other half “nation doomed.” At least with respect to President Trump, our nation ended 2025 with less division.
Meanwhile, speculative markets have a way of feeding off loose conditions, succumbing to crazy excess while disregarding escalating risk. This ensures latent fragilities. Of course, the President wouldn’t risk upsetting the markets ahead of the midterms, would he? Markets have never believed that populist policies would ever trump the President’s fixation on the wealthy class and booming financial markets more generally. Reassessment is in order. He’s going to be desperate for votes. A Friday evening Bloomberg headline: “Wall Street Gives Trump the All-Clear to Push Disruptive Agenda.”
January 13 – Wall Street Journal (Gregory Zuckerman): “Wall Street thought it had an ally in Donald Trump. He’s becoming more of an adversary. The president largely delivered to investors last year, as his administration cut taxes, reduced spending and rolled back an aggressive tariff plan after it spooked markets. Now, after blindsiding Wall Street with a series of rapid-fire moves in the span of a week, Trump appears to be putting it on notice… ‘Investors thought after the April 2025 tariffs that uncertainty around policy would magically go away,’ says Brad Golding, a hedge-fund manager at Christofferson Robb & Co... ‘Now, we’re seeing that midterm elections mean more than the profitability of banks and the stability of markets’.”
An incredible 2025 was surely only a warmup for an unbelievable ‘26. A couple weeks in, “unbelievable” doesn’t ring hyperbole. Likely an understatement.
For the Week:
The S&P500 slipped 0.4% (up 1.4% y-t-d), and the Dow dipped 0.3% (up 2.7%). The Utilities rose 2.0% (up 1.5%). The Banks fell 1.7% (up 2.2%), while the Broker/Dealers rose 2.3% (up 6.2%). The Transports added 0.3% (up 5.1%). The S&P 400 Midcaps gained 1.3% (up 6.1%), and the small cap Russell 2000 rose 2.0% (up 7.9%). The Nasdaq100 declined 0.9% (up 1.1%). The Semiconductors surged 3.8% (up 11.9%). The Biotechs declined 1.4% (up 2.7%). With bullion rising $87, the HUI gold index jumped 5.1% (up 14.3%).
Three-month Treasury bill rates ended the week at 3.55%. Two-year government yields rose five bps to 3.59% (up 11bps y-t-d). Five-year T-note yields gained seven bps to 3.82% (up 9bps). Ten-year Treasury yields increased six bps to 4.22% (up 6bps). Long bond yields added three bps to 4.84% (down 1bp). Benchmark Fannie Mae MBS yields jumped nine bps to 4.97% (down 7bps).
Italian 10-year yields declined four bps to 3.45% (down 10bps y-t-d). Greek 10-year yields slipped two bps to 3.33% (down 11bps). Spain's 10-year yields fell three bps to 3.22% (down 7bps). German bund yields dipped three bps to 2.84% (up 2bps). French yields added a basis point to 3.52% (down 5bps). The French to German 10-year bond spread widened two to 68 bps. U.K. 10-year gilt yields gained three bps to 4.40% (down 8bps). U.K.’s FTSE equities index rose 1.1% (up 3.0% y-t-d).
Japan’s Nikkei 225 Equities Index jumped 3.8% (up 7.1% y-t-d). Japan’s 10-year “JGB” yields surged another nine bps to 2.19% (up 12bps y-t-d). France’s CAC40 reversed 1.2% lower (up 1.3%). The German DAX equities index was little changed (up 3.3%). Spain’s IBEX 35 equities index increased 0.4% (up 2.3%). Italy’s FTSE MIB index added 0.2% (up 1.9%). EM equities were mixed. Brazil’s Bovespa index increased 0.9% (up 2.3%), and Mexico’s Bolsa index gained 1.6% (up 4.3%). South Korea’s Kospi surged 5.5% (up 14.9%). India’s Sensex equities index was unchanged (down 1.9%). China’s Shanghai Exchange Index slipped 0.4% (up 3.4%). Turkey’s Borsa Istanbul National 100 index jumped 3.8% (up 12.5%).
Federal Reserve Credit declined $6.6 billion last week to $6.533 TN, with a five-week gain of $42.5 billion. Fed Credit was down $2.357 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.806 TN, or 75%. Fed Credit inflated $3.722 TN, or 132%, since November 7, 2012 (688 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt recovered $21.4 billion last week to $3.062 TN. “Custody holdings” were down $179 billion y-o-y, or 5.5%.
Total money market fund assets (MMFA) dropped $74.7 billion to $7.729 TN - with a 24-week surge of $653 billion, or 20% annualized. MMFA were up $868 billion, or 12.6%, y-o-y - having ballooned a historic $3.098 TN, or 66.9%, since October 26, 2022.
Total Commercial Paper slipped $1.5 billion to $1.413 TN. CP has expanded $268 billion, or 23.4%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped 10 bps to 6.06% (down 98bps y-o-y) - the low back to September 2022. Fifteen-year rates fell eight bps to 5.38% (down 89bps) - low since October 2024. Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up a basis point to 6.37% (down 77bps).
Currency Watch:
For the week, the U.S. Dollar Index increased 0.3% to 99.393 (up 1.1% y-t-d). On the upside, the Mexican peso increased 2.0%, the South African rand 0.5%, the New Zealand dollar 0.4%, and the Norwegian krone 0.1%. On the downside, the South Korean won declined 1.1%, the euro 0.3%, the Swiss franc 0.2%, the Swedish krona 0.2%, the British pound 0.2%, the Singapore dollar 0.2%, the Brazilian real 0.1%, and the Australian dollar 0.1%. China's (onshore) renminbi increased 0.11% versus the dollar (up 0.25% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index added 1.3% (up 3.6% y-t-d). Spot Gold jumped 1.9% to $4,596 (up 6.4%). Silver surged 12.9% to $90.1257 (up 25.8%). WTI crude increased 32 cents, or 0.5%, to $59.44 (up 4%). Gasoline added 0.3% (up 4%), while Natural Gas fell 2.1% to $3.103 (down 16%). Copper retreated 1.2% (up 2.6%). Wheat was little changed (up 2%), while Corn slumped 4.7% (down 4%). Bitcoin surged $4,700, or 5.2%, to $95,200 (up 8.6%).
Global Credit and Financial Bubble Watch:
January 16 – Axios (Madison Mills): “The AI buildout is turning into a profit engine for the big banks, as the tech giants tap Wall Street to finance enormous capital spending and AI-fueled stock gains lift trading revenues. Banks are cashing in… across debt underwriting, advisory and trading… Morgan Stanley’s debt underwriting revenue jumped to $785 million in the fourth quarter, up 93% from a year ago — the biggest increase on Wall Street. Tech companies are borrowing aggressively to fund AI infrastructure, especially data centers, with spending hitting over $700 billion in 2025. Morgan Stanley arranged tens of billions of dollars in AI-related debt in the fourth quarter alone, including more than $27 billion tied to Meta’s Hyperion data center… The broader AI boom in the stock market is also helping financial institutions: Trading revenue at Goldman Sachs hit a record high, and rose 10% at Bank of America from the prior year.”
January 14 – Wall Street Journal (Gina Heeb and Alexander Saeedy): “American consumers continued to spend and borrow at a healthy clip at the end of 2025, despite a year marked by uncertainty around job security, tariffs and stubborn inflation. JPMorgan…, Bank of America, Citigroup and Wells Fargo this week collectively reported $28.5 billion in profits for the fourth quarter. That amounted to $123.2 billion for the full year, up nearly 5% from 2024. ‘All of the metrics that we can see tell us the consumer remains resilient and in great shape,’ Bank of America Chief Financial Officer Alastair Borthwick said…”
January 10 – Financial Times (Michelle Chan): “Companies are borrowing in the US bond market at the fastest pace since the Covid-19 pandemic, as Wall Street kicks off what is expected to be a record year of debt sales thanks to AI spending and financing for a wave of mergers. Corporate borrowers raised more than $95bn from 55 investment-grade bond deals in the first full week of January, the highest weekly volume since May 2020 and the busiest start to a year on record, according to LSEG...”
January 15 – Bloomberg (Francesca Veronesi and Kat Hidalgo): “Private credit firms’ efforts to reap leveraged debt business from Wall Street is coming at a steep cost — safeguards that made them less vulnerable to an economic downturn. Once rare, the same kind of permissive terms that are widespread on leveraged loans are becoming increasingly common in the $1.7 trillion private credit market. Large borrowers with more clout are pushing for — and getting — so-called ‘covenant-lite’ terms. And the trend is only set to accelerate, if a spate of recent deals is any indication.”
January 14 – Bloomberg (Rachel Graf and Rainier Harris): “While the broader markets have flinched at every political tremor, the world of risky debt is acting like almost nothing’s wrong. The market for triple C bonds — debt that’s deep into junk territory — is thriving. Companies are seeking new leveraged loans at a clip. Some deals have been so popular that banks are reducing borrowing costs, while others have hastened financing deadlines as they capitalize on robust demand. The resilience underscores the persistent hunt for yield amid expectations that interest rates will remain flat or fall modestly later this year.”
Market Instability Watch:
January 14 – Bloomberg (Sridhar Natarajan): “Donald Trump’s return to the White House unleashed a market rally, dealmaking went into overdrive, and bankers embraced all things Trump to rake in the big money. The new year is offering Wall Street enough reason to worry that the party could be cut short… ‘Nobody in banking thinks it’s going to be beer and skittles forever,’ said Steve Gannon, a financial-services lawyer at Davis Wright Tremaine. ‘It’s a messy intersection of politics and banking policy’.”
January 13 – New York Times (Tony Romm): “Nearly one year since returning to the White House, President Trump has come to embrace a risky economic strategy: using the brute force of government as a way to push down prices that remain stubbornly high. From regulatory threats against private businesses to more punitive actions against policymakers, there appears to be no lever in Washington that Mr. Trump now seems unwilling to pull, even if doing so might exacerbate some of the very economic strains that he is trying to combat. The extent of Mr. Trump’s interventions have become especially evident over the past month.”
January 14 – Bloomberg (Edward Bolingbroke): “Traders focused on options are increasingly pricing out expectations for any Federal Reserve interest rate cuts in 2026, making wagers instead that would pay off if the central bank stays on hold all year. The theme has been in place since at least Friday, when the latest US employment data showed an unexpected drop in the jobless rate. That all but erased the chances of a rate cut at this month’s Fed policy meeting, as measured by market prices, and prompted a growing camp of traders to push back their timing for reductions in the months ahead.”
January 14 – Wall Street Journal (Ed Frankl): “Financial markets aren’t registering increased geopolitical uncertainties that have raised downside risks to economic growth, the European Central Bank’s vice president said… ‘High uncertainty in the global environment does not appear to be reflected in current market pricing,’ Luis de Guindos said in a speech… ‘In fact, negative surprises—such as a re-escalation of trade or other geopolitical tensions, setbacks in artificial-intelligence advances with asset price adjustments or intensifying doubts regarding U.S. fiscal credibility—could trigger abrupt shifts in sentiment, with spillovers across asset classes and geographies,’ he added.”
U.S. Credit Trouble Watch:
January 13 – Bloomberg (Scott Carpenter and Ameya Karve): “US President Donald Trump’s efforts to cut interest rates on credit cards could force lenders to cough up more money to support bonds they’ve sold backed by the debt, weighing on their profits, while also cutting into new issuance of the bonds. Trump last week demanded that credit card companies cap the interest rates they charge at 10% for one year, and later said that companies that ignored him would be ‘in violation of the law.’ Many banks and finance companies bundle their credit card loans into bonds and sell them to investors— there’s a $70 billion market for the securities. If the income from those loans is too low, the lenders can be forced to take steps like injecting capital into the trusts that issue the bonds, or to use payments on the loans to start paying the bonds down, known as early amortization.”
January 10 – Bloomberg (Rainier Harris): “Beneath the calm surface of the US corporate bond market, there are worrying signs about companies that could lose their investment-grade status. The first full week of the year has been one of the busiest for US corporate debt sales on record, and risk premiums stayed low even amid heavy issuance. But the amount of bonds teetering on the brink of junk surged last year, according to JPMorgan… Around $63 billion of US corporate bonds in the high-grade universe have a high-yield rating from one bond grader, a BBB- rating from others, and at least one negative outlook… That figure was $37 billion at the end of 2024, JPMorgan strategists wrote.”
January 14 – Wall Street Journal (Jonathan Weil): “The old maxim ‘Buy low, sell high’ has a cash-flow corollary: ‘Collect early, pay late.’ But it is possible for companies to overdo a good thing. Sometimes the cash-flow benefits of paying late are so wondrous, at least on paper, that investors might be getting a distorted picture of a company’s financial strength and liquidity. Last fall’s collapse of auto-parts supplier First Brands has brought renewed scrutiny to some long-used financial-engineering techniques, especially in the field known as supply-chain finance. There is also more transparency about them now than just a few years ago because of new disclosure requirements.”
January 14 – Bloomberg (John Gittelsohn, Thomas Buckley and Todd Gillespie): “Goldman Sachs… is leading a takeover of a historic Los Angeles studio lot after the owner, Hackman Capital Partners, defaulted on a $1.1 billion mortgage. The Radford Studio Center, a one-time silent movie lot where Gilligan’s Island and Seinfeld were shot, is being returned to lenders led by Goldman after months of failed talks to modify the loan. It was appraised at $1.8 billion in 2021.”
Trump Administration Watch:
January 15 – Financial Times (James Fontanella-Khan, Myles McCormick and Christian Davies): “At a Ford plant in Michigan this week, Donald Trump clashed with an employee heckling him from the factory floor. ‘Fuck you,’ the president mouthed at the man before raising his middle finger. The disruption stirred by the US president’s visit is nothing new for Ford. The carmaker last month took a $19.5bn writedown as it scrapped production of its flagship F-150 all-electric pick-up truck after Trump’s crackdown on the green initiatives… Since returning to the White House last year, Trump has upended entire industries without warning, as he takes the most interventionist approach to business of any president in recent history... Trump’s announcement just after 2026 began that the US would take control of Venezuela’s oil industry sent shares in American refiners soaring on the prospect of a flood of fresh crude. But it also stung executives in the US shale patch, who were already worrying about low crude prices. Even comments on social media can shake corporate behemoths: a… threat last week to ban large investors from buying single-family homes sent homebuilder shares tumbling, while a proposed cap on credit card rates knocked… shares in some big banks.”
January 12 – Wall Street Journal (Nick Timiraos, Sadie Gurman and C. Ryan Barber): “U.S. prosecutors are investigating Federal Reserve Chair Jerome Powell over his testimony last summer about the central bank’s building-renovation project… The Fed received grand jury subpoenas from the Justice Department on Friday that threaten a criminal indictment, the Fed chair said… In an extraordinary video statement Sunday night, Powell called the investigation a pretext as part of President Trump’s continuing campaign to pressure the Fed to lower interest rates, and end the independence of the central bank. ‘This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation,’ Powell said… The investigation marks the most aggressive step yet in Trump’s campaign to bend the traditionally independent central bank to his will.”
January 13 – Bloomberg (Courtney Subramanian): “Jeanine Pirro defended her decision to subpoena the Federal Reserve, saying her investigation should not be seen as an attack on the US central bank’s independence, but rather a signal that nobody in Washington is above the law. Pirro, a former Fox News host who was confirmed as the US attorney for the District of Columbia five months ago, spoke about the inquiry in an interview… with… Sean Hannity. ‘No one is above the law,’ Pirro said, ‘nor should anyone think that they have the right to be above the law’.”
