Image Source: Pixabay

“Expect the unexpected” is just not going to cut it. For 2026, I’m adopting “Expect the Unbelievable”.

Three weeks into the new year, markets hint at “unbelievable” possibilities.

January 20 – Bloomberg (Ruth Carson, Taiga Uranaka, Lisa Du, and Finbarr Flynn): “The selling in Japan’s $7.6 trillion bond market began slowly, then seemed to hit all at once. What started as an unremarkable day on Tokyo trading desks quickly morphed into what several market participants described as the most chaotic session in recent memory. While concerns about Japan‘s fiscal position had been simmering for weeks, they suddenly boiled over on Tuesday afternoon with little warning — sending yields on some bonds to all-time highs. The rout left some hedge funds rushing to unwind losing trades, pushed life insurers to dump bonds and caused at least one corporate bond investor to pull out of a multi-million dollar deal. Even as traders struggled to pinpoint an immediate catalyst for the selloff, the overriding worry was clear: Prime Minister Sanae Takaichi’s plans to cut taxes and boost spending are raising doubts about the financial health of one of the world’s most indebted governments. ‘This is basically the market pricing in a Liz Truss moment in Japan,’ said Masahiko Loo, senior fixed-income strategist at State Street Investment Management.”

Sanae Takaichi and JGBs following in the footsteps of Liz Truss and the gilts market from 2022? That’s one major predicament for Japan – and markets across the globe. At upwards of $13 TN, outstanding Japanese government debt is about three-times the size of the UK’s. Weighing in around 250% of GDP – and almost half owned by the BOJ – a Japanese bond crisis has unbelievable possibilities.

Thirty-year JGB yields surged 27 bps in wild Tuesday trading, to 3.85%, before reversing lower to end the week up 14 bps at 3.60%. After trading Tuesday to the highest level since September 1997, 10-year JGB yields closed the week seven bps higher to 2.26% (up 19bps y-t-d).

Ten-year Treasury yields rose to a five-month high 4.30% in Tuesday trading (up 30bps from late-November lows). When JGBs falter, it’s curious to watch the old bond vigilante fears set in. Greek yields surged 18 bps in two sessions to 3.52%, the high back to April’s “liberation day” instability. Interestingly, German (10yr) yields rose seven bps this week to 2.91%, a more than two-year high, and within only five bps of the highest yield since July 2011. Swedish yields added five bps to 2.92%, within two basis points of highs since 2011. Australian yields jumped 11 bps to 4.82%, only a couple bps from highs back to 2011. New Zealand 10-year yields surged 15 bps to 4.59%. Worryingly, UK 10-year gilt yields jumped 11 bps this week to 4.51%.

January 23 – Bloomberg (James Hirai): “Gilts are heading for their worst week since April as the return of political risk and economic data surprises in the UK cap a turbulent spell for global bond markets. A meltdown in Japanese debt early in the week rattled markets, followed by escalating tensions over Greenland. But as other bonds around the world recovered, gilts were hit by worries about the potential for a new leader to increase borrowing, and then took another knock Friday from data signaling a revival in the economy.”

The UK’s January Composite PMI index surged to a stronger-than-expected - and a 21-month high - 53.9. Germany’s Composite PMI was reported at a stronger-than-expected 52.5, the second strongest reading in over two years. While effects are uneven across regions, exceptionally loose global conditions are working their magic.

The Atlanta Fed GDPNow Forecast is up to 5.37%, following Q3’s upwardly revised 4.4% GDP growth. Issue 2026: Overheating risks are high and rising.

Issue 2026: Powell Replacement. Blackrock’s Rick Rieder as new Fed Chair? FT: “BlackRock’s Rick Rieder Surges in Federal Reserve Chair Race.” Unbelievable…

January 23 – Financial Times (Claire Jones, Lauren Fedor and Kate Duguid): “BlackRock executive Rick Rieder has emerged as a leading contender in the race for Federal Reserve chair as Donald Trump’s decision on who to nominate to lead the world’s most important central bank looms. Rieder’s odds on prediction site Polymarket have surged from 6% earlier this week to 34% as of Friday morning, as speculation mounts that the president will back a candidate with close links to Wall Street to replace Jay Powell when his term as chair ends in May… Rieder — who Trump described… earlier this week as ‘very impressive’ — said after the Fed’s most recent rate cut that borrowing costs were ‘still too high for the housing market to [recover] its buoyancy’. He added that small businesses and young households… ‘are still struggling’… ‘Rick is not an ideologue, he’s more pragmatic. He’s more likely to be concerned with his legacy and the legacy of the Fed as an institution,’ said an executive at a large US asset manager. ‘I view Rick to be the best outcome. He is the most market friendly. He is the most independent and will be data driven’.”

January 17 – Bloomberg (Josh Wingrove, Saleha Mohsin, and Joshua Green): “The candidacy of BlackRock’s Rick Rieder to be the next Federal Reserve chair has gained late momentum, people familiar… say, as President Donald Trump weighs congressional blowback in his bid to put a friendlier face at the head of the central bank. Trump’s interview Thursday with Rieder went well, the people said… The search is now a four-man race, some of the people said, among Rieder, National Economic Council Director Kevin Hassett, Fed Governor Christopher Waller and former governor Kevin Warsh… Rieder has called the Fed’s independence ‘critical,’ but has also echoed Treasury Secretary Scott Bessent in saying the central bank could be more ‘innovative’ in how it uses its balance sheet.”

Since the FT’s Friday afternoon article, Polymarket odds have turned upside down – Rick Rieder 53% versus Kevin Warsh at 28% (unbelievable!). I respect Warsh, with his independent and more traditional (i.e., smaller balance sheet) central banking perspective. Meanwhile, with less than 10 months until midterms, the administration is keen to have Fed (and GSE!) balance sheet growth locked and loaded. Rieder: “Whoever ends up being the Fed chair, there’s so many innovative things… how to use the balance sheet, how to use liquidity, where the yield curve is.” I doubt the President is all too enthused by Rick Rieder. Secretary Bessent and others have surely conveyed that the Blackrock senior managing director is a strong market favorite. And with markets vulnerable and Republicans one market accident away from a midterms wipeout, it seems reasonable enough that the President would bite the bullet on this one.

