Week ended Jan 9, 2026: stocks close at record highs

The news feed generated by Mr Trump and his cabinet in the first few days of 2026 is overwhelming, distracting and (at least to me) annoying, mainly because the avalanche of news drowns out what is really be going on in the U.S. economy.  I remember what my (salesman) dad used to tell me when I was first starting my career: “throw enough shit on the wall, and some of it will stick.”  In other words persistence and perseverance are the keys in sales.  If you then sprinkle in some tactics like deflection, distraction and innuendo – coupled with mistruths in some instances – you have a good description of the day-to-day tactics of the leader of the free world.  Certainly Mr Trump is feeling the pressure as the mid-term elections approach and the administration’s popularity remains under severe pressure, largely due to the ongoing affordability crisis (a topic I discussed earlier this week: “The K-shaped economy and the affordability crisis”). 

Think about it – in just the last week (and ignoring social issues entirely), President Trump suggested the following ideas with respect to the U.S. economy:

• The President “ordered” Freddie Mac and Fannie Mae to buy $200 billion of mortgage-backed bonds with their excess cash, in an attempt to lower mortgage rates.

• Mr Trump asked Congress to consider legislation to bar institutional investors from buying single-family homes.

• He met with executives of global oil companies to persuade them to invest in the Venezuelan oil industry, something that Mr Trump has implied is a “no brainer” but is far from that given the poor quality of Venezuelan oil and the potentially hundreds of billions of dollars that will be required to improve the dilapidated infrastructure.  This approach shows a poor understanding of simple oil economics, including most importantly the relationship between oil prices and the cost of extraction.

• The president signed an executive order that prohibits defence companies from paying dividends or repurchasing stock (so they can speed up spending on weapons production).

• Mr Trump then proposed that the U.S. defence budget be increased from around $1 trillion by 2027 to $1.5 trillion.

• The president said that the U.S. “needs” Greenland, and will buy it, bribe Greenlanders through one-off payments or potentially take it by force.

• And just this morning, I read that Mr Trump is proposing that interest rates on credit cards be capped at 10%.

It all smacks of desperation to me because any investor that knows their ass from their elbow as far as economics holds their nose at these sorts of seat-of-the-pants market manipulative policies. Fortunately, investors have learned by now to largely take many of Mr Trump’s policies –  laden with bravado and often inaccurate information – with a grain of salt.  In fact, global equity markets ignored most of this rubbish and continued to power forward last week, acknowledging – at least in the U.S. – that monetary and fiscal stimulus is on the cards (U.S. budget deficit-be-damned).  In fact, the S&P 500 closed at a record high on Friday.  As I often say though, the truth rests with the bond market.  Intermediate and long-term yields barely budged this week, and short-term (Fed-influenced) yields actually rose.  Bond yields remain stubbornly high for a number of reasons which you can read more about in my article “US Treasury yields: what’s next?”.    

Recall that risk sentiment wobbled early last year leading up to the disastrous “Liberation Day” tariff announcement, but then staged a strong recovery once blanket reciprocal tariffs were rescinded.  This occurred in spite of the fact that the Trump Administration seemed to be trying its best to undermine economic growth and completely undo the world order as we know it.  However, to be fair, I don’t hear any viable economic policies coming from the Democrats, so as investors, we must be careful about what we wish for. It’s one thing to constantly moan, a normal reaction of any  party not in power, but developing solid counter-ideas must be a prerequisite for changing course.  And let’ face it – there have been few if any economic ideas or policies coming from the other side of the aisle.  Democratic “form over substance” (meaning little substance) provides Mr Trump the opening he so covets and allows his narrative – right or wrong – to grab centre stage.  Fault him as you may (and I do), it’s very difficult to argue with his salesmanship and level of energy, certainly compared to Mr Biden towards the end of his term.

ECONOMIC DATA LAST WEEK THAT MATTERED

The confluence of economic data released last week suggested a slowly weakening U.S. economy although the data in some respects remains ambiguous and certainly does not point towards an economic meltdown.  Keep in mind that 3Q25 GDP was robust, a reminder  that the U.S. economy is large and diverse, and because of this, is able to withstand a litany of questionable economic policies.  However, the issue that is bothering Americans is affordability, mostly a result of post-pandemic inflation.  As I mentioned in the article I penned earlier this week on the K-shaped economy, higher prices are a pandemic legacy in which the blame can be shared across the prior three presidential administrations (starting with Trump 1.0), and exacerbated by the Fed remaining too easy for too long.  Welcome to politics though.  Mr Biden is long gone so the blame rightly or wrongly falls mostly at the feet of the current administration.  And when you filter out the noise of a “new policy per day” (i.e. throwing a lot of shit on the wall), the electorate is getting increasingly pissed off as affordability worsens.

The December jobs report

The December jobs report was largely a non-event, coming in more or less as expected.  The unemployment rate fell to 4.4% (from original 4.6% in November), although only 50,000 new jobs were added in the month.  Jobs added were also revised down for October and November, too, suggesting that the U.S. labour market is continuing to weaken in spite of the surprise decrease in the unemployment rate.  I believe I read that this was the lowest year of job growth since the pandemic.

Consumer confidence

Consumer confidence improved again in January based on preliminary results.  This would be the second month running of better confidence according to the University of Michigan Surveys of Consumers.  However, January consumer confidence is still 25% below the level of one year ago, and long-term inflation expectations remain elevated at 4.2%.  I

SM manufacturing data (USA)

Further economic weakness came in the form of ISM manufacturing data in the US for December, which suggested the manufacturing sector continues to contract in the U.S.   This follows two months of  improvement and is a step in the wrong direction for the U.S. economy, although there have been many months of contraction over the last two to three years.

Ruling from Supreme Court regarding Trump tariffs

One piece of news that was expected but did not materialise is the Supreme Court’s ruling on the legality of Mr. Trump tariffs.  When the decision does come (as early as next Wednesday), it will rule on the legality of the tariffs under the IEEP Act, as well as ruling whether or not – if illegal – tariffs collected so far would need to be refunded.

MARKETS LAST WEEK

The tables below speak for themselves, since nearly everything was better bid as the first week of the new year ended.  According to my data, the S&P 500, the DJIA and the Russell 2000 closed at record highs on Friday.  Internationally, the FTSE 100, the STOXX 600 (Europe), and the Shanghai Exchange also closed at record highs.  It’s good to be long stocks at the moment! 

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