January 13 – Financial Times (Lauren Fedor and Claire Jones): “Jay Powell wrote to senators last July with details about the Federal Reserve’s $2.5bn renovation project, according to a letter seen by the FT, complicating the Trump administration’s claims that he misled Congress. The four-page letter was sent two and a half weeks after the chair of the central bank testified to the Senate banking committee about the project’s cost overruns.”
January 12 – Wall Street Journal (Lindsay Wise, Siobhan Hughes and Anvee Bhutani): “Senate Republicans criticized the Justice Department’s investigation of Federal Reserve Chair Jerome Powell, defending the central bank’s autonomy against what some GOP lawmakers called an overtly political probe by the Trump administration. Senate Majority Leader John Thune (R., S.D.) said he hadn’t seen the allegations against Powell, but ‘they better be real and they better be serious’… The comments from across the GOP caucus marked a prominent public break with the Republican administration, with many seeing preserving the Fed’s independence as a line in the sand. Several GOP lawmakers said they had spoken with Powell and praised his integrity…”
January 13 – Wall Street Journal (Brian Schwartz, Meridith McGraw, Josh Dawsey and Nick Timiraos): “Some Trump administration officials and allies have expressed concern that the Justice Department’s criminal investigation into Federal Reserve Chair Jerome Powell could imperil the president’s nominees in the Senate and rattle financial markets. Among those alarmed about potential fallout was Treasury Secretary Scott Bessent, who called President Trump Sunday night and told him that the investigation could cause several issues for the administration… Bessent was worried about an impact on financial markets and hurdles during the Senate confirmation process for whomever the president selects to be the next Fed chairman once Powell’s term ends in May... Late Sunday… Sen. Thom Tillis (R., N.C.) said he would oppose any Fed nominee put forward by Trump ‘until this legal matter is fully resolved’.”
January 16 – Bloomberg (Kate Sullivan): “President Donald Trump expressed reluctance toward nominating Kevin Hassett as Federal Reserve chair, casting further doubt over his search for the next head of the central bank. Trump… said if Hassett were to leave his post as director of the White House National Economic Council, it would deprive the administration of one of its most powerful messengers on the economy… ‘I actually want to keep you where you are, if you want to know the truth,’ Trump told Hassett... ‘If I move him, these Fed guys — certainly the one we have now — they don’t talk much. I would lose you. It’s a serious concern to me’.”
January 16 – Fox Business (Edward Lawence): “BlackRock executive Rick Rieder discussed several key issues, including the profitability of the Federal Reserve, during an interview for the top job at the central bank, senior administration sources told FOX Business. Other topics discussed during the meeting with Rieder, the chief investment officer of global fixed income at BlackRock, included the importance of monetary policy stability and U.S. debt dynamics, the sources said. The interview was conducted in the Oval Office and included President Donald Trump, Vice President JD Vance, Treasury Secretary Scott Bessent, chief of staff Susie Wiles and deputy chief of staff Dan Scavino. Rieder stands as the only candidate interviewed on the final list who has no Federal Reserve or government experience. People in the room viewed that as a big positive, the sources said.”
January 14 – Reuters (Lefteris Papadimas and Howard Schneider): “Federal Reserve Governor Stephen Miran said… comments from foreign central banks in defense of U.S. central bank chief Jerome Powell were inappropriate, a remark that stood in contrast to an outpouring of public support for Powell... ‘I don’t think it is appropriate for central bankers to get involved in non-monetary policy issues in their own country, and I think it is even less appropriate in other countries,’ Miran told an economic forum in Athens…”
January 12 – Reuters (Bo Erickson): “White House economic adviser Kevin Hassett said… he was not involved in conversations with the Justice Department about its probe into Federal Reserve Chair Jerome Powell… ‘I’ve not been involved in conversations with the Justice Department about that. I’ve not talked to the Justice Department ahead of them contacting Jay and so I don’t really have anything to add, other than I respect the independence of the Fed and the independence of the Justice Department, and we’ll see how it goes,’ Hassett told CNBC’s ‘Squawk Box… ‘Right now, we’ve got a building that’s got like, dramatic cost overruns and plans for the buildings that look inconsistent with the testimony, but again, I’m not a Justice Department person. I hope everything turns out okay for Jay’…”
January 12 – Bloomberg (Wendy Benjaminson): “President Donald Trump said that credit-card lenders would be ‘in violation of the law’ if they don’t heed his call to cap interest rates at 10% for one year. Trump… doubled down on his demand that card issuers lower interest rates to 10% and keep them there for one year. He set a Jan. 20 deadline for compliance.”
January 13 – Bloomberg (John Harney): “President Donald Trump, addressing American voter concerns about rising electricity prices, said his administration had been in talks with Microsoft Corp. to ensure that consumers ‘don’t pick up the tab’ for enormous data centers… He added that while the data centers ‘are key’ to the artificial intelligence boom, the ‘big Technology Companies who build them must ‘pay their own way.’’ He said that Microsoft would make ‘major changes,’ but was not specific. Power prices have risen above the pace of overall inflation, heightening complaints about the cost of energy and other essentials.”
January 11 – Bloomberg (Nancy Cook, Saleha Mohsin, and Joshua Green): “Federal Housing Finance Agency Director Bill Pulte was a driving force behind the Trump administration’s decision to subpoena the Federal Reserve, according to people familiar… Some of Trump’s allies were alarmed by the move, fearing a legal fight aimed at Fed Chair Jerome Powell will upset the bond market… They are also concerned it will discourage Powell from leaving the Fed once his chairmanship ends in May. Powell can remain on as a Fed governor until 2028 and hasn’t yet said whether he intends to leave as is tradition.”
January 11 – Financial Times (Joe Daniels and Steff Chávez): “US President Donald Trump has vowed to cut off Cuba’s supplies of Venezuelan oil, piling pressure on the Communist government in Havana to make a deal. ‘THERE WILL BE NO MORE OIL OR MONEY GOING TO CUBA — ZERO! I strongly suggest they make a deal, BEFORE IT IS TOO LATE,’ Trump wrote… ‘Cuba lived, for many years, on large amounts of OIL and MONEY from Venezuela,’ Trump added. ‘BUT NOT ANYMORE!’ Later on Sunday, Trump said the US was ‘talking to Cuba’ and that he would make public the type of deal he would like from the Caribbean nation ‘pretty soon’.”
January 14 – Wall Street Journal (Michelle Hackman, Robbie Gramer and Vera Bergengruen): “The State Department will indefinitely pause immigrant visa processing for 75 countries as part of the Trump administration’s ongoing effort to block low-income foreigners from immigrating to the U.S. The pause takes effect starting Jan. 21, and will halt visa issuance to people looking to permanently immigrate, typically through marriage, family ties or work sponsorship… The countries affected span the globe and include many in Africa, the Middle East and Latin America. Visa processing will now be paused for Russia, Thailand, Morocco, Colombia and Brazil, among others…”
New World Order Watch:
January 14 – Politico (Max Griera): “EU foreign policy chief Kaja Kallas privately told lawmakers the state of the world meant it might be a ‘good moment’ to start drinking. Kallas told leaders of the political groups in the European Parliament that while she is not much of a drinker now may be the time to start given events around the globe… She was speaking around the same time as foreign ministers from Greenland and Denmark were meeting U.S. Vice President JD Vance and Secretary of State Marco Rubio over Donald Trump’s threats to seize the Arctic island.”
January 15 – Politico (Tim Ross, Zoya Sheftalovich and Nicholas Vinocur): “Faced with a barrage of American threats to grab Greenland, Denmark’s foreign minister and his Greenlandic counterpart flew to Washington for — they hoped — sympathetic talks with Marco Rubio… But their plan for a soothing diplomatic chat escalated into a tense White House head-to-head with the EU’s nemesis, JD Vance… Among the 10 ministers and officials who spoke anonymously to POLITICO…, none regarded Vance as an ally — either in the Greenland talks or for the transatlantic relationship in general. ‘Vance hates us,’ said one European diplomat… The announcement that the vice president would be helming the Washington talks on Greenland alarmed the European side. ‘He’s the tough guy,’ the same diplomat said. ‘The fact that he’s there says a lot and I think it’s negative for the outcome’.”'
January 11 – Bloomberg (Hal Brands): “A superpower is zapping drug boats, on shaky legal premises, and snatching foreign leaders in the dead of night. From Greenland to Ukraine to the Himalayas, strong countries are redrawing — or threatening to redraw — the borders of weaker neighbors. International law and arms control agreements are unraveling as strategic rivalry intensifies. The incidence of armed conflict is surging as curbs on aggression erode. Freedom of navigation has been challenged in crucial waterways, from the Red Sea to the Western Pacific. The rules-based trading system is, increasingly, a thing of the past. The symptoms are many, but the affliction is the same. The world is experiencing a gradual, but accelerating, transition away from the liberal international order of the post-1945 era. Crucial norms and principles are coming undone.”
January 15 – Reuters (Maria Cheng): “Prime Minister Mark Carney hailed… Canada’s improving ties with China as well as the leadership of President Xi Jinping, declaring that their nations were charting a new course in cooperation at a time of global division and disorder. The four-day visit to China was the first by a Canadian prime minister since 2017, following up on Carney’s positive meeting with Xi in South Korea in October. The two are set to meet again on Friday.”
January 10 – Bloomberg (Thomas Seal and Derek Decloet): “For months, many Canadians hoped Donald Trump had lost interest in making their country the 51st US state — his plate full with turning Washington and the global trading system upside down. The shock capture of Venezuelan President Nicolás Maduro and Trump’s ramped-up talk of seizing Greenland have rattled Canada… The administration’s declaration that ‘THIS IS OUR HEMISPHERE’ makes Trump’s earlier comments about annexing Canada seem ever less like mere insults aimed at former Prime Minister Justin Trudeau, or negotiating tactics in his trade war with current PM Mark Carney.”
Venezuela Watch:
January 13 – Bloomberg (Jennifer A. Dlouhy and Kevin Crowley): “When Exxon Mobil Corp. Chief Executive Darren Woods told President Donald Trump… Venezuela is currently ‘uninvestable,’ he was echoing warnings already issued by oil industry leaders and analysts. Indeed, some of his peers had tried to dissuade the White House from even holding the meeting… While Trump wants US companies to invest at least $100 billion rebuilding Venezuela’s beleaguered oil sector following the capture of President Nicolás Maduro, some executives worry conditions won’t permit a speedy turnaround… Woods not only attended the meeting of roughly 20 oil industry executives, he spoke his mind. But Trump didn’t appear to appreciate the candor. By Sunday evening, the president was telling reporters he ‘didn’t like’ Woods’ remarks and was inclined to keep Exxon out of Venezuela, saying, ‘They’re playing too cute’.”
Greenland Watch:
January 13 – Bloomberg (Sara Sjolin): “Greenland’s prime minister categorically ruled out joining the US and said the Arctic territory prefers to be in a union with Denmark, suggesting the island is putting independence plans on the back burner for now. ‘We are now facing a geopolitical crisis, and if we have to choose between the United States and Denmark here and now, then we choose Denmark,’ Prime Minister Jens-Frederik Nielsen said… with Danish Prime Minister Mette Frederiksen in Copenhagen... ‘We choose the Greenland we know today, which is part of the Kingdom of Denmark,’ he said.”
January 14 – Wall Street Journal (Robbie Gramer, Drew Hinshaw and Alex Leary): “President Trump insisted that the U.S. needed to annex Greenland for U.S. national-security interests, saying anything less than American control would be ‘unacceptable.’ Trump made the comments in a social-media post on Wednesday before senior Greenlandic and Danish officials were set to meet with Vice President JD Vance and Secretary of State Marco Rubio… ‘NATO should be leading the way for us to get it. IF WE DON’T, RUSSIA OR CHINA WILL, AND THAT IS NOT GOING TO HAPPEN!’ Trump said… Trump said acquiring Greenland was vital for his ‘Golden Dome’ plan—the $175 billion missile-defense shield he wants to develop before the end of his term.”
January 14 – Politico (Chris Lunday, Victor Jack and Laura Kayali): “Denmark and allied countries said… they will increase their military presence in Greenland as part of expanded exercises, amid intensifying pressure from Washington over the Arctic island’s sovereignty. ‘Security in the Arctic is of crucial importance to the Kingdom and our Arctic allies, and it is therefore important that we, in close cooperation with allies, further strengthen our ability to operate in the region,’ said Danish Defense Minister Troels Lund Poulsen. ‘The Danish Defense Forces, together with several Arctic and European allies, will explore in the coming weeks how an increased presence and exercise activity in the Arctic can be implemented’… Denmark’s defense ministry said additional Danish aircraft, naval assets and troops will be deployed in and around Greenland starting immediately as part of expanded training and exercise activity.”
January 12 – Wall Street Journal (Daniel Michaels): “President Trump’s assertion that the U.S. must own Greenland to expand its defenses there runs counter to decades of policy and undermines the deterrence of its global network of bases and alliances, say former American military and diplomatic officials. Trump has said the U.S. should have full control of the island… In recent days, he has said the U.S. needs to own it to assure Arctic and U.S. security. ‘When we own it, we defend it. You don’t defend leases the same way. You have to own it,’ Trump said... But military officials and diplomats say the U.S. has built the world’s most formidable assembly of overseas military bases without owning foreign soil. The Defense Department manages or uses more than 128 foreign bases in at least 51 countries…”
January 14 – Financial Times (Richard Milne): “The US, Denmark and Greenland will set up a high-level group to discuss the future of the vast Arctic island but ‘fundamental disagreement’ remains between the two sides, according to the Danish foreign minister. Lars Løkke Rasmussen said he and Greenlandic colleague Vivian Motzfeldt had a ‘frank but constructive’ discussion lasting more than an hour with US vice-president JD Vance and secretary of state Marco Rubio… But he added US President Donald Trump continued to insist on ‘conquering’ Greenland, which was ‘totally unacceptable’. The talks marked the first formal meeting between the US, Denmark and Greenland since Trump initially expressed the idea of buying the world’s largest island in 2019. But they failed to bring a diplomatic breakthrough, with Rasmussen saying Denmark and Greenland had ‘red lines’ they could not cross…”
January 13 – Bloomberg (Sara Sjolin): “Greenland’s government said it will intensify efforts to ensure the island’s defenses are managed within the NATO military alliance, pushing back on renewed threats from the US about taking over the territory. ‘All NATO member states, including the United States, share a common interest in the defense of Greenland,’ the prime minister’s office said… ‘The Government coalition in Greenland will therefore, in cooperation with Denmark, work to ensure that dialogue and further development of Greenland’s defense take place within the NATO framework’.”
January 14 – CNBC (Anniek Bao and Dan Murphy): “Any U.S. attempt to seize Greenland by force would trigger ‘monumental consequences’ for the Western alliance and the global order, Iceland’s former President Olafur Ragnar Grimsson said, as… Trump sharpens rhetoric on controlling the Arctic territory. Grimsson warned on CNBC’s ‘Access Middle East’ that ‘the fallout would be on a scale that we have never seen in living memory.’ Grimsson, the longest-serving president of Iceland from 1996 to 2016, currently serves as the Chairman of the Arctic Circle, the world’s largest annual gathering on Arctic issues.”
January 14 – New York Times (Jeffrey Gettleman and Maya Tekeli): “Pipaluk Lynge knows the history of how Indigenous people have been treated in the United States. And she’s well aware of the holes in the country’s health care system and its yawning economic inequality. Ms. Lynge, one of Greenland’s top officials and the leader of the Parliament’s foreign and security policy committee, chafes at President Trump’s offer to buy Greenland... ‘We’re not going to sell our soul,’ she said. ‘We’re not stupid.’ As President Trump seems to toy with Greenland’s fate, a kaleidoscope of feelings swirl in Greenland itself. People are shocked, angry, confused, humiliated, insulted and, most of all, scared.”