A deeply divided Fed is a key Issue 2026: Deeply unstable markets will only compound the problem, whether it’s Rieder or Warsh at the helm. The rates market is pricing about two cuts (45bps) by year-end. So long as the boom persists, the hawkish contingent will have none of that. The new Fed Chair will come with a Trump mandate to cut rates. I’ll assume the non-economist Rieder will have an especially challenging task of pushing through lower rates.

Issue 2026: QE and the Fed’s balance sheet. Things turn unbelievably fascinating if the fledgling Rieder Fed confronts de-risking/deleveraging and market crisis – a scenario these days with uncomfortably elevated odds. Markets would demand a big liquidity bailout to the tune of many hundreds of billions (for starters). And Rick Reider would have his work cut out selling monster QE to the Committee, the American people, and global investors – especially ahead of unbelievably consequential midterm elections. Time will be of the essence. The QE number(s) will be unbelievably massive – and any Fed flinching could unleash unbelievable instability. The podium will say “Federal Reserve,” but many folks will see and think Blackrock. Potentially unbelievably messy.

Unbelievable to most, Silver ended the week at $103, with Gold just shy of $5,000. Gold has jumped 15.5% in the initial three weeks of the year, adding to 2025’s spectacular 64.6% advance. Unbelievably, Silver has jumped 44%, after last year’s 148%, with Platinum rising another 18.7%, following 2025’s 127%.

A Wednesday Fortune headline gets to the crux of an Issue 2026: “Ray Dalio Warns that the Monetary Order is Breaking Down, Leaving us with a Terrible Choice: ‘Do Your Print Money or Let a Debt Crisis Happen.” Trapped.

We’ll look back at the precious metals’ move as the signal that should have been heeded. Poor Dalio got up on the wrong side of his comfy Davos hotel bed. Fortune: “‘Let’s Not be Naïve’: Ray Dalio Warns the Global Rules-Based Order is Already ‘Gone’, Toppled by America’s Debt.” So many unbelievable headlines from Davos week; where to begin: “Ray Dalio Sees Ongoing Diversification Away from U.S. Assets.” “Trump Threats Sow Anxiety Among Europe’s Rich on Their U.S. Bets.” “Dollar’s Worst Week Since May Comes with US ‘Policy Nightmare.”

An unbelievable Davos week is a harbinger of things to come. An accelerating breakdown of the global order is one major Issue 2026.

January 22 – Financial Times (Paola Tamma, Barbara Moens and Christopher Miller): “EU leaders have cautiously welcomed Donald Trump’s decision to drop his threat of tariffs against European allies and the apparent softening of his desire to seize Greenland, but they still voiced concern over relations with the US ahead of an emergency summit to discuss the issue… ‘We have learnt something in the past days and weeks,’ said Denmark’s Prime Minister Mette Frederiksen… ‘When Europe is not divided, when we stand together, and when we are clear and strong also in our willingness to stand for ourselves, the results will show’.”

January 22 – Bloomberg (Kate Sullivan and María Paula Mijares Torres): “President Donald Trump vowed ‘big retaliation’ if European countries sell US assets in response to his tariff threats related to Greenland, adding pressure on them to stick with an emerging deal over the future of the island. ‘If they do, they do. But you know, if that would happen, there would be a big retaliation on our part,’ Trump said… ‘And we have all the cards’.”

We have “all the cards?” as previously asserted early in Chinese trade negotiations? Unfortunately, we owe the world an unbelievable amount of “money.” The Dollar Index was slammed 1.8% this week, the biggest hit since May trade negotiation instability. Davos week had disconcerting similarities to April/May, along with February’s despicable Zelenskyy Oval Office beat down. Festering for a year, crisis of confidence dynamics gained important momentum this week.

I’ll spare readers a more comprehensive analysis of what went down. NYT: “Trump and ‘Taco’ Roils Davos.” Bloomberg: “How Trump’s Greenland Threat Revived the TACO Trade.”

Politico: “Why 2026 May Bring More Tacos.” CNN: “Trump’s Latest TACO Moment Puts his Increasingly Erratic Temperament in the Spotlight.”

That was one unbelievable U-turn. Alarming, ominous and all the rest. And equities are well-conditioned to celebrate the power they hold over our power-hungry President. Issues 2026 trepidation: The Game of Chicken. Davos was a big win for European leadership and solidarity. At this point, they’ve seen enough. Red lines trampled on. They held together firmly, and Trump had nowhere to go but to retreat. The world has learned from the Chinese. And with U.S. markets fragile and midterms looming, the President’s international bullying capacity has rapidly diminished.

And this has me worried. More will stand up to him – and President Trump’s instinct is to lash out and double-down. “Trump Says U.S. ‘Armada’ Is Heading to Iran, Raising Pressure on Regime.” “Trump Administration Weighs Naval Blockage to Halt Cuban Oil Imports.” “U.S. Seeks New Regime in Cuba by End of Year.”

That was one swift and surely infuriating comedown in Davos – right after the thrill, marvel, and exaltation of the Maduro operation. With the world increasingly willing to stand one’s ground in 2026, our Commander and Chief’s predilection for wielding military power raises the risk of confrontation and geopolitical accidents.

January 23 – Reuters (Libby George and Trevor Hunnicutt): “U.S. control of Venezuela's oil exports has ensnared barrels that had been servicing debt to China, lining up another potential showdown between the two superpowers that could further complicate the South American country’s path out of default. Around a tenth of Venezuela’s $150 billion foreign debt pile is estimated to be loans from China that the OPEC member was paying in oil cargoes - until the U.S. seized Venezuelan President Nicolas Maduro earlier this ‌month.”

Issue 2026: unbelievable discord between extreme and rising risk – and Halcyon market risk perceptions.

