by Gavyn Jensen-Schneider, Research Associate

Markets had little reaction to what was an eventful week for corporate earnings and the Fed. The S&P 500 finished the week up +0.34%, while the Nasdaq fell -0.17%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.25%, up +2 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, remained unchanged at 3.63%.

The Federal Open Market Committee (FOMC) kept the policy rate unchanged at 3.50% – 3.75%, as was widely expected. The Committee’s statement, which articulates its view of the US economy, was more hawkish than at the previous meeting. Chair Powell described the economy as being on “firm footing” as economic activity expanded, the unemployment rate stabilized, and inflation remained at an elevated-but-stable level. It’s expected that the economic picture will remain largely the same through the next FOMC meeting on March 17^th – 18^th. According to CME FedWatch, analysts estimate an 87% chance of rates remaining unchanged.

In other Fed news, President Trump announced former Fed Governor Kevin Warsh as his nominee for Federal Reserve Board Chair. The long-awaited announcement comes four months before current chair Jerome Powell’s term expires. Warsh served at the Fed from 2006 to 2011, during the heart of the Great Financial Crisis. In that time, he was considered a hawk, pushing for higher interest rates even as the country struggled with the Great Recession. Since leaving the Fed, and especially in the months leading up to this announcement, he has appeared notably more dovish, arguing in favor of lower interest rates.

Congress may prove an obstacle to Warsh’s appointment as instating a new member to the Fed Board of Governors requires approval by the Senate. Senator Thom Tillis has stated that he will oppose Warsh’s nomination until the Department of Justice investigation into Chair Jerome Powell is resolved. As a member of the Senate Banking Committee, Tillis has the leeway to halt the Senate confirmation process, putting the appointment of Warsh at his mercy. Once the congressional logjam is resolved, Warsh is expected to fill the seat of Governor Stephen Miran—whose term expires at the end of January—before being promoted to Chair at the conclusion of Chair Powell’s term.

Speaking of congressional logjams, the legislative branch is quickly barreling toward another government shutdown. The Senate was slated to pass six appropriations bills this week that would fund around 75% of the government. The funding bills had been crafted in a bipartisan negotiation process over the past several months but were quickly halted in the aftermath of an ICE-involved shooting in Minneapolis. Lawmakers have seemingly cut a deal that will pass five of the six bills and implement a two-week stopgap measure for the remaining appropriations package to be renegotiated. This deal won’t be voted on until February 1^st at the earliest, after government funding has lapsed, though congressional leaders are hopeful that this shutdown will not last very long.

AI continues to drive earnings growth for hyperscalers. Meta and Microsoft both touted earnings per share for Q4 that exceeded Wall Street expectations. Both firms continue to invest in compute capacity by expanding their data center footprints. Additional compute allowed Meta to improve AI-augmented advertisement recommendation systems, which increased advertising performance in the quarter. Microsoft invested its compute in Copilot, its AI assistant, as well as increasing the capacity of its cloud computing service, Azure. Though both stocks saw strong top-line performance, the market responded differently to their earnings reports, with Meta gaining +10% and Microsoft falling -12%, demonstrating the volatility of investor sentiment.

Market sentiment toward AI and hyperscale spending will remain top of mind next week as Alphabet (Google’s parent company) and Amazon are set to report on Wednesday and Thursday, respectively. In addition, a fresh set of labor market data will be released, with JOLTS on Tuesday and both nonfarm payrolls and the unemployment rate on Friday.

by Gavyn Jensen-Schneider, Research Associate

Major market indices fell over 2% on Tuesday but clawed back most of those losses by week’s end, making for a noisy week of trading. The S&P 500 finished the week down -0.35%, while the Nasdaq fell -0.06%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.23%, unchanged from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, rose +1 basis point (bp) to 3.63%.

Over the weekend, the President announced a new set of 10% general tariffs on eight European nations—Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland—which were scheduled to go into effect February 1^st. These newly announced levies were part of the Administration’s push to acquire the semi-autonomous Danish territory of Greenland. The territory has a strategic location for military applications and has a supply of rare earth minerals comparable to the United States. Those minerals are trapped under a layer of arctic ice, making the minerals on this ironically named island difficult to access.

Though markets recoiled after these new tariffs were announced, investor’s fears were assuaged on Wednesday, when President Trump and NATO Secretary General Mark Rutte reached a “framework” for a future deal on Greenland. Negotiations are ongoing, but in light of the diplomatic progress, the February 1^st tariff package was withdrawn.

The Core Personal Consumption Expenditures (PCE) Price Index rose 0.2% month over month in both October and November. On an annualized basis, Core PCE was 2.7% and 2.8% respectively, as inflation remains stubbornly above the Federal Reserve’s 2% inflation target. The final revised reading of GDP growth for Q3 beat analyst expectations, coming in at 4.4%, a strong showing considering that job growth was sluggish during the quarter.