Iran Watch:
January 13 – Wall Street Journal (Jared Malsin): “The biggest harbinger that things were about to fall apart in Iran didn’t come from the thwarted anger of the country’s opposition or the frustrated hopes of young people hungry for more personal freedom. It came from the collapse of a bank. Late last year, Ayandeh Bank, run by regime cronies and saddled with nearly $5 billion in losses on a pile of bad loans, went bust. The government folded the carcass into a state bank and printed a massive amount of money to try to paper over all the red ink. That buried the problem but didn’t solve it. Instead, the failure became both a symbol and an accelerant of an economic unraveling that ultimately triggered the protests that now pose the most significant threat to the regime since the founding of the Islamic Republic half a century ago.”
January 13 – Axios (Barak Ravid): “President Trump called on the Iranian people… to ‘keep protesting’ and ‘take over’ government institutions. This is the most explicit backing Trump has given to the idea of toppling the Iranian regime since the protests started more than two weeks ago. While Trump said ‘help is on its way,’ he didn’t say what form it would take… ‘Iranian Patriots, KEEP PROTESTING - TAKE OVER YOUR INSTITUTIONS!!! Save the names of the killers and abusers. They will pay a big price,’ Trump wrote…”
January 13 – Financial Times (Steff Chávez, Abigail Hauslohner and Raya Jalabi): “Donald Trump has said that ‘HELP IS ON ITS WAY’ for protesters in Iran as he urged them to take over the country’s institutions, in his strongest signal yet that the US could intervene in the Islamic republic. In a post…, the US president added that he had cancelled ‘all meetings’ with Iranian officials until the killings of the protesters had stopped. ‘Iranian Patriots, KEEP PROTESTING — TAKE OVER YOUR INSTITUTIONS!!!’ Trump wrote. ‘Save the names of the killers and abusers. They will pay a big price… HELP IS ON ITS WAY.’ Trump has been weighing a possible military intervention in Iran, where nationwide demonstrations erupted in late December over the regime’s failure to stabilise the economy. Officials in western capitals believe the US is stepping up preparations for an attack. Asked whether US allies should evacuate Iran, Trump said: ‘They should get out… It’s a good idea’.”
January 14 – Associated Press (Jon Gambrell and Farnoush Amiri): “Iranian officials signaled Wednesday that fast trials and executions lay ahead for suspects detained in nationwide protests while the Islamic Republic promised a ‘decisive response’ if the U.S. or Israel intervene in the domestic unrest. The threats emerged as some personnel at a key U.S. military base in Qatar were advised to evacuate by Wednesday evening…”
China Trade War Watch:
January 14 – Bloomberg: “Donald Trump’s tariff war occupied US allies for much of last year. Now, President Xi Jinping is welcoming a procession of leaders looking to mend fences with the world’s other major economy. South Korea’s Lee Jae Myung kicked off the trend this month, cementing an improvement in ties by becoming his nation’s first president to visit China since 2019. Canada’s Mark Carney followed suit…, closing a near-decade gap in leader-to-leader diplomacy between Ottawa and Beijing in the Asian nation. Days later, Prime Minister Keir Starmer is set to travel to the Chinese capital to buoy British business, marking a first since 2018. Germany’s chancellor, Friedrich Merz is also expected to visit next month.”
January 14 – Associated Press (Chan Ho-Him): “China’s trade surplus surged to a record of almost $1.2 trillion in 2025…, as exports to other countries made up for slowing shipments to the U.S. under… Trump’s onslaught of higher tariffs. China’s exports rose 5.5% for the whole of last year to $3.77 trillion… Imports flatlined at $2.58 trillion. The 2024 trade surplus was over $992 billion. In December, China’s exports climbed 6.6% from the year before in dollar terms… For the whole of 2025, China’s exports to the U.S. fell 20%. In contrast, exports to Africa surged 26%. Those to Southeast Asian countries jumped 13%; to the European Union 8%, and to Latin America, 7%.”
January 12 – Bloomberg: “US President Donald Trump’s announcement of new tariffs on goods from countries trading with Iran risks derailing his one-year trade truce with China, the world’s top buyer of Iranian oil. ‘Any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America,’ Trump posted… The levy is ‘effective immediately,’ he added, without elaborating on the scope or implementation of the charges…”
January 11 – Bloomberg (Jenny Leonard, Haze Fan, and Sarah Jacob): “An effort by Europe to stand up to China and retain local technology is approaching a breaking point. In a fight over a critical link in the global supply chain, chipmaker Nexperia BV was wrested away from its Chinese owner by a Dutch court and now one of the leaders in so-called legacy chips is racing to defend its independence... By pushing back over Nexperia, Europe aims to ‘set a precedent for what ‘de-risking’ means,’ said Benedetta Girardi, program coordinator at the Hague Centre for Strategic Studies, referring to Europe’s objective of reducing dependencies on China.”
Trade War Watch:
January 16 – Bloomberg (Sanne Wass and Sara Sjolin): “President Donald Trump threatened fresh tariffs on goods from nations that oppose his push to take control of Greenland, stepping up his rhetoric while Denmark hosted US lawmakers on its home turf following meetings in Washington this week. ‘I may put a tariff on countries if they don’t go along with Greenland, because we need Greenland for national security,’ Trump said…”
January 12 – CNBC (Kevin Breuninger): “President Donald Trump… said any country doing business with Iran will face a 25% tariff ‘on any and all business being done with the United States of America.’ That new tariff on imports from Iran’s trading partners is ‘effective immediately,’ Trump said... ‘This Order is final and conclusive. Thank you for your attention to this matter!’ he wrote.”
Constitution Watch:
January 15 – Associated Press (Steve Karnowski, Alanna Durkin Richer, Hallie Golden and Aamer Madhani): “President Donald Trump… threatened to invoke the Insurrection Act and deploy troops to quell persistent protests against the federal officers sent to Minneapolis to enforce his administration’s massive immigration crackdown… Trump has repeatedly threatened to invoke the rarely used federal law to deploy the U.S. military or federalize the National Guard for domestic law enforcement… ‘If the corrupt politicians of Minnesota don’t obey the law and stop the professional agitators and insurrectionists from attacking the Patriots of I.C.E., who are only trying to do their job, I will institute the INSURRECTION ACT, which many Presidents have done before me, and quickly put an end to the travesty that is taking place in that once great State,’ Trump said…”
January 12 – Bloomberg (Craig Stirling): “The Trump administration’s new legal assault on the Federal Reserve further threatens independence and makes it harder for the central bank’s next chief to do their job, according to Scope Ratings…. The European credit assessor observed that the criminal probe into Chair Jerome Powell is another example of the sort of policy that prompted the company to cut the country in October to its fourth-highest rung, placing it on the same level as France. ‘This reflects one of the main negative drivers for the downgrade of the US sovereign rating to AA-,’ said Eiko Sievert, Scope’s executive director for sovereign and public sector. ‘The legal action the central bank is now facing further intensifies the growing political and legal pressure from the executive branch on the independence and credibility of a key pillar of US governance’.”
January 12 – Associated Press (Michael Kunzelman): “Democratic Sen. Mark Kelly sued the Pentagon… over attempts to punish him for his warnings about illegal orders, claiming the Trump administration trampled on his constitutional rights to free speech. Kelly, a former U.S. Navy pilot who represents Arizona, is seeking to block his censure last week from Defense Secretary Pete Hegseth, who said he censured Kelly over his participation in a video that called on troops to resist unlawful orders.”
January 14 – Axios (Sara Fischer): “The FBI searched the home and devices of Washington Post reporter Hannah Natanson, who covers the Trump administration’s reshaping of the federal government… Searching a journalist’s home is an extraordinary step — even past administrations that aggressively pursued leak investigations stopped short of raiding reporters' homes. According to the Washington Post, Natanson was at her Virginia home when agents arrived. The FBI warrant said the search was part of an investigation into a Maryland system administrator accused of ‘accessing and taking home classified intelligence reports,’ per the affidavit…”
Budget Watch:
January 9 – Reuters (David Lawder): “The U.S. Treasury has more than adequate funds to pay any tariff refunds ordered if the Supreme Court rules against President Donald Trump's emergency tariffs, but any repayments would be spread out over weeks or even a year, U.S. Treasury Secretary Scott Bessent told Reuters… He added that any negative ruling may not be a simple yes-or-no result, but something more nuanced that could complicate the refund process. ‘It won't be a problem if we have to do it, but I can tell you that if it happens - which I don't think it's going to - it's just a corporate boondoggle,’ Bessent said.”
U.S./Russia/China/Europe/Iran Watch:
January 11 – Reuters (Michael Martina, Trevor Hunnicutt and David Brunnstrom): “Among the many goals of last week's U.S. military operation that captured Venezuelan President Nicolas Maduro was to send China a message: stay away from the Americas. For at least two decades, Beijing has sought to build influence in Latin America, not only to pursue economic opportunities but to gain a strategic foothold on the doorstep of its top geopolitical rival. China’s progress… has been an irritant for successive U.S. administrations, including that of Donald Trump. Several Trump administration officials told Reuters the U.S. president’s move against Maduro was intended in part to counter China’s ambitions, and Beijing’s days of leveraging debt to get cheap oil from Venezuela were ‘over’.”
January 13 – Wall Street Journal (Lingling Wei): “The U.S. ouster of the Venezuelan strongman Nicolás Maduro is forcing Beijing into a high-stakes recalculation of its ambitions in a region that looks like America’s backyard again, said people close to internal discussions in the Chinese leadership. For years, China made inroads into Latin America, coaxing countries to abandon support for Taiwan with loans to build roads, ports and rail lines, making significant purchases of commodities like soybeans and oil, and mining metals such as copper. Maduro was its most important ally, an anti-American leader with oil resources, earning Venezuela the rare distinction of an ‘all-weather’ partnership—China’s highest diplomatic honor and a status held by no other country in Latin America. Now, Beijing is no longer seeking to make new advances into the region in the near term, the people said. Instead, the discourse in China’s policymaking circles has shifted toward a potential trade-off: If the Western Hemisphere belongs to the Americans, then the Taiwan Strait belongs to the Chinese.”
Ukraine War Watch:
January 14 – Bloomberg (Derek Wallbank): “President Donald Trump faulted Ukraine’s leader Volodymyr Zelenskiy as the main obstacle to an agreement to end the war Russia launched against his country four years ago. Trump… described Russian President Vladimir Putin as ‘ready to make a deal,’ Reuters reported. When pressed on what was impeding a deal, Trump replied, ‘Zelenskiy,’ Reuters said… Trump’s comments mark a shift from recent weeks in which he had expressed growing frustration with Putin amid a year-end frenzied diplomatic push to end the war.”
January 13 – Associated Press (Illia Novikov): “Russia launched a second major drone and missile bombardment of Ukraine in four days…, aiming again at the power grid amid freezing temperatures in an apparent snub to U.S.-led peace efforts as Moscow’s invasion of its neighbor approaches the four-year mark. Russia fired almost 300 drones, 18 ballistic missiles and seven cruise missiles at eight regions overnight, Ukrainian President Volodymyr Zelenskyy said…”
AI Bubble/Arms Race Watch:
January 14 – Reuters (Jonathan Stempel and Stephen Nellis): “Oracle was sued… by bondholders who say they suffered losses because the company chaired by billionaire Larry Ellison failed to disclose it needed to sell significant additional debt to build out its artificial intelligence infrastructure. The proposed class action was filed… in Manhattan on behalf of investors who bought $18 billion of notes and bonds that Oracle issued on Sept. 25, two weeks after Oracle announced a $300 billion, five-year contract to supply OpenAI with computing power.”
January 12 – Financial Times (Cristina Criddle): “Microsoft has warned that US AI groups are being outpaced by Chinese rivals in the battle for users outside the west, as China combines low-cost ‘open’ models with hefty state subsidies to gain an edge. Brad Smith, Microsoft’s president, told the FT that the rapid adoption of Chinese AI start-up DeepSeek’s technology in emerging markets such as Africa underscores the competition American groups face around the world. ‘We have to recognise that right now, unlike a year ago, China has an open-source model, and increasingly more than one, that is competitive,’ he said. ‘They benefit from subsidisation by the Chinese government. They benefit from subsidies that enable [them] to basically undercut American companies based on price’.”
January 13 – Bloomberg (Will Wade and Naureen S Malik): “New York plans to require data center operators to shoulder more of the cost of powering their energy-hungry facilities, aiming to prevent surging electricity demand from pushing up household utility bills. Under a new initiative Governor Kathy Hochul is unveiling Tuesday, large power users that don’t deliver significant job growth or other benefits to the state would be required to either generate their own electricity or pay more for energy from the grid. The initiative seeks to balance protections for ratepayers with the state’s push to attract data centers and other electricity-intensive industries to support economic growth.”
Bubble and Mania Watch:
January 15 – Axios (Madison Mills): “Young people who are anxious about their jobs in an AI future are hedging that by investing in the stock market, according to a study by the Oliver Wyman Forum of 300,000 investors since 2020. Young investors often favor vibes and momentum over fundamentals… Many younger investors ‘don’t believe traditional milestones will bring security,’ such as buying a home or staying at a job for a long time, Ana Kreacic, chief operating officer of the Oliver Wyman Forum, tells Axios. Gen Z’s desire for independence has led to a boom in investing among the young cohort. They have a sense of urgency over having more money right now, potentially leaving novice traders with a false impression of what their returns should look like.”
January 16 – Bloomberg (Preeti Singh): “Secondary deal volume for private assets surged 41% to a record $226 billion last year, Evercore Inc. said…, as investors got more creative about tapping that market for liquidity. The growth stems from innovation in deal structures and the sustained need for cash — and it has further expanded beyond buyouts… Private credit secondaries hit record levels of fundraising and activity, and continued expansion in infrastructure and venture have diversified the market... Portfolio sales by investors in private asset firms, known as limited partners, increased about 35% from last year to $120 billion and remain a primary driver of secondary activity.”
January 14 – Financial Times (Zehra Munir): “New York’s luxury office market is booming as flourishing financial services, legal and technology companies seek comfort and space for their employees, according to data from real estate brokers. The number of leases signed for Manhattan office space priced at $100 or more per sq ft rocketed to an all-time high last year, according to… JLL and CBRE. The move to snap up luxury office space is being driven by a fierce desire to attract talent and pull more employees back to the office.”
January 13 – Bloomberg (Katherine Doherty and Paula Seligson): “Trading revenue at market-making firm Hudson River Trading rose in 2025 toward a record level as volatile markets helped lift results globally for companies that step in to match buyers and sellers. Initial estimates show the firm generated about $12.3 billion in net trading revenue in 2025…”
Inflation Watch:
January 16 – Axios (Courtenay Brown and Megan Morrone): “The world is on the cusp of a generation-defining construction boom, but the U.S. may not have enough workers to make it happen, BlackRock warns... This is the new fault line of the global economy — soaring demand for some workers and shrinking appetite for others… The world is entering what could be the greatest period of construction in human history — needing as much as $85 trillion in new infrastructure over the next 15 years. Fueling the construction boom are the AI buildout and a fresh push to bring manufacturing facilities onshore and upgrade aging infrastructure. ‘The world is entering what could be the greatest period of construction in human history,’ Sandra Lawson, BlackRock managing director of corporate affairs, writes... ‘[L]abor could be a potential constraint if the world cannot train workers quickly enough,’ the report says.”