January 22 – Bloomberg (Rainier Harris): “A key measure of credit risk reached the lowest level since the late 1990s on Thursday, after geopolitical tensions cooled and fears of a global economic slowdown abated. Risk premiums on US investment-grade corporate bonds, or the extra yield above Treasuries that investors demand for owning high-quality company debt, shrank to just 71 bps… That marks the lowest for the measure since 1998.”

January 23 – Axios (Madison Mills): “Retail investor activity hit a new record high on a rolling monthly basis, JPMorgan says, as the group continues to buy the dip in the stock market. Novice traders aren’t only dip buying. They’re also staying invested, making them increasingly formidable participants that Wall Street can’t afford to ignore. Retail investor dip buying on Tuesday is the third-largest trading day for the group in a year, as traders scooped up stocks while the Dow fell 900 points... Trading volume on the platform Public surged 304% from this time last year as more retail investors turn to new platforms to make their trades. Investors on Public used this latest dip to move cash on the sidelines into Big Tech names, Leif Abraham, Public co-CEO and co-founder, tells Axios.”

From the perspective of my analytical framework, there’s no conundrum. Especially over the past year, unbelievable global liquidity overabundance has masked serious festering issues. And unprecedented leveraged speculation remains at the epicenter of monetary disorder and market upside dislocation.

January 23 – Bloomberg (Brian Meehan): “The Treasury basis trade is doing what it always does in calm markets: getting massive -- now up to a near-record $1.4 trillion. Leveraged funds are parked in near-record net shorts in Treasury futures, and dealers are at all-time highs too as they take down long-duration Treasuries and hedge with contracts…”

January 19 – Bloomberg (Marcus Ashworth): “Dave Ramsden, the Bank of England’s deputy governor for markets, has finally said the quiet bit out loud. In a speech last week addressing massive hedge fund leverage in the UK gilt repurchase agreement market — where government debt is borrowed and loaned to ease liquidity — he threw down the gauntlet: ‘Something needs to be done’… The central bank’s July 2025 Financial Stability Report highlighted that just five hedge funds are responsible for 90% of net gilt repo borrowing, with more than £100 billion ($134bn) of exposure as of the end of November.”

Issue 2026: the unwind of “basis trade” and speculative leverage would trigger an unbelievable change in market and economic backdrops. A long list of festering issues, masked by historic liquidity overabundance, would be revealed. Harsh realities will wallop market misperceptions.

Importantly, a tightening of liquidity conditions would have a momentous impact on the AI mania/arms race. Tighter Credit conditions would propel the unfolding downturn in leveraged lending and “private Credit.” Sinking stock prices would see a problematic “wealth effect” turnabout, halting a major driver of U.S. economic resilience. And with speculative leverage having become integral to global market and economic booms, de-risking/deleveraging would be extraordinarily problematic globally. Moreover, in the current environment, we definitely can’t take international crisis-response coordination for granted.

I anticipate an unbelievable year. And I and so many others have difficulty believing anything our federal government tells us. With less than 10 months until midterms, the administration will say and do anything. I would expect the President to hold off on the Insurrection Act and other actions that might trigger more widespread social unrest and mayhem – but who knows. Meanwhile, the winter storm taking hold across the country reminds us that odds favor weather mayhem and destruction. And when it comes to unbelievable, I fear that in a crisis environment, we might be overwhelmed by AI generated misinformation and propaganda.

Of course, history’s most unbelievable Bubble could inflate through yet another year. I wouldn’t bet on it. Things got too crazy – late-cycle Credit and speculative “Terminal Phase” excess too intense and systematic. Blind optimism took complete control. As such, people today couldn’t be more unprepared. Faith in Fed and Trump “puts” spurred “blowoff” excess in history’s greatest Bubble in leveraged speculation. And Bubbles eventually burst. Confidence in the Fed and Trump administration seemingly couldn’t be more fragile. I’ve been amazed so far, but I’ll find it unbelievable if the leveraged speculating community doesn’t move to pare back risk. There are too many things that can go wrong in 2026.

Bloomberg’s Erik Schatzker (1/21/26): “Two days ago, Ken, we witnessed a disorderly – seemingly uncontrollable - selloff in the Japanese bond market… It has been described as eerily similar to the UK’s 2022 gilt crisis. Is there an implicit warning in that selloff for the U.S. Treasury bond market?”

Citadel’s Ken Griffin: “I actually think there’s an explicit warning – that if your fiscal house is not in order, the bond vigilantes can come out and extract their price. And what’s particularly troubling is that if you look at what happened in Japan – when bonds and stocks move together in prices then bonds are no longer a hedge for your equity portfolio. And they lose a substantial part of what makes them so special in constructing a portfolio. If U.S. Treasuries are viewed as being at risk - because the United States is not seen as being creditworthy – then bonds and stocks will move together in price and that will result in bonds having a much-higher demanded yield in the marketplace. So, mortgage interest rates will be higher. The cost for us to finance our deficits will be higher. I think that what happened in Japan is a very important message to the House and to the Senate: you need to get our fiscal house in order.”

Schatzker: “Liz Truss was playing with fire. The Japanese just learned they’re playing with fire. Is the United States – is President Trump - playing with fire?”

Griffin: “Probably not yet. The U.S. has so much wealth. We can maintain this level of deficit spending for some period of time. But the longer we wait to change direction, the more draconian the consequences will be of that change.”


Some will argue the President’s threats on Greenland, Denmark and our European allies were “no harm, no foul.” Just Trumpian “art of the deal” antics. Globally, most see a most flagrant foul not soon forgotten. I can’t help but draw a connection between the administration’s tactics, a breakdown in the global order, an incipient crisis of confidence dynamics, and an impetus for sophisticated players to commence de-risking/deleveraging.

For Posterity:

CNN’s Jim Sciutto (1/19/26): “Given where it already is, has President Trump already irreparably harmed, damaged the Transatlantic Alliance?”