The final week in January will be a busy one as some of the big tech companies—Microsoft, Meta, and Apple—announce their Q4 earnings. The Federal Reserve will meet on Tuesday and Wednesday next week to discuss interest rate policy, although the Fed is widely expected to leave the policy rate unchanged at 3.50% – 3.75% for now.

by Gavyn Jensen-Schneider, Research Associate

Market indices changed little after a volatile week of trading. The S&P 500 finished the week down -0.38%, while the Nasdaq fell -0.66%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.23%, up +6 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, rose +3 bps to 3.62%.

The Department of Justice (DOJ) served grand jury subpoenas to Fed Chair Jerome Powell regarding his testimony before Congress last June, which focused on the renovation of Federal Reserve office buildings. In response, the Fed Chair released a statement in which he described the investigation as an “unprecedented action [that] should be seen in the broader context of the administration’s threats and ongoing pressure.” Over the past year, the President has speculated about removing both Chair Powell and Governor Lisa Cook.

The independence of the Federal Reserve is a vital component of monetary policymaking. The last time the Federal Reserve acquiesced to political pressures was in 1971, when President Nixon pushed then-Fed Chair Arthur Burns to ease monetary policy before the 1972 presidential election. The excessive monetary expansion helped create the “stagflationary” economy of the 1970s.

The December Consumer Price Index (CPI) released on Tuesday came in better than expected. Headline CPI was 2.7% while Core CPI, which removes volatile food and energy prices, was 2.6%. Analysts had been expecting to see Core CPI increase to 2.7%, or 10 bps higher than November. The positive print is a welcome one, as many analysts, including myself, believed the November inflation rate to be underreported due to issues in collecting and weighting the data.

Tuesday marked the unofficial start of Q4 earnings season as the Big Banks kicked off quarterly reporting. The US banks saw earnings beats on strong loan and deposit growth, controlled expenses, and good credit trends. Fee income (from investment banking and capital markets) was a mixed bag, however, with some reporting softness amidst geopolitical uncertainty despite strong pipelines for future business. Given that expectations for the banks were high, the group saw some stock pullbacks during the week. Looking forward, executives shared positive outlooks for robust growth in 2026, including a pickup in IPO activity as well as AI-driven cost savings.

Earnings season continues next week, with notable names including Netflix, Intel, and Charles Schwab. On the data side, the November Personal Consumption Expenditures (PCE) inflation index will be released Thursday morning, followed by the University of Michigan Consumer Sentiment for January on Friday. Finally, the Supreme Court will hear oral arguments next Wednesday on whether the President has the authority to fire Fed Governor Lisa Cook over her alleged mortgage fraud. While a formal ruling is not expected until later this summer, market volatility will likely hinge on the perceived leanings of the justices during the proceedings.

by Gavyn Jensen-Schneider, Research Associate

Geopolitics dominated news headlines this week, though financial markets were largely unimpacted as the S&P 500 coasted to a new record high on Friday. The S&P 500 finished the week up +1.57%, while the Nasdaq grew +1.88%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.17%, down -2 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, fell -2 bps to 3.59%.

A slew of labor market indicators were released this week, coming from private firms and the Bureau of Labor Statistics. JOLTS job openings of 7,146k were well below Wall Street expectations of 7,700k. The Challenger Job Cuts report on Thursday was positive, as job cuts fell to their lowest level in 17 months. Friday saw the release of the December employment report, including the unemployment rate and nonfarm payrolls. The unemployment rate fell to 4.4% from 4.5% in November as the economy added +50k jobs across the month. While the unemployment rate was better-than-expected, the job gains from nonfarm payrolls fell just short of Wall Street’s +55k consensus estimate. Overall, the economy added +49k jobs each month during 2025, down from +168K a month the year prior.

Investor conferences in the new year kicked off this week with CES Las Vegas, which focuses on consumer electronics. AI technology was at the forefront of the conversation, with executives from chipmakers Nvidia and AMD headlining different nights of the multi-day conference. Nvidia CEO Jensen Huang discussed the production of their most powerful AI processor chip, Vera Rubin, which is set to ship in the second half of 2026. These chips outperform the previous generation Blackwell chips in model “training” by 3.5 times, and in model “inference” by 5 times. The increase in processing capacity is key for expanding the capabilities of leading AI models.

The onslaught of earnings reports begins anew next week, with the big banks—JPMorgan Chase, Bank of America, and more—set to kick off the Q4 results. On the data side, December’s Consumer Price Index (CPI) inflation report is set for Tuesday, followed by the Producer Price Index (PPI) inflation report on Wednesday. This will be the first uninterrupted set of inflation data since the August CPI report, as the CPI and PPI reports from the past three months were either delayed, partially collected, or canceled altogether.

On Thursday, Jared attended an Economic Club of Minnesota event where U.S. Treasury Secretary Scott Bessent shared his perspective with the group on the current economic environment, policy initiatives, and how various forces are at play in the markets. He noted that a new Federal Reserve Chair, who will replace Chair Powell after his term ends in May, will likely be announced within the next two weeks or so. It is commonly believed this replacement may push for quicker reductions in benchmark interest rates.