January 12 – Wall Street Journal (Katherine Blunt and Jennifer Hiller): “America’s AI boom is pushing the nation’s largest power-grid operator to the brink of a supply crisis. Sixty-seven million people in a 13-state region stretching from New Jersey to Kentucky get their power from a market operated by nonprofit PJM. So, too, do the many AI data centers springing up in Northern Virginia’s ‘Data Center Alley’… Rates are going up for consumers. Older power plants are going out of service faster than new ones can be built. And the grid’s capacity is in danger of maxing out during periods of high demand, which could force PJM to call for rolling blackouts… Mark Christie, former chairman of the Federal Energy Regulatory Commission, said that a few years ago he considered the PJM blackout threat to be on the horizon. ‘Now I’m saying that the reliability risk is across the street,’ he said.”
January 13 – CNBC (Jeff Cox): “Core U.S. consumer prices rose less than predicted in December… Excluding volatile food and energy prices, the consumer price index showed a seasonally adjusted 0.2% gain on a monthly basis and 2.6% annually… Shelter, a key element of stickiness, increased 0.4%, which was the biggest item for the monthly increase… The category accounts for more than one-third of the CPI weighting and was up 3.2% on an annual basis. Other parts of the report also showed inflation persisting. Food prices jumped 0.7% for the month, though egg prices tumbled 8.2%... Other areas seeing increases included recreation, airfares and medical care.”
January 14 – NPR (Alina Selyukh and Connie Hanzhang Jin): “The cost of living in the U.S. rose 2.7% in December compared with a year before… Since 2018, NPR has tracked the prices of dozens of items at this suburban Walmart superstore… Prices in NPR’s basket rose 5% on average last year. Almost half the items on NPR’s shopping list got more expensive in 2025, including shrimp, Oreo cookies, Coca-Cola and Dove soap. Some price increases, notably on items made in China and Vietnam, appear to be tariff related. Other price hikes had to do with weather events affecting harvests of crops such as cacao and coffee beans. Just under a quarter of the items on NPR's list got cheaper, including eggs, milk and Cheerios. And many packaged foods stayed the same after years of price hikes.”
January 14 – Axios (Courtenay Brown and Tasha Tsiaperas): “Groceries still aren’t getting cheaper. Grocery prices rose at the fastest pace in three years, keeping pressure on household budgets even as overall inflation held steady in December. Grocery prices… rose by 0.7% in December, the largest monthly gain since the peak inflation period in August 2022. Grocery prices were up roughly 2.4% nationwide in December compared with the prior year. But that masks double-digit price increases for a slew of household staples over the past 12 months, including coffee (+20%), beef (+16%) and candy (+10%). There is some relief elsewhere in the grocery store: Egg prices, for instance, are down more than 20% from a year ago, with an 8% decline in December alone.”
January 14 – Associated Press (Paul Wiseman): “U.S. wholesale prices rose modestly in November… The… producer price index — which measures inflation before it reaches consumers — rose 0.2% in November from October and 3% from a year earlier… Gasoline prices rose sharply in November. Excluding volatile food and energy prices, so-called core wholesale prices were unchanged from October and up 3% from November 2024.”
January 14 – New York Times (Kevin Draper and Julie Creswell): “Days away from the first anniversary of President Trump’s second term in office, grocery prices are still rising, undercutting his administration’s rhetoric about how it is making life more affordable for average Americans. The price of beef has risen 16.4% over the last year. The price of coffee is up a whopping 19.8%. The price of lettuce is up 7.3% and frozen fish 8.6%.”
January 12 – Bloomberg (Ilena Peng): “Florida’s orange harvest is expected to fall to the lowest in nearly a century, as shrinking groves continue to offset improvements in yields. The state is seen producing 12 million boxes of fruit in the 2025-26 season, down 2% from the prior year... That output, the lowest since 1930, comes as Florida’s historical orange groves continued to be removed following years of disease and the impacts of Hurricane Milton at the end of 2024.”
Federal Reserve Watch:
January 12 – Financial Times (Katie Martin): “Unscheduled weekend statements from the Federal Reserve are, to put it mildly, not generally a good sign. In the past couple of decades, they have been rare, and have come only in response to dire emergencies: the collapses of Bear Stearns and then of Lehman Brothers in 2008, the Covid pandemic of 2020 and the failure of several US regional banks in 2023. On each occasion, the US central bank has scrambled together a statement to show leadership and action before markets open in response to a serious crisis. It is well worth viewing Sunday’s video from Fed chair Jay Powell through that lens. The Fed is under attack. This is not a drill.”
January 12 – Financial Times (Claire Jones and Myles McCormick): “The criminal probe into Jay Powell by US prosecutors has galvanised the Federal Reserve’s top leaders to resist President Donald Trump’s attacks and could push the chair to remain a governor until 2028, officials say… ‘People inside the Fed will view this development as really alarming and see it as a statement that Trump absolutely intends to gain control over monetary policy,’ said Janet Yellen… ‘Those that are worried about threats to independence may be more inclined to stay so that there are fewer seats available for Trump to gain control of the board,’ Yellen added.”
January 15 – CNBC (Jeff Cox): “Chicago Federal Reserve President Austan Goolsbee expressed caution Thursday about recent attacks on the central bank and Chair Jerome Powell, saying they could adversely affect inflation. ‘Anything that’s infringing or attacking the independence of the central bank is a mess,’ Goolsbee said… ‘You’re going to get inflation come roaring back if you try to take away the independence of the central bank’.”
January 14 – New York Times (Colby Smith): “Neel T. Kashkari, president of the Federal Reserve Bank of Minneapolis, said the Trump administration’s actions against the central bank in the past year were ‘really about monetary policy,’ as he came to the defense of Jerome H. Powell… ‘The escalation over the course of the past year is really about monetary policy,’ Mr. Kashkari said… ‘I thought the chairman explained that accurately’.”
January 15 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Kansas City President Jeff Schmid said interest rates should stay at a level where they continue to put some pressure on the economy so that inflation can cool further. ‘With inflation pressures still evident, my preference would be to keep monetary policy modestly restrictive,’ Schmid said… ‘And while the labor market has cooled, some cooling is likely necessary to keep the inflation outlook from worsening,’ he said.”
January 13 – Bloomberg (Catherine Lucey): “President Donald Trump dismissed Jamie Dimon’s criticism over the Justice Department probe into the Federal Reserve, saying the JPMorgan… chief executive officer was ‘wrong’ to suggest he was undermining the independence of the central bank. ‘I think it’s fine what I’m doing,’ Trump said. ‘And we have a bad Fed person.’ Earlier Tuesday, Dimon expressed concern about the investigation into Fed Chair Jerome Powell over the cost of the central bank’s headquarters renovation and his subsequent congressional testimony about the project. ‘Everyone we know believes in Fed independence,’ Dimon said. ‘And anything that chips away at that is probably not a great idea. And in my view, will have the reverse consequences. It’ll raise inflation expectations and probably increase rates over time’.”
January 12 – Bloomberg (Carter Johnson): “Strategists and economists at JPMorgan… no longer expect the Federal Reserve to cut interest rates this year and see a rate hike next year, a forecast change made in response to December employment data… ‘We now expect the Fed to stay on hold throughout 2026, though with the market unwilling to price out labor market weakness and attention occupied by the Fed chair race, additional front-end premium may persist for a few months’…”
U.S. Economic Bubble Watch:
January 12 – Axios (Jim VandeHei and Mike Allen): “The nation is splitting into three distinct economic realities: the Have-Nots (stalling) ... the Haves (coasting) ... and the Have-Lots (rocketing to greater wealth). This isn’t just about ‘inequality.’ It’s about a structural shift where the growing number of hyperwealthy are profiting wildly off the AI revolution — through exclusive access to private deals, massive investment power, governmental connections, and equity stakes that ‘normal’ investors can’t touch. This shift, if it holds, will rattle economics, politics and AI throughout 2026 and beyond. We’re already seeing it in rising inequality, pessimism about the future and AI opposition. It’s human nature to judge your personal economics and mood on how you feel, influenced heavily by conscious and subconscious comparisons to others… It’s also possible the AI bubble pops, and everyone suffers. But the Have-Lots will (mostly) still have lots.”
January 15 – Bloomberg (Amara Omeokwe and Enda Curran): “Economic activity picked up at a ‘slight to modest pace’ in most parts of the US since mid-November, the Federal Reserve said in its Beige Book… ‘This marks an improvement over the last three report cycles where a majority of districts reported little change,’ the report said… Employment levels were mostly unchanged in eight of the Fed’s 12 regional districts. Wages grew at a ‘moderate’ pace, with ‘multiple contacts reporting that wage growth had returned to ‘normal’ levels’… A majority of districts saw prices grow at a ‘moderate’ rate. Still, ‘several contacts that initially absorbed tariff-related costs were beginning to pass them on to customers as pre-tariff inventories became depleted or as pressures to preserve margins grew more acute,’ the report said.”
January 14 – Associated Press (Anne D’Innocenzio): “Shoppers increased their spending in November from October as holiday shopping kicked into full gear. Retail sales rose a better-than-expected 0.6% in November, following a revised 0.1% decline October… A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose in November by a solid 0.4%, a sign that consumers are still spending on discretionary items.”
January 12 – Wall Street Journal (Don Nico Forbes): “Small-business confidence in the U.S. rose in December, driven by a jump in those expecting better business conditions going forward. The National Federation of Independent Business said… its small-business optimism index rose to 99.5, compared with 99.0 in November. The figure remains above the index’s long-term average of 98.”
January 13 – Bloomberg (Vince Golle): “US mortgage rates slid last week to one of the lowest levels in years… The contract rate on a 30-year mortgage dropped 7 bps to 6.18% in the week ended Jan. 9, according to Mortgage Bankers Association data... That’s the lowest reading since September 2024 and one of the lowest since 2022. The rate on a five-year adjustable mortgage plunged nearly a half percentage point to 5.42%, the second-lowest since May 2023.”
January 14 – CNBC (Diana Olick): “Mortgage demand spiked markedly higher last week as consumers returned from the holidays to find overall lower interest rates and then a sharp rate drop Friday on news from the White House… Refinance demand… surged 40% higher for the week and was 128% higher than the same week one year ago… Applications for a mortgage to purchase a home, which are less sensitive to sudden rate changes, rose 16% for the week and were 13% higher than the same week one year ago.”
January 14 – Reuters (Lucia Mutikani): “U.S. existing home sales accelerated in December… Home sales jumped 5.1% last month to a seasonally-adjusted annual rate of 4.35 million units... Home sales increased 1.4% on a year-over-year basis. ‘In the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth,’ Lawrence Yun, the NAR’s chief economist, said... ‘Inventory levels remain tight, with fewer sellers feeling eager to move, homeowners are taking their time deciding when to list or delist their homes’… The inventory of existing homes rose 3.5% from a year ago to 1.18 million units in December. At December’s sales pace, it would take 3.3 months to exhaust the current inventory of existing homes… The median existing home price last month increased 0.4% from a year ago to $405,400.”
January 13 – Bloomberg (Michael Sasso): “Sales of new homes in the US were little changed in October near the strongest pace since 2023 as builders lured anxious customers with price cuts and incentives. New single-family home sales eased 0.1% to an annual rate of 737,000 following a 3.8% September increase… New-home inventory was unchanged at 488,000 units in October from a month earlier, still near the highest since 2007… In December, 67% of homebuilders reported using sales incentives, a record in the post-Covid period, while a still-high 40% reported cutting prices…”
China Watch:
January 15 – Bloomberg: “Chinese banks extended the smallest amount of new loans since 2018 last year despite an uptick in December, in a reflection of sluggish demand from borrowers that’s weighing on growth. Financial institutions provided 908 billion yuan ($130bn) of new yuan loans in December… That far exceeded forecasts and was more than double the total in November. Still, for all of 2025, new loans reached a seven-year low of 16.27 trillion yuan. Aggregate financing, a broad measure of credit, increased 2.2 trillion yuan in the month, compared with a median forecast of 1.9 trillion yuan.”
January 15 – Reuters (Colleen Howe): “China’s State Grid will spend 4 trillion yuan ($574bn) to upgrade the country’s power grid between 2026 and 2030, state-run Xinhua news agency said… That is a 40% jump in fixed-asset investments from the previous five-year period…, as China ramps up wind and solar capacity to meet its goal of peaking its carbon emissions by 2030.”
Central Banker Watch:
January 13 – Reuters (Francesco Canepa): “The chiefs of many of the world’s major central banks issued a joint statement in support of Federal Reserve chair Jerome Powell on Tuesday after the Trump administration threatened him with a criminal indictment. ‘We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,’ the heads of the European Central Bank, the Bank of England and nine other institutions said. ‘The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve,’ they added.”
Europe Watch:
January 14 – Bloomberg (Lionel Laurent): “Marine Le Pen is changing tack — and not for the first time. After a combative and fiery reaction to her five-year election ban over an embezzlement case last year, the French far-right leader is taking a more conciliatory approach in her appeal… Her troubles haven’t hurt her Rassemblement National party in the slightest, and she appears to have a ready-made heir. US President Donald Trump and his MAGA acolytes will be following the fortunes of their nationalist fellow traveler closely at a critical political moment for France and Europe. They’ll barely be able to contain their glee.”
Japan Watch:
January 12 – Bloomberg (Sakura Murakami, Yoshiaki Nohara and Alice French): “Japanese Prime Minister Sanae Takaichi’s reported plan for a snap election fueled a rally in stocks while pushing down bonds and driving the yen deeper into the intervention-risk zone. Success at the polls for Takaichi, who ascended to the premiership in October, would provide a mandate for her to continue hawkish diplomacy and pro-stimulus policies.”
January 13 – Bloomberg (John Cheng): “Japan’s five-year government bond auction drew the weakest demand since August as expectations that Prime Minister Sanae Takaichi will call a snap election reinforced concerns over increased debt issuance. Bond futures slid after the sale’s bid-to-cover ratio came in at 3.08, down from 3.17 at the previous offering in December and below the 12-month average of 3.54. Ahead of the results, yields on five-year bonds rose to 1.615%, the highest since the debt’s debut in 2000… Takaichi’s government plans to unveil a record initial budget for the fiscal year starting in April.”
Leveraged Speculation Watch:
January 16 – Bloomberg (Felice Maranz): “Shares of Fannie Mae and Freddie Mac extended days-long losing streaks amid mounting unease about the impact of President Donald Trump’s policy moves on efforts to release the mortgage-finance giants from government control. Fannie and Freddie common stock both sank around 12% in Friday trading, closing at the lowest levels since August. Fannie fell for a fifth day, and Freddie dropped for a seventh day.”
January 12 – Bloomberg (Justina Lee): “Even in the most vanilla corners of institutional money management, an appetite for leverage is quietly returning. Known as equity extensions, these strategies can turn a $100 investment into $130 in long bets and $30 in shorts — giving managers more room to express their views by scaling up favored stock-market positions and betting against others… Nearly two decades after the financial crisis discredited all manner of complex trades, this assertive style of active investing is making a comeback. Assets in extensions hit $152.6 billion at the end of September… — more than double their total from three years ago and on pace for the biggest annual increase in at least a decade.”
Social, Political, Environmental, Cybersecurity Instability Watch:
January 12 – Bloomberg (Stephan Kahl): “Never before has the insurance industry faced such big losses tied to floods, severe thunderstorms and wildfires, according to a fresh study that links rising temperatures to increasingly dangerous weather patterns. Insured losses for so-called non-peak perils — also sometimes referred to as secondary perils — reached a record $98 billion last year, Munich Re said.... Overall insured losses from natural disasters, including peak perils such as hurricanes, were $108 billion, it said.”