Rasmus Jarlov – Member of Danish Parliament and Defense Committee Chair: “It will be quite difficult to return to the levels of trust we had before, because it is a shock that the U.S.A. has turned on us that quickly and that aggressively. So, it is dangerous for us to be as dependent on the Americans as we have been before, and of course we have to take [that] into account in the future. But it’s not too late to work together to save NATO, to find our enemies, free the West from terrorism and threats. We can still do that, and we want to do that.”

Sciutto: “As you know, President Trump is threatening your country and other countries in Europe with economic penalties – these new tariffs. But he’s also continuing to refuse to rule out using military force to take Greenland. Just today, when asked by NBC if he would use force, he said simply ‘no comment.’ You are Chair of Denmark’s Defense Committee. You are responsible in part for helping design the defense of Denmark. Do you consider that a genuine possibility – that we might deploy troops there to in effect force Denmark out of Greenland?”

Jarlov: “I have to say at this point, with the very aggressive statements also made today about not wanting to work only for peace and linking that to Greenland, that is quite threatening and we would be reckless if we didn’t take that seriously. We know you so well in the United States. We have been your friend for 250 years. And this is not you. This is not a country that attacks and threatens peaceful friendly neighbors that have done absolutely nothing to you and don’t pose a threat. You’re a country that stands for freedom. You’re not a country that subjugates neighbors and goes on wars of conquest to take land from other countries. You work together with your allies. You are a country that can be trusted – not one that suddenly turns on its allies and runs away from treaties and says all the sudden that there’s no document that proves that Greenland belongs to Denmark after six and a half centuries of ownership. This is not you, and we don’t recognize you at the moment. And we have to get away from this path because there is no way that we can give in to a demand of handing over land and people that does not want to be part of the United States. We can’t do it, and from there it’s up to the US how much of a confrontation this is going to turn into. We don’t want a confrontation. We want to work with you, and we want to give you the access to Greenland that you need. But we can never give in to a demand that we should just hand over land and people that the United States has absolutely no right to.”

Sciutto: “But what if this is America today under Trump, regardless of its history – and by the way, he’s President for three more years and has other leverage to hand – for instance, he could, and he’s threatened before, to remove troops from Europe. He’s threatened before to stop all U.S. aid to Ukraine. How far is Denmark and how far are your allies in Europe willing to go to defend this red line you’re setting?”

Jarlov: “We will of course defend Greenland if there is an invasion by American troops. It would be a war. And we would be fighting against each other. We know that the Americans are stronger than us. You have a much stronger military than ours. But it is our duty to defend our land and our people. And the 57,000 Danish citizens that live in Greenland that have made it absolutely crystal clear that they don’t want to be taken by the United States. We have an obligation to fight for those people and our forces will do that. But it would be a disaster, also for the United States. We know this is not you. It’s not who you are. But even for the very, very few people in the United States that don’t care about what is right and wrong – that you can’t just take your neighbor’s land just because you think you need it – even for those people this is a very, very bad idea. The business case of taking Greenland is terrible because you already have access to it. And if you annexed it, the only thing you would get [are] more expenses. You would have to run the country. You would have a population that would never recognize that you own their land. And you would have to do without all the things that Denmark pays for today. We’re paying a lot of money for Greenland. We’re not making any money on it. We’re paying a lot of money for defense. We have invested about $14 billion in the past two years in drones, ships, satellites, troops on the ground, helicopters, everything else that you won’t [have] up there. Why would you want to take over that expense? Why not work together with us when the door is wide open. You have access to Greenland. There’s no expiry date to that access. And you can put as many troops up there as you want. But Greenland is not threatened by the Chinese or Russians. We have kept them out. And they’re in no way about to take over the country.”
 

For the Week:

The S&P500 slipped 0.4% (up 1.0% y-t-d), and the Dow declined 0.5% (up 2.2%). The Utilities fell 1.5% (down 0.1%). The Banks dropped 2.1% (up 0.1%), and the Broker/Dealers declined 0.9% (up 5.3%). The Transports dipped 0.3% (up 4.9%). The S&P 400 Midcaps declined 0.5% (up 5.5%), and the small cap Russell 2000 slipped 0.3% (up 7.5%). The Nasdaq100 added 0.3% (up 1.4%). The Semiconductors increased 0.4% (up 12.4%). The Biotechs surged 3.7% (up 6.4%). With bullion jumping $392, the HUI gold index surged 10.3% (up 26.1%).

Three-month Treasury bill rates ended the week at 3.5825%. Two-year government yields added a basis point to 3.59% (up 12bps y-t-d). Five-year T-note yields increased one basis point to 3.82% (up 10bps). Ten-year Treasury yields were little changed at 4.23% (up 6bps). Long bond yields slipped a basis point to 4.83% (down 2bps). Benchmark Fannie Mae MBS yields rose four bps to 5.01% (down 3bps).

Italian 10-year yields gained six bps to 3.51% (down 4bps y-t-d). Greek 10-year yields surged 18 bps to 3.51% (up 7bps). Spain's 10-year yields increased five bps to 3.27% (down 2bps). German bund yields jumped seven bps to 2.91% (up 5bps). French yields dipped two bps to 3.49% (down 7bps). The French to German 10-year bond spread narrowed nine to 58 bps. U.K. 10-year gilt yields jumped 11 bps to 4.51% (up 3bps). U.K.’s FTSE equities index declined 0.9% (up 2.0% y-t-d).

Japan’s Nikkei 225 Equities Index slipped 0.2% (up 7.0% y-t-d). Japan’s 10-year “JGB” yields surged another seven bps to 2.26% (up 19bps y-t-d). France’s CAC40 declined 1.4% (down 0.1%). The German DAX equities index fell 1.6% (up 1.7%). Spain’s IBEX 35 equities index dipped 0.9% (up 1.4%). Italy’s FTSE MIB index dropped 2.1% (down 0.3%). EM equities were mixed. Brazil’s Bovespa index surged 8.5% (up 11.0%), and Mexico’s Bolsa index gained 1.6% (up 5.9%). South Korea’s Kospi gained another 3.1% (up 18.4%). India’s Sensex equities index dropped 2.4% (down 4.3%). China’s Shanghai Exchange Index increased 0.8% (up 4.2%). Turkey’s Borsa Istanbul National 100 index jumped 2.6% (up 15.4%).