January 14 – Financial Times (Susannah Savage): “In the early 18th century, Finland was familiar with the fear of hunger. A famine fuelled by an unpredictable climate had killed off a third of the population in the 1690s. The Great Northern War with Russia further disrupted farming, as well as everything else, in the first 20 years of the century. So in 1726, the country began setting aside grain to ensure it could feed the population in case of emergency. Long winters, a short growing season and disruption from clashing empires demanded it. Three centuries later, that logic is shaping policy far beyond Finland… From Sweden and Norway to India and Indonesia, states are holding back increasing quantities of rice, wheat and other staples as insurance against a world they increasingly view as unstable.”
The S&P500 slipped 0.4% (up 1.4% y-t-d), and the Dow dipped 0.3% (up 2.7%). The Utilities rose 2.0% (up 1.5%). The Banks fell 1.7% (up 2.2%), while the Broker/Dealers rose 2.3% (up 6.2%). The Transports added 0.3% (up 5.1%). The S&P 400 Midcaps gained 1.3% (up 6.1%), and the small cap Russell 2000 rose 2.0% (up 7.9%). The Nasdaq100 declined 0.9% (up 1.1%). The Semiconductors surged 3.8% (up 11.9%). The Biotechs declined 1.4% (up 2.7%). With bullion rising $87, the HUI gold index jumped 5.1% (up 14.3%).
Three-month Treasury bill rates ended the week at 3.55%. Two-year government yields rose five bps to 3.59% (up 11bps y-t-d). Five-year T-note yields gained seven bps to 3.82% (up 9bps). Ten-year Treasury yields increased six bps to 4.22% (up 6bps). Long bond yields added three bps to 4.84% (down 1bp). Benchmark Fannie Mae MBS yields jumped nine bps to 4.97% (down 7bps).
Italian 10-year yields declined four bps to 3.45% (down 10bps y-t-d). Greek 10-year yields slipped two bps to 3.33% (down 11bps). Spain's 10-year yields fell three bps to 3.22% (down 7bps). German bund yields dipped three bps to 2.84% (up 2bps). French yields added a basis point to 3.52% (down 5bps). The French to German 10-year bond spread widened two to 68 bps. U.K. 10-year gilt yields gained three bps to 4.40% (down 8bps). U.K.’s FTSE equities index rose 1.1% (up 3.0% y-t-d).
Japan’s Nikkei 225 Equities Index jumped 3.8% (up 7.1% y-t-d). Japan’s 10-year “JGB” yields surged another nine bps to 2.19% (up 12bps y-t-d). France’s CAC40 reversed 1.2% lower (up 1.3%). The German DAX equities index was little changed (up 3.3%). Spain’s IBEX 35 equities index increased 0.4% (up 2.3%). Italy’s FTSE MIB index added 0.2% (up 1.9%). EM equities were mixed. Brazil’s Bovespa index increased 0.9% (up 2.3%), and Mexico’s Bolsa index gained 1.6% (up 4.3%). South Korea’s Kospi surged 5.5% (up 14.9%). India’s Sensex equities index was unchanged (down 1.9%). China’s Shanghai Exchange Index slipped 0.4% (up 3.4%). Turkey’s Borsa Istanbul National 100 index jumped 3.8% (up 12.5%).
Federal Reserve Credit declined $6.6 billion last week to $6.533 TN, with a five-week gain of $42.5 billion. Fed Credit was down $2.357 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.806 TN, or 75%. Fed Credit inflated $3.722 TN, or 132%, since November 7, 2012 (688 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt recovered $21.4 billion last week to $3.062 TN. “Custody holdings” were down $179 billion y-o-y, or 5.5%.
Total money market fund assets (MMFA) dropped $74.7 billion to $7.729 TN - with a 24-week surge of $653 billion, or 20% annualized. MMFA were up $868 billion, or 12.6%, y-o-y - having ballooned a historic $3.098 TN, or 66.9%, since October 26, 2022.
Total Commercial Paper slipped $1.5 billion to $1.413 TN. CP has expanded $268 billion, or 23.4%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped 10 bps to 6.06% (down 98bps y-o-y) - the low back to September 2022. Fifteen-year rates fell eight bps to 5.38% (down 89bps) - low since October 2024. Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up a basis point to 6.37% (down 77bps).
Currency Watch:
For the week, the U.S. Dollar Index increased 0.3% to 99.393 (up 1.1% y-t-d). On the upside, the Mexican peso increased 2.0%, the South African rand 0.5%, the New Zealand dollar 0.4%, and the Norwegian krone 0.1%. On the downside, the South Korean won declined 1.1%, the euro 0.3%, the Swiss franc 0.2%, the Swedish krona 0.2%, the British pound 0.2%, the Singapore dollar 0.2%, the Brazilian real 0.1%, and the Australian dollar 0.1%. China's (onshore) renminbi increased 0.11% versus the dollar (up 0.25% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index added 1.3% (up 3.6% y-t-d). Spot Gold jumped 1.9% to $4,596 (up 6.4%). Silver surged 12.9% to $90.1257 (up 25.8%). WTI crude increased 32 cents, or 0.5%, to $59.44 (up 4%). Gasoline added 0.3% (up 4%), while Natural Gas fell 2.1% to $3.103 (down 16%). Copper retreated 1.2% (up 2.6%). Wheat was little changed (up 2%), while Corn slumped 4.7% (down 4%). Bitcoin surged $4,700, or 5.2%, to $95,200 (up 8.6%).
Global Credit and Financial Bubble Watch:
January 16 – Axios (Madison Mills): “The AI buildout is turning into a profit engine for the big banks, as the tech giants tap Wall Street to finance enormous capital spending and AI-fueled stock gains lift trading revenues. Banks are cashing in… across debt underwriting, advisory and trading… Morgan Stanley’s debt underwriting revenue jumped to $785 million in the fourth quarter, up 93% from a year ago — the biggest increase on Wall Street. Tech companies are borrowing aggressively to fund AI infrastructure, especially data centers, with spending hitting over $700 billion in 2025. Morgan Stanley arranged tens of billions of dollars in AI-related debt in the fourth quarter alone, including more than $27 billion tied to Meta’s Hyperion data center… The broader AI boom in the stock market is also helping financial institutions: Trading revenue at Goldman Sachs hit a record high, and rose 10% at Bank of America from the prior year.”
January 14 – Wall Street Journal (Gina Heeb and Alexander Saeedy): “American consumers continued to spend and borrow at a healthy clip at the end of 2025, despite a year marked by uncertainty around job security, tariffs and stubborn inflation. JPMorgan…, Bank of America, Citigroup and Wells Fargo this week collectively reported $28.5 billion in profits for the fourth quarter. That amounted to $123.2 billion for the full year, up nearly 5% from 2024. ‘All of the metrics that we can see tell us the consumer remains resilient and in great shape,’ Bank of America Chief Financial Officer Alastair Borthwick said…”
January 10 – Financial Times (Michelle Chan): “Companies are borrowing in the US bond market at the fastest pace since the Covid-19 pandemic, as Wall Street kicks off what is expected to be a record year of debt sales thanks to AI spending and financing for a wave of mergers. Corporate borrowers raised more than $95bn from 55 investment-grade bond deals in the first full week of January, the highest weekly volume since May 2020 and the busiest start to a year on record, according to LSEG...”
January 15 – Bloomberg (Francesca Veronesi and Kat Hidalgo): “Private credit firms’ efforts to reap leveraged debt business from Wall Street is coming at a steep cost — safeguards that made them less vulnerable to an economic downturn. Once rare, the same kind of permissive terms that are widespread on leveraged loans are becoming increasingly common in the $1.7 trillion private credit market. Large borrowers with more clout are pushing for — and getting — so-called ‘covenant-lite’ terms. And the trend is only set to accelerate, if a spate of recent deals is any indication.”
January 14 – Bloomberg (Rachel Graf and Rainier Harris): “While the broader markets have flinched at every political tremor, the world of risky debt is acting like almost nothing’s wrong. The market for triple C bonds — debt that’s deep into junk territory — is thriving. Companies are seeking new leveraged loans at a clip. Some deals have been so popular that banks are reducing borrowing costs, while others have hastened financing deadlines as they capitalize on robust demand. The resilience underscores the persistent hunt for yield amid expectations that interest rates will remain flat or fall modestly later this year.”
Market Instability Watch:
January 14 – Bloomberg (Sridhar Natarajan): “Donald Trump’s return to the White House unleashed a market rally, dealmaking went into overdrive, and bankers embraced all things Trump to rake in the big money. The new year is offering Wall Street enough reason to worry that the party could be cut short… ‘Nobody in banking thinks it’s going to be beer and skittles forever,’ said Steve Gannon, a financial-services lawyer at Davis Wright Tremaine. ‘It’s a messy intersection of politics and banking policy’.”
January 13 – New York Times (Tony Romm): “Nearly one year since returning to the White House, President Trump has come to embrace a risky economic strategy: using the brute force of government as a way to push down prices that remain stubbornly high. From regulatory threats against private businesses to more punitive actions against policymakers, there appears to be no lever in Washington that Mr. Trump now seems unwilling to pull, even if doing so might exacerbate some of the very economic strains that he is trying to combat. The extent of Mr. Trump’s interventions have become especially evident over the past month.”
January 14 – Bloomberg (Edward Bolingbroke): “Traders focused on options are increasingly pricing out expectations for any Federal Reserve interest rate cuts in 2026, making wagers instead that would pay off if the central bank stays on hold all year. The theme has been in place since at least Friday, when the latest US employment data showed an unexpected drop in the jobless rate. That all but erased the chances of a rate cut at this month’s Fed policy meeting, as measured by market prices, and prompted a growing camp of traders to push back their timing for reductions in the months ahead.”
January 14 – Wall Street Journal (Ed Frankl): “Financial markets aren’t registering increased geopolitical uncertainties that have raised downside risks to economic growth, the European Central Bank’s vice president said… ‘High uncertainty in the global environment does not appear to be reflected in current market pricing,’ Luis de Guindos said in a speech… ‘In fact, negative surprises—such as a re-escalation of trade or other geopolitical tensions, setbacks in artificial-intelligence advances with asset price adjustments or intensifying doubts regarding U.S. fiscal credibility—could trigger abrupt shifts in sentiment, with spillovers across asset classes and geographies,’ he added.”
U.S. Credit Trouble Watch:
January 13 – Bloomberg (Scott Carpenter and Ameya Karve): “US President Donald Trump’s efforts to cut interest rates on credit cards could force lenders to cough up more money to support bonds they’ve sold backed by the debt, weighing on their profits, while also cutting into new issuance of the bonds. Trump last week demanded that credit card companies cap the interest rates they charge at 10% for one year, and later said that companies that ignored him would be ‘in violation of the law.’ Many banks and finance companies bundle their credit card loans into bonds and sell them to investors— there’s a $70 billion market for the securities. If the income from those loans is too low, the lenders can be forced to take steps like injecting capital into the trusts that issue the bonds, or to use payments on the loans to start paying the bonds down, known as early amortization.”
January 10 – Bloomberg (Rainier Harris): “Beneath the calm surface of the US corporate bond market, there are worrying signs about companies that could lose their investment-grade status. The first full week of the year has been one of the busiest for US corporate debt sales on record, and risk premiums stayed low even amid heavy issuance. But the amount of bonds teetering on the brink of junk surged last year, according to JPMorgan… Around $63 billion of US corporate bonds in the high-grade universe have a high-yield rating from one bond grader, a BBB- rating from others, and at least one negative outlook… That figure was $37 billion at the end of 2024, JPMorgan strategists wrote.”
January 14 – Wall Street Journal (Jonathan Weil): “The old maxim ‘Buy low, sell high’ has a cash-flow corollary: ‘Collect early, pay late.’ But it is possible for companies to overdo a good thing. Sometimes the cash-flow benefits of paying late are so wondrous, at least on paper, that investors might be getting a distorted picture of a company’s financial strength and liquidity. Last fall’s collapse of auto-parts supplier First Brands has brought renewed scrutiny to some long-used financial-engineering techniques, especially in the field known as supply-chain finance. There is also more transparency about them now than just a few years ago because of new disclosure requirements.”
January 14 – Bloomberg (John Gittelsohn, Thomas Buckley and Todd Gillespie): “Goldman Sachs… is leading a takeover of a historic Los Angeles studio lot after the owner, Hackman Capital Partners, defaulted on a $1.1 billion mortgage. The Radford Studio Center, a one-time silent movie lot where Gilligan’s Island and Seinfeld were shot, is being returned to lenders led by Goldman after months of failed talks to modify the loan. It was appraised at $1.8 billion in 2021.”
Trump Administration Watch:
January 15 – Financial Times (James Fontanella-Khan, Myles McCormick and Christian Davies): “At a Ford plant in Michigan this week, Donald Trump clashed with an employee heckling him from the factory floor. ‘Fuck you,’ the president mouthed at the man before raising his middle finger. The disruption stirred by the US president’s visit is nothing new for Ford. The carmaker last month took a $19.5bn writedown as it scrapped production of its flagship F-150 all-electric pick-up truck after Trump’s crackdown on the green initiatives… Since returning to the White House last year, Trump has upended entire industries without warning, as he takes the most interventionist approach to business of any president in recent history... Trump’s announcement just after 2026 began that the US would take control of Venezuela’s oil industry sent shares in American refiners soaring on the prospect of a flood of fresh crude. But it also stung executives in the US shale patch, who were already worrying about low crude prices. Even comments on social media can shake corporate behemoths: a… threat last week to ban large investors from buying single-family homes sent homebuilder shares tumbling, while a proposed cap on credit card rates knocked… shares in some big banks.”
January 12 – Wall Street Journal (Nick Timiraos, Sadie Gurman and C. Ryan Barber): “U.S. prosecutors are investigating Federal Reserve Chair Jerome Powell over his testimony last summer about the central bank’s building-renovation project… The Fed received grand jury subpoenas from the Justice Department on Friday that threaten a criminal indictment, the Fed chair said… In an extraordinary video statement Sunday night, Powell called the investigation a pretext as part of President Trump’s continuing campaign to pressure the Fed to lower interest rates, and end the independence of the central bank. ‘This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation,’ Powell said… The investigation marks the most aggressive step yet in Trump’s campaign to bend the traditionally independent central bank to his will.”
January 13 – Bloomberg (Courtney Subramanian): “Jeanine Pirro defended her decision to subpoena the Federal Reserve, saying her investigation should not be seen as an attack on the US central bank’s independence, but rather a signal that nobody in Washington is above the law. Pirro, a former Fox News host who was confirmed as the US attorney for the District of Columbia five months ago, spoke about the inquiry in an interview… with… Sean Hannity. ‘No one is above the law,’ Pirro said, ‘nor should anyone think that they have the right to be above the law’.”
January 13 – Financial Times (Lauren Fedor and Claire Jones): “Jay Powell wrote to senators last July with details about the Federal Reserve’s $2.5bn renovation project, according to a letter seen by the FT, complicating the Trump administration’s claims that he misled Congress. The four-page letter was sent two and a half weeks after the chair of the central bank testified to the Senate banking committee about the project’s cost overruns.”
January 12 – Wall Street Journal (Lindsay Wise, Siobhan Hughes and Anvee Bhutani): “Senate Republicans criticized the Justice Department’s investigation of Federal Reserve Chair Jerome Powell, defending the central bank’s autonomy against what some GOP lawmakers called an overtly political probe by the Trump administration. Senate Majority Leader John Thune (R., S.D.) said he hadn’t seen the allegations against Powell, but ‘they better be real and they better be serious’… The comments from across the GOP caucus marked a prominent public break with the Republican administration, with many seeing preserving the Fed’s independence as a line in the sand. Several GOP lawmakers said they had spoken with Powell and praised his integrity…”
January 13 – Wall Street Journal (Brian Schwartz, Meridith McGraw, Josh Dawsey and Nick Timiraos): “Some Trump administration officials and allies have expressed concern that the Justice Department’s criminal investigation into Federal Reserve Chair Jerome Powell could imperil the president’s nominees in the Senate and rattle financial markets. Among those alarmed about potential fallout was Treasury Secretary Scott Bessent, who called President Trump Sunday night and told him that the investigation could cause several issues for the administration… Bessent was worried about an impact on financial markets and hurdles during the Senate confirmation process for whomever the president selects to be the next Fed chairman once Powell’s term ends in May... Late Sunday… Sen. Thom Tillis (R., N.C.) said he would oppose any Fed nominee put forward by Trump ‘until this legal matter is fully resolved’.”
January 16 – Bloomberg (Kate Sullivan): “President Donald Trump expressed reluctance toward nominating Kevin Hassett as Federal Reserve chair, casting further doubt over his search for the next head of the central bank. Trump… said if Hassett were to leave his post as director of the White House National Economic Council, it would deprive the administration of one of its most powerful messengers on the economy… ‘I actually want to keep you where you are, if you want to know the truth,’ Trump told Hassett... ‘If I move him, these Fed guys — certainly the one we have now — they don’t talk much. I would lose you. It’s a serious concern to me’.”
January 16 – Fox Business (Edward Lawence): “BlackRock executive Rick Rieder discussed several key issues, including the profitability of the Federal Reserve, during an interview for the top job at the central bank, senior administration sources told FOX Business. Other topics discussed during the meeting with Rieder, the chief investment officer of global fixed income at BlackRock, included the importance of monetary policy stability and U.S. debt dynamics, the sources said. The interview was conducted in the Oval Office and included President Donald Trump, Vice President JD Vance, Treasury Secretary Scott Bessent, chief of staff Susie Wiles and deputy chief of staff Dan Scavino. Rieder stands as the only candidate interviewed on the final list who has no Federal Reserve or government experience. People in the room viewed that as a big positive, the sources said.”
January 14 – Reuters (Lefteris Papadimas and Howard Schneider): “Federal Reserve Governor Stephen Miran said… comments from foreign central banks in defense of U.S. central bank chief Jerome Powell were inappropriate, a remark that stood in contrast to an outpouring of public support for Powell... ‘I don’t think it is appropriate for central bankers to get involved in non-monetary policy issues in their own country, and I think it is even less appropriate in other countries,’ Miran told an economic forum in Athens…”
January 12 – Reuters (Bo Erickson): “White House economic adviser Kevin Hassett said… he was not involved in conversations with the Justice Department about its probe into Federal Reserve Chair Jerome Powell… ‘I’ve not been involved in conversations with the Justice Department about that. I’ve not talked to the Justice Department ahead of them contacting Jay and so I don’t really have anything to add, other than I respect the independence of the Fed and the independence of the Justice Department, and we’ll see how it goes,’ Hassett told CNBC’s ‘Squawk Box… ‘Right now, we’ve got a building that’s got like, dramatic cost overruns and plans for the buildings that look inconsistent with the testimony, but again, I’m not a Justice Department person. I hope everything turns out okay for Jay’…”
January 12 – Bloomberg (Wendy Benjaminson): “President Donald Trump said that credit-card lenders would be ‘in violation of the law’ if they don’t heed his call to cap interest rates at 10% for one year. Trump… doubled down on his demand that card issuers lower interest rates to 10% and keep them there for one year. He set a Jan. 20 deadline for compliance.”
January 13 – Bloomberg (John Harney): “President Donald Trump, addressing American voter concerns about rising electricity prices, said his administration had been in talks with Microsoft Corp. to ensure that consumers ‘don’t pick up the tab’ for enormous data centers… He added that while the data centers ‘are key’ to the artificial intelligence boom, the ‘big Technology Companies who build them must ‘pay their own way.’’ He said that Microsoft would make ‘major changes,’ but was not specific. Power prices have risen above the pace of overall inflation, heightening complaints about the cost of energy and other essentials.”
January 11 – Bloomberg (Nancy Cook, Saleha Mohsin, and Joshua Green): “Federal Housing Finance Agency Director Bill Pulte was a driving force behind the Trump administration’s decision to subpoena the Federal Reserve, according to people familiar… Some of Trump’s allies were alarmed by the move, fearing a legal fight aimed at Fed Chair Jerome Powell will upset the bond market… They are also concerned it will discourage Powell from leaving the Fed once his chairmanship ends in May. Powell can remain on as a Fed governor until 2028 and hasn’t yet said whether he intends to leave as is tradition.”
January 11 – Financial Times (Joe Daniels and Steff Chávez): “US President Donald Trump has vowed to cut off Cuba’s supplies of Venezuelan oil, piling pressure on the Communist government in Havana to make a deal. ‘THERE WILL BE NO MORE OIL OR MONEY GOING TO CUBA — ZERO! I strongly suggest they make a deal, BEFORE IT IS TOO LATE,’ Trump wrote… ‘Cuba lived, for many years, on large amounts of OIL and MONEY from Venezuela,’ Trump added. ‘BUT NOT ANYMORE!’ Later on Sunday, Trump said the US was ‘talking to Cuba’ and that he would make public the type of deal he would like from the Caribbean nation ‘pretty soon’.”
January 14 – Wall Street Journal (Michelle Hackman, Robbie Gramer and Vera Bergengruen): “The State Department will indefinitely pause immigrant visa processing for 75 countries as part of the Trump administration’s ongoing effort to block low-income foreigners from immigrating to the U.S. The pause takes effect starting Jan. 21, and will halt visa issuance to people looking to permanently immigrate, typically through marriage, family ties or work sponsorship… The countries affected span the globe and include many in Africa, the Middle East and Latin America. Visa processing will now be paused for Russia, Thailand, Morocco, Colombia and Brazil, among others…”
New World Order Watch:
January 14 – Politico (Max Griera): “EU foreign policy chief Kaja Kallas privately told lawmakers the state of the world meant it might be a ‘good moment’ to start drinking. Kallas told leaders of the political groups in the European Parliament that while she is not much of a drinker now may be the time to start given events around the globe… She was speaking around the same time as foreign ministers from Greenland and Denmark were meeting U.S. Vice President JD Vance and Secretary of State Marco Rubio over Donald Trump’s threats to seize the Arctic island.”
January 15 – Politico (Tim Ross, Zoya Sheftalovich and Nicholas Vinocur): “Faced with a barrage of American threats to grab Greenland, Denmark’s foreign minister and his Greenlandic counterpart flew to Washington for — they hoped — sympathetic talks with Marco Rubio… But their plan for a soothing diplomatic chat escalated into a tense White House head-to-head with the EU’s nemesis, JD Vance… Among the 10 ministers and officials who spoke anonymously to POLITICO…, none regarded Vance as an ally — either in the Greenland talks or for the transatlantic relationship in general. ‘Vance hates us,’ said one European diplomat… The announcement that the vice president would be helming the Washington talks on Greenland alarmed the European side. ‘He’s the tough guy,’ the same diplomat said. ‘The fact that he’s there says a lot and I think it’s negative for the outcome’.”'
January 11 – Bloomberg (Hal Brands): “A superpower is zapping drug boats, on shaky legal premises, and snatching foreign leaders in the dead of night. From Greenland to Ukraine to the Himalayas, strong countries are redrawing — or threatening to redraw — the borders of weaker neighbors. International law and arms control agreements are unraveling as strategic rivalry intensifies. The incidence of armed conflict is surging as curbs on aggression erode. Freedom of navigation has been challenged in crucial waterways, from the Red Sea to the Western Pacific. The rules-based trading system is, increasingly, a thing of the past. The symptoms are many, but the affliction is the same. The world is experiencing a gradual, but accelerating, transition away from the liberal international order of the post-1945 era. Crucial norms and principles are coming undone.”
January 15 – Reuters (Maria Cheng): “Prime Minister Mark Carney hailed… Canada’s improving ties with China as well as the leadership of President Xi Jinping, declaring that their nations were charting a new course in cooperation at a time of global division and disorder. The four-day visit to China was the first by a Canadian prime minister since 2017, following up on Carney’s positive meeting with Xi in South Korea in October. The two are set to meet again on Friday.”
January 10 – Bloomberg (Thomas Seal and Derek Decloet): “For months, many Canadians hoped Donald Trump had lost interest in making their country the 51st US state — his plate full with turning Washington and the global trading system upside down. The shock capture of Venezuelan President Nicolás Maduro and Trump’s ramped-up talk of seizing Greenland have rattled Canada… The administration’s declaration that ‘THIS IS OUR HEMISPHERE’ makes Trump’s earlier comments about annexing Canada seem ever less like mere insults aimed at former Prime Minister Justin Trudeau, or negotiating tactics in his trade war with current PM Mark Carney.”
Venezuela Watch:
January 13 – Bloomberg (Jennifer A. Dlouhy and Kevin Crowley): “When Exxon Mobil Corp. Chief Executive Darren Woods told President Donald Trump… Venezuela is currently ‘uninvestable,’ he was echoing warnings already issued by oil industry leaders and analysts. Indeed, some of his peers had tried to dissuade the White House from even holding the meeting… While Trump wants US companies to invest at least $100 billion rebuilding Venezuela’s beleaguered oil sector following the capture of President Nicolás Maduro, some executives worry conditions won’t permit a speedy turnaround… Woods not only attended the meeting of roughly 20 oil industry executives, he spoke his mind. But Trump didn’t appear to appreciate the candor. By Sunday evening, the president was telling reporters he ‘didn’t like’ Woods’ remarks and was inclined to keep Exxon out of Venezuela, saying, ‘They’re playing too cute’.”
Greenland Watch:
January 13 – Bloomberg (Sara Sjolin): “Greenland’s prime minister categorically ruled out joining the US and said the Arctic territory prefers to be in a union with Denmark, suggesting the island is putting independence plans on the back burner for now. ‘We are now facing a geopolitical crisis, and if we have to choose between the United States and Denmark here and now, then we choose Denmark,’ Prime Minister Jens-Frederik Nielsen said… with Danish Prime Minister Mette Frederiksen in Copenhagen... ‘We choose the Greenland we know today, which is part of the Kingdom of Denmark,’ he said.”
January 14 – Wall Street Journal (Robbie Gramer, Drew Hinshaw and Alex Leary): “President Trump insisted that the U.S. needed to annex Greenland for U.S. national-security interests, saying anything less than American control would be ‘unacceptable.’ Trump made the comments in a social-media post on Wednesday before senior Greenlandic and Danish officials were set to meet with Vice President JD Vance and Secretary of State Marco Rubio… ‘NATO should be leading the way for us to get it. IF WE DON’T, RUSSIA OR CHINA WILL, AND THAT IS NOT GOING TO HAPPEN!’ Trump said… Trump said acquiring Greenland was vital for his ‘Golden Dome’ plan—the $175 billion missile-defense shield he wants to develop before the end of his term.”
January 14 – Politico (Chris Lunday, Victor Jack and Laura Kayali): “Denmark and allied countries said… they will increase their military presence in Greenland as part of expanded exercises, amid intensifying pressure from Washington over the Arctic island’s sovereignty. ‘Security in the Arctic is of crucial importance to the Kingdom and our Arctic allies, and it is therefore important that we, in close cooperation with allies, further strengthen our ability to operate in the region,’ said Danish Defense Minister Troels Lund Poulsen. ‘The Danish Defense Forces, together with several Arctic and European allies, will explore in the coming weeks how an increased presence and exercise activity in the Arctic can be implemented’… Denmark’s defense ministry said additional Danish aircraft, naval assets and troops will be deployed in and around Greenland starting immediately as part of expanded training and exercise activity.”
January 12 – Wall Street Journal (Daniel Michaels): “President Trump’s assertion that the U.S. must own Greenland to expand its defenses there runs counter to decades of policy and undermines the deterrence of its global network of bases and alliances, say former American military and diplomatic officials. Trump has said the U.S. should have full control of the island… In recent days, he has said the U.S. needs to own it to assure Arctic and U.S. security. ‘When we own it, we defend it. You don’t defend leases the same way. You have to own it,’ Trump said... But military officials and diplomats say the U.S. has built the world’s most formidable assembly of overseas military bases without owning foreign soil. The Defense Department manages or uses more than 128 foreign bases in at least 51 countries…”
January 14 – Financial Times (Richard Milne): “The US, Denmark and Greenland will set up a high-level group to discuss the future of the vast Arctic island but ‘fundamental disagreement’ remains between the two sides, according to the Danish foreign minister. Lars Løkke Rasmussen said he and Greenlandic colleague Vivian Motzfeldt had a ‘frank but constructive’ discussion lasting more than an hour with US vice-president JD Vance and secretary of state Marco Rubio… But he added US President Donald Trump continued to insist on ‘conquering’ Greenland, which was ‘totally unacceptable’. The talks marked the first formal meeting between the US, Denmark and Greenland since Trump initially expressed the idea of buying the world’s largest island in 2019. But they failed to bring a diplomatic breakthrough, with Rasmussen saying Denmark and Greenland had ‘red lines’ they could not cross…”
January 13 – Bloomberg (Sara Sjolin): “Greenland’s government said it will intensify efforts to ensure the island’s defenses are managed within the NATO military alliance, pushing back on renewed threats from the US about taking over the territory. ‘All NATO member states, including the United States, share a common interest in the defense of Greenland,’ the prime minister’s office said… ‘The Government coalition in Greenland will therefore, in cooperation with Denmark, work to ensure that dialogue and further development of Greenland’s defense take place within the NATO framework’.”
January 14 – CNBC (Anniek Bao and Dan Murphy): “Any U.S. attempt to seize Greenland by force would trigger ‘monumental consequences’ for the Western alliance and the global order, Iceland’s former President Olafur Ragnar Grimsson said, as… Trump sharpens rhetoric on controlling the Arctic territory. Grimsson warned on CNBC’s ‘Access Middle East’ that ‘the fallout would be on a scale that we have never seen in living memory.’ Grimsson, the longest-serving president of Iceland from 1996 to 2016, currently serves as the Chairman of the Arctic Circle, the world’s largest annual gathering on Arctic issues.”
January 14 – New York Times (Jeffrey Gettleman and Maya Tekeli): “Pipaluk Lynge knows the history of how Indigenous people have been treated in the United States. And she’s well aware of the holes in the country’s health care system and its yawning economic inequality. Ms. Lynge, one of Greenland’s top officials and the leader of the Parliament’s foreign and security policy committee, chafes at President Trump’s offer to buy Greenland... ‘We’re not going to sell our soul,’ she said. ‘We’re not stupid.’ As President Trump seems to toy with Greenland’s fate, a kaleidoscope of feelings swirl in Greenland itself. People are shocked, angry, confused, humiliated, insulted and, most of all, scared.”
Iran Watch:
January 13 – Wall Street Journal (Jared Malsin): “The biggest harbinger that things were about to fall apart in Iran didn’t come from the thwarted anger of the country’s opposition or the frustrated hopes of young people hungry for more personal freedom. It came from the collapse of a bank. Late last year, Ayandeh Bank, run by regime cronies and saddled with nearly $5 billion in losses on a pile of bad loans, went bust. The government folded the carcass into a state bank and printed a massive amount of money to try to paper over all the red ink. That buried the problem but didn’t solve it. Instead, the failure became both a symbol and an accelerant of an economic unraveling that ultimately triggered the protests that now pose the most significant threat to the regime since the founding of the Islamic Republic half a century ago.”