Federal Reserve Credit was little changed last week at $6.532 TN, with a six-week gain of $42 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 (689 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt gained $5.0 billion last week to $3.067 TN. “Custody holdings” were down $192 billion y-o-y, or 5.9%.

Total money market fund assets (MMFA) declined $30.8 billion to $7.699 TN - with a 26-week surge of $620 billion, or 17.5% annualized. MMFA were up $795 billion, or 11.5%, y-o-y - having ballooned a historic $3.114 TN, or 68%, since October 26, 2022.

Total Commercial Paper declined $11.5 billion to $1.402 TN. CP has expanded $245 billion, or 21.2%, y-o-y.

Freddie Mac 30-year fixed mortgage rates increased three bps to 6.09% (down 87bps y-o-y) - just off the low back to September 2022. Fifteen-year rates rose six bps to 5.44% (down 72bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up nine bps to 6.46% (down 67bps).

Currency Watch:

For the week, the U.S. Dollar Index dropped 1.8% to 97.599 (down 0.9% y-t-d). On the upside, the New Zealand dollar increased 3.4%, the Norwegian krone 3.3%, the Australian dollar 3.2%, the Swedish krona 3.1%, the Swiss franc 3.0%, the euro 2.0%, the the British pound 2.0%, the South African rand 1.7%, the Brazilian real 1.6%, the Canadian dollar 1.6%, the Japanese yen 1.6%, the Mexican peso 1.5%, the Singapore dollar 1.3%, and the South Korean won 0.7%. China's (onshore) renminbi increased 0.1% versus the dollar (up 0.38% y-t-d).

Commodities Watch:

The Bloomberg Commodities Index jumped 5.3% (up 9.0% y-t-d). Spot Gold surged 8.5% to $4,988 (up 15.5%). Silver spiked 14.6% to $103.32 (up 44.2%). WTI crude rallied $1.87, or 3.1%, to $61.31 (up 7%). Gasoline surged 3.8% (up 8%), and Natural Gas spiked 71.9% higher to $5.333 (up 45%). Copper gained 1.8% (up 5%). Wheat rose 2.4% (up 5%), and Corn increased 1.4% (down 2%). Bitcoin sank $5,900, or 6.2%, to $89,300 (up 1.9%).

Market Instability Watch:

January 19 – Bloomberg (Yoshiaki Nohara, Sakura Murakami, and Erica Yokoyama): “Japanese officials played down a sudden meltdown in the Japanese bond market after a tax cut pledge by Prime Minister Sanae Takaichi helped trigger a surge in 40-year bond yields to the highest in decades. ‘Long-term yields move on various factors and are determined in the market so I’ll refrain from commenting on every move,’ government spokesperson Minoru Kihara said… ‘We’ll make sure to gain market trust through a sustainable fiscal policy, making our economy strong and bringing down the debt-to-GDP ratio,’ he said…”

January 21 – Bloomberg (Shuli Ren): “It’s happening again. From Japan to the US, the world’s biggest government bond markets seem increasingly unstable, prone to flash crashes. On Tuesday, what began as a quiet trading day in Tokyo quickly morphed into chaos. Yields on the country’s ultra-long bonds jumped by more than 25 bps, reminiscent of a similar episode last May. A selloff in the US market followed, with the 30-year yield hovering near its late 2023 peak. Japan’s longer maturity bonds rebounded on Wednesday… Nonetheless, it’s worth asking why sudden global bond routs are becoming so frequent.”

January 20 – Bloomberg (John Cheng): “A sharp rise in volatility in Japan’s government bond market could spill over into other markets — especially US Treasuries — forcing some investors to cut back risk across portfolios, Citigroup Inc. said. Risk parity funds, which allocate capital across multiple asset classes from stocks to bonds and commodities with equal volatility, may need to sell as much as one third of their current exposure, potentially triggering up to $130 billion of bond selling in the US alone, Mohammed Apabhai, head of Asia trading strategy at Citigroup Global Markets, wrote…”

January 17 – Wall Street Journal (Rory Jones): “One potential beneficiary of the tug of war over the Federal Reserve’s independence: China. The criminal investigation into Fed Chair Jerome Powell is being viewed globally as an effort by the Trump administration to wrest control of monetary policy from the central bank. That… risks damaging investor confidence in the U.S. financial system and the dollar, just as China is expanding use of its own currency around the world. ‘The institutional setup of the U.S.—through actions like those against the Fed—is being undermined,’ said Bert Hofman, a former World Bank country director for China… ‘Holding dollars becomes a relatively less attractive proposition as a form of safety’.”

January 22 – Reuters (Naomi Rovnick, Simon Johnson and Simon Jessop): “Big Northern European investors are increasingly wary of the risks of holding U.S. assets in the face of geopolitical tensions, pensions chiefs told Reuters, a sign of a broadening shift away from the world's biggest financial market. A top investment adviser, three pension funds and a leading industry ‌body said the risk premium attached to holding U.S. assets had also gone up in part because of worries about the nation’s finances. Pension industry leaders and investment chiefs from Finland, Sweden and Denmark told Reuters they viewed U.S. foreign policy uncertainty and White House debt levels as a threat to the dollar, U.S. Treasuries and stocks. The Nordic region is home to some of Europe's biggest pension funds by assets.”

January 22 – Bloomberg (Ben Stupples, Jan-Henrik Förster and Charlie Wells): “Europe’s ultra-rich have made lucrative bets in the US on everything from cosmetic brands to space travel, but now the outsized nature of those holdings are putting many on edge. Some of the region’s wealthy elite have assessed their portfolios’ exposure to the US after claims by President Donald Trump over Greenland and recent geopolitical shocks in Venezuela and Iran, according to private bankers and advisers. They’ve explored moving some money out of US assets to broaden the geographical diversification of their investments, or curbing their exposure to the dollar, the people said…”

January 22 – Bloomberg (Joel Leon): “Small-capitalization stocks are outperforming their bigger peers every day this year. The Russell 2000 Index is on track to beat the broader S&P 500 Index Thursday for the 14th straight session, which would be the longest stretch of wins over large caps since May 1996, when the dot-com boom was in early days. The small-cap gauge is also on pace for its eighth record close of 2026.”