January 13 – Axios (Barak Ravid): “President Trump called on the Iranian people… to ‘keep protesting’ and ‘take over’ government institutions. This is the most explicit backing Trump has given to the idea of toppling the Iranian regime since the protests started more than two weeks ago. While Trump said ‘help is on its way,’ he didn’t say what form it would take… ‘Iranian Patriots, KEEP PROTESTING - TAKE OVER YOUR INSTITUTIONS!!! Save the names of the killers and abusers. They will pay a big price,’ Trump wrote…”
January 13 – Financial Times (Steff Chávez, Abigail Hauslohner and Raya Jalabi): “Donald Trump has said that ‘HELP IS ON ITS WAY’ for protesters in Iran as he urged them to take over the country’s institutions, in his strongest signal yet that the US could intervene in the Islamic republic. In a post…, the US president added that he had cancelled ‘all meetings’ with Iranian officials until the killings of the protesters had stopped. ‘Iranian Patriots, KEEP PROTESTING — TAKE OVER YOUR INSTITUTIONS!!!’ Trump wrote. ‘Save the names of the killers and abusers. They will pay a big price… HELP IS ON ITS WAY.’ Trump has been weighing a possible military intervention in Iran, where nationwide demonstrations erupted in late December over the regime’s failure to stabilise the economy. Officials in western capitals believe the US is stepping up preparations for an attack. Asked whether US allies should evacuate Iran, Trump said: ‘They should get out… It’s a good idea’.”
January 14 – Associated Press (Jon Gambrell and Farnoush Amiri): “Iranian officials signaled Wednesday that fast trials and executions lay ahead for suspects detained in nationwide protests while the Islamic Republic promised a ‘decisive response’ if the U.S. or Israel intervene in the domestic unrest. The threats emerged as some personnel at a key U.S. military base in Qatar were advised to evacuate by Wednesday evening…”
China Trade War Watch:
January 14 – Bloomberg: “Donald Trump’s tariff war occupied US allies for much of last year. Now, President Xi Jinping is welcoming a procession of leaders looking to mend fences with the world’s other major economy. South Korea’s Lee Jae Myung kicked off the trend this month, cementing an improvement in ties by becoming his nation’s first president to visit China since 2019. Canada’s Mark Carney followed suit…, closing a near-decade gap in leader-to-leader diplomacy between Ottawa and Beijing in the Asian nation. Days later, Prime Minister Keir Starmer is set to travel to the Chinese capital to buoy British business, marking a first since 2018. Germany’s chancellor, Friedrich Merz is also expected to visit next month.”
January 14 – Associated Press (Chan Ho-Him): “China’s trade surplus surged to a record of almost $1.2 trillion in 2025…, as exports to other countries made up for slowing shipments to the U.S. under… Trump’s onslaught of higher tariffs. China’s exports rose 5.5% for the whole of last year to $3.77 trillion… Imports flatlined at $2.58 trillion. The 2024 trade surplus was over $992 billion. In December, China’s exports climbed 6.6% from the year before in dollar terms… For the whole of 2025, China’s exports to the U.S. fell 20%. In contrast, exports to Africa surged 26%. Those to Southeast Asian countries jumped 13%; to the European Union 8%, and to Latin America, 7%.”
January 12 – Bloomberg: “US President Donald Trump’s announcement of new tariffs on goods from countries trading with Iran risks derailing his one-year trade truce with China, the world’s top buyer of Iranian oil. ‘Any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America,’ Trump posted… The levy is ‘effective immediately,’ he added, without elaborating on the scope or implementation of the charges…”
January 11 – Bloomberg (Jenny Leonard, Haze Fan, and Sarah Jacob): “An effort by Europe to stand up to China and retain local technology is approaching a breaking point. In a fight over a critical link in the global supply chain, chipmaker Nexperia BV was wrested away from its Chinese owner by a Dutch court and now one of the leaders in so-called legacy chips is racing to defend its independence... By pushing back over Nexperia, Europe aims to ‘set a precedent for what ‘de-risking’ means,’ said Benedetta Girardi, program coordinator at the Hague Centre for Strategic Studies, referring to Europe’s objective of reducing dependencies on China.”
Trade War Watch:
January 16 – Bloomberg (Sanne Wass and Sara Sjolin): “President Donald Trump threatened fresh tariffs on goods from nations that oppose his push to take control of Greenland, stepping up his rhetoric while Denmark hosted US lawmakers on its home turf following meetings in Washington this week. ‘I may put a tariff on countries if they don’t go along with Greenland, because we need Greenland for national security,’ Trump said…”
January 12 – CNBC (Kevin Breuninger): “President Donald Trump… said any country doing business with Iran will face a 25% tariff ‘on any and all business being done with the United States of America.’ That new tariff on imports from Iran’s trading partners is ‘effective immediately,’ Trump said... ‘This Order is final and conclusive. Thank you for your attention to this matter!’ he wrote.”
Constitution Watch:
January 15 – Associated Press (Steve Karnowski, Alanna Durkin Richer, Hallie Golden and Aamer Madhani): “President Donald Trump… threatened to invoke the Insurrection Act and deploy troops to quell persistent protests against the federal officers sent to Minneapolis to enforce his administration’s massive immigration crackdown… Trump has repeatedly threatened to invoke the rarely used federal law to deploy the U.S. military or federalize the National Guard for domestic law enforcement… ‘If the corrupt politicians of Minnesota don’t obey the law and stop the professional agitators and insurrectionists from attacking the Patriots of I.C.E., who are only trying to do their job, I will institute the INSURRECTION ACT, which many Presidents have done before me, and quickly put an end to the travesty that is taking place in that once great State,’ Trump said…”
January 12 – Bloomberg (Craig Stirling): “The Trump administration’s new legal assault on the Federal Reserve further threatens independence and makes it harder for the central bank’s next chief to do their job, according to Scope Ratings…. The European credit assessor observed that the criminal probe into Chair Jerome Powell is another example of the sort of policy that prompted the company to cut the country in October to its fourth-highest rung, placing it on the same level as France. ‘This reflects one of the main negative drivers for the downgrade of the US sovereign rating to AA-,’ said Eiko Sievert, Scope’s executive director for sovereign and public sector. ‘The legal action the central bank is now facing further intensifies the growing political and legal pressure from the executive branch on the independence and credibility of a key pillar of US governance’.”
January 12 – Associated Press (Michael Kunzelman): “Democratic Sen. Mark Kelly sued the Pentagon… over attempts to punish him for his warnings about illegal orders, claiming the Trump administration trampled on his constitutional rights to free speech. Kelly, a former U.S. Navy pilot who represents Arizona, is seeking to block his censure last week from Defense Secretary Pete Hegseth, who said he censured Kelly over his participation in a video that called on troops to resist unlawful orders.”
January 14 – Axios (Sara Fischer): “The FBI searched the home and devices of Washington Post reporter Hannah Natanson, who covers the Trump administration’s reshaping of the federal government… Searching a journalist’s home is an extraordinary step — even past administrations that aggressively pursued leak investigations stopped short of raiding reporters' homes. According to the Washington Post, Natanson was at her Virginia home when agents arrived. The FBI warrant said the search was part of an investigation into a Maryland system administrator accused of ‘accessing and taking home classified intelligence reports,’ per the affidavit…”
Budget Watch:
January 9 – Reuters (David Lawder): “The U.S. Treasury has more than adequate funds to pay any tariff refunds ordered if the Supreme Court rules against President Donald Trump's emergency tariffs, but any repayments would be spread out over weeks or even a year, U.S. Treasury Secretary Scott Bessent told Reuters… He added that any negative ruling may not be a simple yes-or-no result, but something more nuanced that could complicate the refund process. ‘It won't be a problem if we have to do it, but I can tell you that if it happens - which I don't think it's going to - it's just a corporate boondoggle,’ Bessent said.”
U.S./Russia/China/Europe/Iran Watch:
January 11 – Reuters (Michael Martina, Trevor Hunnicutt and David Brunnstrom): “Among the many goals of last week's U.S. military operation that captured Venezuelan President Nicolas Maduro was to send China a message: stay away from the Americas. For at least two decades, Beijing has sought to build influence in Latin America, not only to pursue economic opportunities but to gain a strategic foothold on the doorstep of its top geopolitical rival. China’s progress… has been an irritant for successive U.S. administrations, including that of Donald Trump. Several Trump administration officials told Reuters the U.S. president’s move against Maduro was intended in part to counter China’s ambitions, and Beijing’s days of leveraging debt to get cheap oil from Venezuela were ‘over’.”
January 13 – Wall Street Journal (Lingling Wei): “The U.S. ouster of the Venezuelan strongman Nicolás Maduro is forcing Beijing into a high-stakes recalculation of its ambitions in a region that looks like America’s backyard again, said people close to internal discussions in the Chinese leadership. For years, China made inroads into Latin America, coaxing countries to abandon support for Taiwan with loans to build roads, ports and rail lines, making significant purchases of commodities like soybeans and oil, and mining metals such as copper. Maduro was its most important ally, an anti-American leader with oil resources, earning Venezuela the rare distinction of an ‘all-weather’ partnership—China’s highest diplomatic honor and a status held by no other country in Latin America. Now, Beijing is no longer seeking to make new advances into the region in the near term, the people said. Instead, the discourse in China’s policymaking circles has shifted toward a potential trade-off: If the Western Hemisphere belongs to the Americans, then the Taiwan Strait belongs to the Chinese.”
Ukraine War Watch:
January 14 – Bloomberg (Derek Wallbank): “President Donald Trump faulted Ukraine’s leader Volodymyr Zelenskiy as the main obstacle to an agreement to end the war Russia launched against his country four years ago. Trump… described Russian President Vladimir Putin as ‘ready to make a deal,’ Reuters reported. When pressed on what was impeding a deal, Trump replied, ‘Zelenskiy,’ Reuters said… Trump’s comments mark a shift from recent weeks in which he had expressed growing frustration with Putin amid a year-end frenzied diplomatic push to end the war.”
January 13 – Associated Press (Illia Novikov): “Russia launched a second major drone and missile bombardment of Ukraine in four days…, aiming again at the power grid amid freezing temperatures in an apparent snub to U.S.-led peace efforts as Moscow’s invasion of its neighbor approaches the four-year mark. Russia fired almost 300 drones, 18 ballistic missiles and seven cruise missiles at eight regions overnight, Ukrainian President Volodymyr Zelenskyy said…”
AI Bubble/Arms Race Watch:
January 14 – Reuters (Jonathan Stempel and Stephen Nellis): “Oracle was sued… by bondholders who say they suffered losses because the company chaired by billionaire Larry Ellison failed to disclose it needed to sell significant additional debt to build out its artificial intelligence infrastructure. The proposed class action was filed… in Manhattan on behalf of investors who bought $18 billion of notes and bonds that Oracle issued on Sept. 25, two weeks after Oracle announced a $300 billion, five-year contract to supply OpenAI with computing power.”
January 12 – Financial Times (Cristina Criddle): “Microsoft has warned that US AI groups are being outpaced by Chinese rivals in the battle for users outside the west, as China combines low-cost ‘open’ models with hefty state subsidies to gain an edge. Brad Smith, Microsoft’s president, told the FT that the rapid adoption of Chinese AI start-up DeepSeek’s technology in emerging markets such as Africa underscores the competition American groups face around the world. ‘We have to recognise that right now, unlike a year ago, China has an open-source model, and increasingly more than one, that is competitive,’ he said. ‘They benefit from subsidisation by the Chinese government. They benefit from subsidies that enable [them] to basically undercut American companies based on price’.”
January 13 – Bloomberg (Will Wade and Naureen S Malik): “New York plans to require data center operators to shoulder more of the cost of powering their energy-hungry facilities, aiming to prevent surging electricity demand from pushing up household utility bills. Under a new initiative Governor Kathy Hochul is unveiling Tuesday, large power users that don’t deliver significant job growth or other benefits to the state would be required to either generate their own electricity or pay more for energy from the grid. The initiative seeks to balance protections for ratepayers with the state’s push to attract data centers and other electricity-intensive industries to support economic growth.”
Bubble and Mania Watch:
January 15 – Axios (Madison Mills): “Young people who are anxious about their jobs in an AI future are hedging that by investing in the stock market, according to a study by the Oliver Wyman Forum of 300,000 investors since 2020. Young investors often favor vibes and momentum over fundamentals… Many younger investors ‘don’t believe traditional milestones will bring security,’ such as buying a home or staying at a job for a long time, Ana Kreacic, chief operating officer of the Oliver Wyman Forum, tells Axios. Gen Z’s desire for independence has led to a boom in investing among the young cohort. They have a sense of urgency over having more money right now, potentially leaving novice traders with a false impression of what their returns should look like.”
January 16 – Bloomberg (Preeti Singh): “Secondary deal volume for private assets surged 41% to a record $226 billion last year, Evercore Inc. said…, as investors got more creative about tapping that market for liquidity. The growth stems from innovation in deal structures and the sustained need for cash — and it has further expanded beyond buyouts… Private credit secondaries hit record levels of fundraising and activity, and continued expansion in infrastructure and venture have diversified the market... Portfolio sales by investors in private asset firms, known as limited partners, increased about 35% from last year to $120 billion and remain a primary driver of secondary activity.”
January 14 – Financial Times (Zehra Munir): “New York’s luxury office market is booming as flourishing financial services, legal and technology companies seek comfort and space for their employees, according to data from real estate brokers. The number of leases signed for Manhattan office space priced at $100 or more per sq ft rocketed to an all-time high last year, according to… JLL and CBRE. The move to snap up luxury office space is being driven by a fierce desire to attract talent and pull more employees back to the office.”
January 13 – Bloomberg (Katherine Doherty and Paula Seligson): “Trading revenue at market-making firm Hudson River Trading rose in 2025 toward a record level as volatile markets helped lift results globally for companies that step in to match buyers and sellers. Initial estimates show the firm generated about $12.3 billion in net trading revenue in 2025…”
Inflation Watch:
January 16 – Axios (Courtenay Brown and Megan Morrone): “The world is on the cusp of a generation-defining construction boom, but the U.S. may not have enough workers to make it happen, BlackRock warns... This is the new fault line of the global economy — soaring demand for some workers and shrinking appetite for others… The world is entering what could be the greatest period of construction in human history — needing as much as $85 trillion in new infrastructure over the next 15 years. Fueling the construction boom are the AI buildout and a fresh push to bring manufacturing facilities onshore and upgrade aging infrastructure. ‘The world is entering what could be the greatest period of construction in human history,’ Sandra Lawson, BlackRock managing director of corporate affairs, writes... ‘[L]abor could be a potential constraint if the world cannot train workers quickly enough,’ the report says.”
January 12 – Wall Street Journal (Katherine Blunt and Jennifer Hiller): “America’s AI boom is pushing the nation’s largest power-grid operator to the brink of a supply crisis. Sixty-seven million people in a 13-state region stretching from New Jersey to Kentucky get their power from a market operated by nonprofit PJM. So, too, do the many AI data centers springing up in Northern Virginia’s ‘Data Center Alley’… Rates are going up for consumers. Older power plants are going out of service faster than new ones can be built. And the grid’s capacity is in danger of maxing out during periods of high demand, which could force PJM to call for rolling blackouts… Mark Christie, former chairman of the Federal Energy Regulatory Commission, said that a few years ago he considered the PJM blackout threat to be on the horizon. ‘Now I’m saying that the reliability risk is across the street,’ he said.”