January 21 – Financial Times (Ian Smith): “European governments are curbing their sales of long-term sovereign bonds, as they shift towards shorter-term funding to limit the damage from a rise in borrowing costs. The average maturity of debt sold across big Eurozone markets including Germany, France and Italy is expected to dip below 10 years for the first time since 2015 this year… In the UK, the bank expects an average maturity of roughly 8.8 years, the lowest this century.”

U.S. Credit Trouble Watch:

January 22 – Bloomberg (Nir Kaissar): “US companies are on a borrowing binge, and debt markets don’t seem the slightest bit concerned. Companies issued a collective $2 trillion of public debt in each of the last two years, up from $1.5 trillion in 2022 and 2023. Yet credit spreads… are at historical lows for both high-grade and junk bonds, a sign the market is confident that companies can pay back their debts. Not everyone is so sure. Much of the recent, massive borrowing backs acquisitions and investment in artificial intelligence with uncertain, even speculative, payoffs. Interest rates are also double what they were a few years ago, making borrowing riskier. JPMorgan... already sees signs of stress in rating agencies downgrading many more corporate bonds last year than they elevated.”

January 21 – Wall Street Journal (Matt Wirz): “For the first time since the start of the private-credit boom, large numbers of individual investors are trying to get their money out. Several of the biggest funds eligible to wealthy individuals received requests from about 5% of shareholders to cash out at the end of last year, well above the normal volume, according to Securities and Exchange Commission filings. One, managed by Blue Owl, got redemptions for about 15% of its shares, primarily from Asian clients… The rising redemptions come at an awkward time for private-credit fund managers—and for the Trump administration—as they push for new rules that would ‘democratize’ private markets by encouraging their inclusion in 401(k) retirement plans for all Americans.”

January 22 – Bloomberg (Silas Brown, Alexandre Rajbhandari, and Laura Benitez): “Egan-Jones Ratings Co. has been removed from the Bermuda Monetary Authority’s list of recognized credit ratings providers, according to recent guidance from the watchdog. The regulator is no longer listing Egan-Jones among the ratings providers that can inform an insurer’s solvency capital requirements in the region, something it had done for several years beforehand.”

Trump Administration Watch:

January 19 – Reuters (Tim Reid): “President Donald Trump… will mark his first year back in the White House after a shock-and-awe policy blitz that has expanded presidential power and reshaped America’s relations with the world. As he enters his second year, he appears increasingly unconstrained, pursuing policies that have deepened divisions in the country… When asked about the potential economic fallout from the probe into Powell. Speaking to The New York Times…, Trump said the only check on him as commander-in-chief to launch military strikes abroad was ‘my own morality’.”

January 21 – Financial Times (James Politi, Richard Milne, Ben Hall and Steff Chávez): “Donald Trump said he was dropping his threat to hit European countries with new tariffs after striking ‘the framework of a future deal’ over Greenland in talks with Nato’s secretary-general Mark Rutte. The US president… said he had held a ‘very productive’ meeting with Rutte and would hold future talks and find a solution that ‘if consummated’ would be a ‘great one’ for the US and Nato members. ‘Based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st,’ Trump wrote… ‘Additional discussions are being held concerning The Golden Dome as it pertains to Greenland,’ he added…”

January 19 – Wall Street Journal (David S. Cloud, Summer Said and Dov Lieber): “President Trump has expanded the mission of his proposed Gaza Board of Peace into a global body that would take on the role mediating conflicts currently held by the United Nations and carry a $1 billion fee for a permanent seat… Trump announced the board last September as part of the Gaza cease-fire deal between Israel and Hamas. The charter doesn’t mention Gaza or the U.N., describing a ‘nimble and effective international peace-building body’ with Trump as chairman and other governments serving as member states. ‘Too many approaches to peace-building foster perpetual dependency, and institutionalize crisis rather than leading people beyond it,’ the charter’s preamble says, calling for ‘a coalition of willing States committed to practical cooperation and effective action’.”

January 19 – Bloomberg: “Russian President Vladimir Putin has received an invitation to join Donald Trump’s proposed Board of Peace for Gaza, the Kremlin said. Putin ‘received an offer through diplomatic channels’ and Russia aims to contact the US side to clarify all the details of the proposal, Kremlin spokesman Dmitry Peskov told reporters…”

January 23 – Politico (Aaron Pellish): “President Donald Trump revoked Canada’s invitation to participate in his ‘Board of Peace’ initiative, in the latest blow to the increasingly frosty relations between the North American neighbors. Trump said… Canadian Prime Minister Mark Carney would no longer be welcome on the board, which his administration initially created to oversee the end of the war in Gaza but has since said would have a broader mission.”

January 19 – Politico (Clea Caulcutt): “French President Emmanuel Macron has rejected U.S. President Donald Trump’s offer to join the ‘Board of Peace’ tasked with overseeing the next steps in Gaza, his office said… The decision was taken over concerns that the ‘Board of Peace,’ chaired by Trump, would have extensive powers beyond transitional governance of the Gaza Strip, and undermine the United Nations framework. The statement noted that the board’s charter ‘goes beyond the framework of Gaza and raises serious questions, in particular with respect to the principles and structure of the United Nations, which cannot be called into question’.”

January 18 – Financial Times (Aime Williams and Amy Mackinnon): “US Treasury secretary Scott Bessent said that Europe was too weak to guarantee Greenland’s security, as the US refused to back down on its demand to take control of the strategically important island… Bessent insisted that the US must acquire the Danish territory and accused Europe of being unable to protect the land in the face of Russian or Chinese aggression. ‘Europeans project weakness, US projects strength,’ he said. ‘The president believes enhanced security is not possible without Greenland being part of the US’.”

January 21 – CNBC (Tasmin Lockwood): “‘Denmark’s investment in U.S. Treasury bonds, like Denmark itself, is irrelevant,’ U.S. Treasury Secretary Scott Bessent told reporters… The ‘sell America’ trade was in full swing Tuesday after President Donald Trump and European leaders escalated tensions over Greenland. U.S. stocks and bond prices tumbled, sending yields spiking. It comes as Trump’s threats to impose 10% tariffs on eight European countries as part of his push to take over Greenland spooked markets… Danish pension operator AkademikerPension said Tuesday it was selling $100 million in U.S. Treasurys. The decision was driven by ‘poor [U.S.] government finances,’ said Anders Schelde, AkademikerPension’s investing chief.”

January 19 – Bloomberg (Greg Ritchie): “As Europe considers how best to respond to US President Donald Trump’s latest threats over Greenland’s sovereignty, there’s one extreme potential countermeasure that’s fueling debate among investors. European countries hold trillions of dollars of US bonds and stocks, some of which sit with public sector funds. That’s spurring speculation they could sell such assets in response to Trump’s renewed tariff war, potentially driving borrowing costs up and equities down given US reliance on foreign capital. But that’s easier said than done. The bulk of these assets are held by private funds outside the control of governments, and in any case such a move would likely hurt European investors too.”

January 19 – Financial Times (Robin Wigglesworth and Toby Nangle): “As George Saravelos, Deutsche Bank’s chief FX strategist, says in a note over the weekend: Europe owns Greenland, it also owns a lot of Treasuries. We spent most of last year arguing that for all its military and economic strength, the US has one key weakness: it relies on others to pay its bills via large external deficits. Europe, on the other hand, is America’s largest lender: European countries own $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined. In an environment where the geoeconomic stability of the western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part…’”

January 21 – Financial Times: “US commerce secretary Howard Lutnick was heckled at a World Economic Forum dinner in Davos, with European Central Bank president Christine Lagarde walking out during his speech. The gathering on Tuesday night descended into uproar after combative remarks from Lutnick…, with widespread jeering amid appeals for calm from BlackRock’s Larry Fink… Lagarde was among the attendees who walked out during the speech… Lutnick told his audience that the world should focus on coal as an energy source rather than renewables…, and made dismissive comments about Europe. He had earlier… written an op-ed for the FT in which he said: ‘We’re not going to Davos to uphold the status quo. We’re going to confront it head-on.’ He also wrote: ‘We are here at Davos to make one thing crystal clear: With President Trump, capitalism has a new sheriff in town’.”

January 21 – Bloomberg (Hadriana Lowenkron): “President Donald Trump suggested that Jerome Powell would not enjoy his tenure if he stayed on the Federal Reserve’s Board of Governors after his term as chair expired, in the latest broadside against the central bank chief. ‘We’ll see how it all works out,’ Trump said… But when pressed on Powell potentially staying on as a Fed governor until 2028, Trump who has been searching for a replacement chair, cautioned that ‘if that happens, his life won’t be very, very happy, I don’t think’.”

January 21 – Bloomberg (Paige Smith): “US President Donald Trump said he would ask Congress to implement his proposal to cap credit card interest rates at 10% for one year, a policy that’s drawn pushback from some of the biggest banks and card issuers. ‘I’m asking Congress to cap credit card interest rates at 10% for one year and this will help millions of Americans save for a home,’ Trump said… in a speech at the World Economic Forum…”

January 21 – Bloomberg (Yizhu Wang): “Jamie Dimon said President Donald Trump’s proposal to cap credit-card interest rates would spell ‘economic disaster’ for the US, forcing banks to pull credit lines for many Americans. Speaking at the World Economic Forum…, the JPMorgan… chief executive officer said his firm will give a ‘real analysis’ of the proposal to the government. JPMorgan has already provided some thoughts on the idea, ‘but not a lot,’ Dimon said… ‘Our business, you know, we would survive it by the way,’ Dimon said. ‘In the worst case, you’d have to have a drastic reduction of the credit-card business’.”

January 19 – Bloomberg (Tony Capaccio and Alicia A. Caldwell): “The US is taking steps to vastly increase the number of law enforcement agents and potentially send military personnel to Minneapolis, where immigration agents have tangled with residents protesting their tactics. The Pentagon has ordered 1,500 US troops based in Alaska to prepare to deploy to Minnesota as a precautionary measure… The unit of the 11th Airborne Division is a cold-weather unit nicknamed ‘The Arctic Angels’.”

January 22 – Associated Press (Ken Sweet): “President Donald Trump sued banking giant JPMorgan… and its CEO Jamie Dimon for $5 billion… over allegations that JPMorgan stopped providing banking services to him and his businesses for political reasons after he left office in January 2021. The lawsuit… alleges that JPMorgan abruptly closed multiple accounts in February 2021 with just 60 days notice and no explanation. By doing so, Trump claims JPMorgan and Dimon cut the president and his businesses off from millions of dollars, disrupted their operations and forced Trump and the businesses to urgently open bank accounts elsewhere.”

January 21 – Politico (Cheyanne M. Daniels): “President Donald Trump… said individuals will soon be prosecuted for their role in what he called the ‘rigged 2020 election,’ continuing his fixation on an election he lost. Speaking at the World Economic Forum in Davos, Switzerland, Trump said ‘everybody now knows that’ the 2020 presidential election was rigged and ‘people will soon be prosecuted for what they did’.”

January 17 – New York Times (Michael M. Grynbaum and Benjamin Mullin): “It was an aside, caught on camera, that said a lot about the uneasy business of conducting journalism today. Moments after President Trump finished taping a 13-minute interview… with the ‘CBS Evening News’ anchor Tony Dokoupil…, Karoline Leavitt, the White House press secretary, approached Mr. Dokoupil and his colleagues to convey a message from the president. ‘He said, ‘Make sure you guys don’t cut the tape, make sure the interview is out in full,’’ Ms. Leavitt said in an even tone… ‘Yeah, we’re doing it, yeah,’ Mr. Dokoupil responded. Ms. Leavitt replied: ‘He said, ‘If it’s not out in full, we’ll sue your ass off’’.”