January 13 – CNBC (Jeff Cox): “Core U.S. consumer prices rose less than predicted in December… Excluding volatile food and energy prices, the consumer price index showed a seasonally adjusted 0.2% gain on a monthly basis and 2.6% annually… Shelter, a key element of stickiness, increased 0.4%, which was the biggest item for the monthly increase… The category accounts for more than one-third of the CPI weighting and was up 3.2% on an annual basis. Other parts of the report also showed inflation persisting. Food prices jumped 0.7% for the month, though egg prices tumbled 8.2%... Other areas seeing increases included recreation, airfares and medical care.”
January 14 – NPR (Alina Selyukh and Connie Hanzhang Jin): “The cost of living in the U.S. rose 2.7% in December compared with a year before… Since 2018, NPR has tracked the prices of dozens of items at this suburban Walmart superstore… Prices in NPR’s basket rose 5% on average last year. Almost half the items on NPR’s shopping list got more expensive in 2025, including shrimp, Oreo cookies, Coca-Cola and Dove soap. Some price increases, notably on items made in China and Vietnam, appear to be tariff related. Other price hikes had to do with weather events affecting harvests of crops such as cacao and coffee beans. Just under a quarter of the items on NPR's list got cheaper, including eggs, milk and Cheerios. And many packaged foods stayed the same after years of price hikes.”
January 14 – Axios (Courtenay Brown and Tasha Tsiaperas): “Groceries still aren’t getting cheaper. Grocery prices rose at the fastest pace in three years, keeping pressure on household budgets even as overall inflation held steady in December. Grocery prices… rose by 0.7% in December, the largest monthly gain since the peak inflation period in August 2022. Grocery prices were up roughly 2.4% nationwide in December compared with the prior year. But that masks double-digit price increases for a slew of household staples over the past 12 months, including coffee (+20%), beef (+16%) and candy (+10%). There is some relief elsewhere in the grocery store: Egg prices, for instance, are down more than 20% from a year ago, with an 8% decline in December alone.”
January 14 – Associated Press (Paul Wiseman): “U.S. wholesale prices rose modestly in November… The… producer price index — which measures inflation before it reaches consumers — rose 0.2% in November from October and 3% from a year earlier… Gasoline prices rose sharply in November. Excluding volatile food and energy prices, so-called core wholesale prices were unchanged from October and up 3% from November 2024.”
January 14 – New York Times (Kevin Draper and Julie Creswell): “Days away from the first anniversary of President Trump’s second term in office, grocery prices are still rising, undercutting his administration’s rhetoric about how it is making life more affordable for average Americans. The price of beef has risen 16.4% over the last year. The price of coffee is up a whopping 19.8%. The price of lettuce is up 7.3% and frozen fish 8.6%.”
January 12 – Bloomberg (Ilena Peng): “Florida’s orange harvest is expected to fall to the lowest in nearly a century, as shrinking groves continue to offset improvements in yields. The state is seen producing 12 million boxes of fruit in the 2025-26 season, down 2% from the prior year... That output, the lowest since 1930, comes as Florida’s historical orange groves continued to be removed following years of disease and the impacts of Hurricane Milton at the end of 2024.”
Federal Reserve Watch:
January 12 – Financial Times (Katie Martin): “Unscheduled weekend statements from the Federal Reserve are, to put it mildly, not generally a good sign. In the past couple of decades, they have been rare, and have come only in response to dire emergencies: the collapses of Bear Stearns and then of Lehman Brothers in 2008, the Covid pandemic of 2020 and the failure of several US regional banks in 2023. On each occasion, the US central bank has scrambled together a statement to show leadership and action before markets open in response to a serious crisis. It is well worth viewing Sunday’s video from Fed chair Jay Powell through that lens. The Fed is under attack. This is not a drill.”
January 12 – Financial Times (Claire Jones and Myles McCormick): “The criminal probe into Jay Powell by US prosecutors has galvanised the Federal Reserve’s top leaders to resist President Donald Trump’s attacks and could push the chair to remain a governor until 2028, officials say… ‘People inside the Fed will view this development as really alarming and see it as a statement that Trump absolutely intends to gain control over monetary policy,’ said Janet Yellen… ‘Those that are worried about threats to independence may be more inclined to stay so that there are fewer seats available for Trump to gain control of the board,’ Yellen added.”
January 15 – CNBC (Jeff Cox): “Chicago Federal Reserve President Austan Goolsbee expressed caution Thursday about recent attacks on the central bank and Chair Jerome Powell, saying they could adversely affect inflation. ‘Anything that’s infringing or attacking the independence of the central bank is a mess,’ Goolsbee said… ‘You’re going to get inflation come roaring back if you try to take away the independence of the central bank’.”
January 14 – New York Times (Colby Smith): “Neel T. Kashkari, president of the Federal Reserve Bank of Minneapolis, said the Trump administration’s actions against the central bank in the past year were ‘really about monetary policy,’ as he came to the defense of Jerome H. Powell… ‘The escalation over the course of the past year is really about monetary policy,’ Mr. Kashkari said… ‘I thought the chairman explained that accurately’.”
January 15 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Kansas City President Jeff Schmid said interest rates should stay at a level where they continue to put some pressure on the economy so that inflation can cool further. ‘With inflation pressures still evident, my preference would be to keep monetary policy modestly restrictive,’ Schmid said… ‘And while the labor market has cooled, some cooling is likely necessary to keep the inflation outlook from worsening,’ he said.”
January 13 – Bloomberg (Catherine Lucey): “President Donald Trump dismissed Jamie Dimon’s criticism over the Justice Department probe into the Federal Reserve, saying the JPMorgan… chief executive officer was ‘wrong’ to suggest he was undermining the independence of the central bank. ‘I think it’s fine what I’m doing,’ Trump said. ‘And we have a bad Fed person.’ Earlier Tuesday, Dimon expressed concern about the investigation into Fed Chair Jerome Powell over the cost of the central bank’s headquarters renovation and his subsequent congressional testimony about the project. ‘Everyone we know believes in Fed independence,’ Dimon said. ‘And anything that chips away at that is probably not a great idea. And in my view, will have the reverse consequences. It’ll raise inflation expectations and probably increase rates over time’.”
January 12 – Bloomberg (Carter Johnson): “Strategists and economists at JPMorgan… no longer expect the Federal Reserve to cut interest rates this year and see a rate hike next year, a forecast change made in response to December employment data… ‘We now expect the Fed to stay on hold throughout 2026, though with the market unwilling to price out labor market weakness and attention occupied by the Fed chair race, additional front-end premium may persist for a few months’…”
U.S. Economic Bubble Watch:
January 12 – Axios (Jim VandeHei and Mike Allen): “The nation is splitting into three distinct economic realities: the Have-Nots (stalling) ... the Haves (coasting) ... and the Have-Lots (rocketing to greater wealth). This isn’t just about ‘inequality.’ It’s about a structural shift where the growing number of hyperwealthy are profiting wildly off the AI revolution — through exclusive access to private deals, massive investment power, governmental connections, and equity stakes that ‘normal’ investors can’t touch. This shift, if it holds, will rattle economics, politics and AI throughout 2026 and beyond. We’re already seeing it in rising inequality, pessimism about the future and AI opposition. It’s human nature to judge your personal economics and mood on how you feel, influenced heavily by conscious and subconscious comparisons to others… It’s also possible the AI bubble pops, and everyone suffers. But the Have-Lots will (mostly) still have lots.”
January 15 – Bloomberg (Amara Omeokwe and Enda Curran): “Economic activity picked up at a ‘slight to modest pace’ in most parts of the US since mid-November, the Federal Reserve said in its Beige Book… ‘This marks an improvement over the last three report cycles where a majority of districts reported little change,’ the report said… Employment levels were mostly unchanged in eight of the Fed’s 12 regional districts. Wages grew at a ‘moderate’ pace, with ‘multiple contacts reporting that wage growth had returned to ‘normal’ levels’… A majority of districts saw prices grow at a ‘moderate’ rate. Still, ‘several contacts that initially absorbed tariff-related costs were beginning to pass them on to customers as pre-tariff inventories became depleted or as pressures to preserve margins grew more acute,’ the report said.”
January 14 – Associated Press (Anne D’Innocenzio): “Shoppers increased their spending in November from October as holiday shopping kicked into full gear. Retail sales rose a better-than-expected 0.6% in November, following a revised 0.1% decline October… A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose in November by a solid 0.4%, a sign that consumers are still spending on discretionary items.”
January 12 – Wall Street Journal (Don Nico Forbes): “Small-business confidence in the U.S. rose in December, driven by a jump in those expecting better business conditions going forward. The National Federation of Independent Business said… its small-business optimism index rose to 99.5, compared with 99.0 in November. The figure remains above the index’s long-term average of 98.”
January 13 – Bloomberg (Vince Golle): “US mortgage rates slid last week to one of the lowest levels in years… The contract rate on a 30-year mortgage dropped 7 bps to 6.18% in the week ended Jan. 9, according to Mortgage Bankers Association data... That’s the lowest reading since September 2024 and one of the lowest since 2022. The rate on a five-year adjustable mortgage plunged nearly a half percentage point to 5.42%, the second-lowest since May 2023.”
January 14 – CNBC (Diana Olick): “Mortgage demand spiked markedly higher last week as consumers returned from the holidays to find overall lower interest rates and then a sharp rate drop Friday on news from the White House… Refinance demand… surged 40% higher for the week and was 128% higher than the same week one year ago… Applications for a mortgage to purchase a home, which are less sensitive to sudden rate changes, rose 16% for the week and were 13% higher than the same week one year ago.”
January 14 – Reuters (Lucia Mutikani): “U.S. existing home sales accelerated in December… Home sales jumped 5.1% last month to a seasonally-adjusted annual rate of 4.35 million units... Home sales increased 1.4% on a year-over-year basis. ‘In the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth,’ Lawrence Yun, the NAR’s chief economist, said... ‘Inventory levels remain tight, with fewer sellers feeling eager to move, homeowners are taking their time deciding when to list or delist their homes’… The inventory of existing homes rose 3.5% from a year ago to 1.18 million units in December. At December’s sales pace, it would take 3.3 months to exhaust the current inventory of existing homes… The median existing home price last month increased 0.4% from a year ago to $405,400.”
January 13 – Bloomberg (Michael Sasso): “Sales of new homes in the US were little changed in October near the strongest pace since 2023 as builders lured anxious customers with price cuts and incentives. New single-family home sales eased 0.1% to an annual rate of 737,000 following a 3.8% September increase… New-home inventory was unchanged at 488,000 units in October from a month earlier, still near the highest since 2007… In December, 67% of homebuilders reported using sales incentives, a record in the post-Covid period, while a still-high 40% reported cutting prices…”
China Watch:
January 15 – Bloomberg: “Chinese banks extended the smallest amount of new loans since 2018 last year despite an uptick in December, in a reflection of sluggish demand from borrowers that’s weighing on growth. Financial institutions provided 908 billion yuan ($130bn) of new yuan loans in December… That far exceeded forecasts and was more than double the total in November. Still, for all of 2025, new loans reached a seven-year low of 16.27 trillion yuan. Aggregate financing, a broad measure of credit, increased 2.2 trillion yuan in the month, compared with a median forecast of 1.9 trillion yuan.”
January 15 – Reuters (Colleen Howe): “China’s State Grid will spend 4 trillion yuan ($574bn) to upgrade the country’s power grid between 2026 and 2030, state-run Xinhua news agency said… That is a 40% jump in fixed-asset investments from the previous five-year period…, as China ramps up wind and solar capacity to meet its goal of peaking its carbon emissions by 2030.”
Central Banker Watch:
January 13 – Reuters (Francesco Canepa): “The chiefs of many of the world’s major central banks issued a joint statement in support of Federal Reserve chair Jerome Powell on Tuesday after the Trump administration threatened him with a criminal indictment. ‘We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,’ the heads of the European Central Bank, the Bank of England and nine other institutions said. ‘The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve,’ they added.”
Europe Watch:
January 14 – Bloomberg (Lionel Laurent): “Marine Le Pen is changing tack — and not for the first time. After a combative and fiery reaction to her five-year election ban over an embezzlement case last year, the French far-right leader is taking a more conciliatory approach in her appeal… Her troubles haven’t hurt her Rassemblement National party in the slightest, and she appears to have a ready-made heir. US President Donald Trump and his MAGA acolytes will be following the fortunes of their nationalist fellow traveler closely at a critical political moment for France and Europe. They’ll barely be able to contain their glee.”
Japan Watch:
January 12 – Bloomberg (Sakura Murakami, Yoshiaki Nohara and Alice French): “Japanese Prime Minister Sanae Takaichi’s reported plan for a snap election fueled a rally in stocks while pushing down bonds and driving the yen deeper into the intervention-risk zone. Success at the polls for Takaichi, who ascended to the premiership in October, would provide a mandate for her to continue hawkish diplomacy and pro-stimulus policies.”
January 13 – Bloomberg (John Cheng): “Japan’s five-year government bond auction drew the weakest demand since August as expectations that Prime Minister Sanae Takaichi will call a snap election reinforced concerns over increased debt issuance. Bond futures slid after the sale’s bid-to-cover ratio came in at 3.08, down from 3.17 at the previous offering in December and below the 12-month average of 3.54. Ahead of the results, yields on five-year bonds rose to 1.615%, the highest since the debt’s debut in 2000… Takaichi’s government plans to unveil a record initial budget for the fiscal year starting in April.”
Leveraged Speculation Watch:
January 16 – Bloomberg (Felice Maranz): “Shares of Fannie Mae and Freddie Mac extended days-long losing streaks amid mounting unease about the impact of President Donald Trump’s policy moves on efforts to release the mortgage-finance giants from government control. Fannie and Freddie common stock both sank around 12% in Friday trading, closing at the lowest levels since August. Fannie fell for a fifth day, and Freddie dropped for a seventh day.”
January 12 – Bloomberg (Justina Lee): “Even in the most vanilla corners of institutional money management, an appetite for leverage is quietly returning. Known as equity extensions, these strategies can turn a $100 investment into $130 in long bets and $30 in shorts — giving managers more room to express their views by scaling up favored stock-market positions and betting against others… Nearly two decades after the financial crisis discredited all manner of complex trades, this assertive style of active investing is making a comeback. Assets in extensions hit $152.6 billion at the end of September… — more than double their total from three years ago and on pace for the biggest annual increase in at least a decade.”
Social, Political, Environmental, Cybersecurity Instability Watch:
January 12 – Bloomberg (Stephan Kahl): “Never before has the insurance industry faced such big losses tied to floods, severe thunderstorms and wildfires, according to a fresh study that links rising temperatures to increasingly dangerous weather patterns. Insured losses for so-called non-peak perils — also sometimes referred to as secondary perils — reached a record $98 billion last year, Munich Re said.... Overall insured losses from natural disasters, including peak perils such as hurricanes, were $108 billion, it said.”
January 14 – Financial Times (Susannah Savage): “In the early 18th century, Finland was familiar with the fear of hunger. A famine fuelled by an unpredictable climate had killed off a third of the population in the 1690s. The Great Northern War with Russia further disrupted farming, as well as everything else, in the first 20 years of the century. So in 1726, the country began setting aside grain to ensure it could feed the population in case of emergency. Long winters, a short growing season and disruption from clashing empires demanded it. Three centuries later, that logic is shaping policy far beyond Finland… From Sweden and Norway to India and Indonesia, states are holding back increasing quantities of rice, wheat and other staples as insurance against a world they increasingly view as unstable.”