January 22 – Wall Street Journal (José de Córdoba, Vera Bergengruen and Deborah Acosta): “Emboldened by the U.S. ouster of Venezuelan President Nicolás Maduro, the Trump administration is searching for Cuban government insiders who can help cut a deal to push out the Communist regime by the end of the year, people familiar… said. The Trump administration has assessed that Cuba’s economy is close to collapse and that the government has never been this fragile after losing a vital benefactor in Maduro…”

New World Order Watch:

January 20 – Financial Times (Ilya Gridneff): “Canada’s Prime Minister Mark Carney said on Tuesday, as he urged the world’s ‘middle powers’ to unite in response. Carney did not mention Donald Trump by name but his speech at Davos won a standing ovation from executives attending the World Economic… The Canadian leader pointed to the ‘fiction’ of a global order with ‘American hegemony’ at its centre, but said an era of multilateralism was ending as groups such as the World Trade Organization and UN became ‘greatly diminished’. ‘Canadians know that our old, comfortable assumption that our geography and alliance memberships automatically conferred prosperity and security is no longer valid,’ Carney said.”

January 22 – Bloomberg (Laura Dhillon Kane and Mathieu Dion): “Days after his stark warning in Davos about great powers coercing smaller countries, Mark Carney returned to Canada with a message aimed at defining his country’s role in a fracturing global order. ‘In a time of rising populism and ethnic nationalism, Canada can show how diversity can be a strength, not a weakness,’ the prime minister said… ‘Canada cannot solve all the world’s problems. But we can show that another way is possible, that the arc of history isn’t destined to be warped towards authoritarianism and exclusion. It can still bend towards progress and justice’.”

January 21 – Axios (Avery Lotz): “President Trump said… that Canada should be ‘grateful’ to the U.S. for the ‘freebies’ it receives because of the two nations’ relationship. Trump’s dig at Canada came a day after Prime Minister Mark Carney delivered his own warning at the World Economic Forum over the ‘rupture’ of the world order. ‘Canada lives because of the United States,’ Trump said… before taking a direct jab at Carney. ‘Remember that, Mark, the next time you make your statements.’ Trump said Carney ‘wasn’t so grateful’ in his address. Carney avoided naming Trump in his speech — a strategy a Canadian official previously told Axios was deliberate. However, the official indicated that Carney's remarks were aimed squarely at the president's recent actions.”

January 22 – Politico (Seb Starcevic): “German Chancellor Friedrich Merz welcomed U.S. President Donald Trump’s vow not to use military force to take Greenland, while warning that Europe must exert its own power as the world becomes a more far more dangerous place. Calling it ‘good news’ that Trump said he would drop the Feb. 1 tariffs he’d pledged…, Merz nonetheless said Washington was ‘radically reshaping’ its foreign policy, shaking the foundations of the international order. ‘This new world of great powers is being built on power, on strength, and when it comes to it, on force,’ Merz said Thursday… ‘It’s not a cozy place’.”

January 20 – Axios (Zachary Basu): “The European Union’s chief executive called for ‘permanent’ independence from the U.S. on Tuesday, framing President Trump’s hostility toward allies as a rupture on the scale of the 1971 ‘Nixon shock.’ Ursula von der Leyen’s remarks reflect the deep unease hanging over the World Economic Forum… Trump's fixation on taking control of Greenland — and his threats to impose tariffs on allies who oppose the move — have jolted European leaders and become the dominant undercurrent of the Davos summit. Overnight, Trump further inflamed tensions by posting alleged private messages from NATO chief Mark Rutte and French President Emmanuel Macron… Von der Leyen, the president of the European Commission, warned Trump in her speech that the EU's response to his Greenland threats would be ‘unflinching, united and proportional’.”

January 22 – Associated Press (Zoya Sheftalovich): “European governments have reached a difficult conclusion: The Americans are the baddies now. As leaders of the EU’s 27 countries assemble in Brussels for an emergency summit Thursday, that assessment is predominant across almost all capitals in Europe, according to nine EU diplomats. These officials come from countries which have varying degrees of historic fondness of the U.S., and they made clear that this way of thinking is particularly stark in places that have previously had the strongest ties to Washington.”

January 22 – Bloomberg (Suzanne Lynch): “European officials agreed on one thing in the hours after US President Donald Trump pulled back from the brink over Greenland: The continent’s economy and defenses must stand on their own, fast. But when it came to opinions on how to do that, and how strongly to confront the US in the future, that unity dissolved. The head-spinning events of the past week have underscored the European Union’s vulnerabilities to US aggression. Trump’s threats to take Greenland and pile tariffs on those opposing him showed his willingness to defy Europe at any moment, even if it upends a global order that has kept western allies mostly safe for decades.”

January 21 – Fortune (Nick Lichtenberg): “Bridgewater Associates founder Ray Dalio… issued a stark warning to global leaders and business executives: Stop pretending the old rules still apply. In a candid assessment of the current geopolitical landscape, Dalio argued the fate of the post-World War II global order—much debated amid President Donald Trump’s pursuit of Greenland and unsettling of the NATO alliance—is a moot point. ‘Let’s not be naive and say, ‘Oh, we’re breaking the rule-based system,’’ Dalio said. ‘It’s gone’.” The billionaire founder of the largest hedge fund in history added that as a student of financial history, he pays close attention to the economic cycles of the last 500 years and sees cycles repeat themselves over time. ‘And what I learned through that exercise is the same thing happens over and over again… And it’s like a movie for me. It’s like watching the same movie happen’.”

Greenland Watch:

January 19 – Financial Times (Richard Milne, Henry Foy, Barbara Moens and George Parker): “Denmark dispatched additional troops to Greenland as US President Donald Trump declined to rule out using force to seize control of the vast Arctic island. Several aircraft carrying Danish troops and military equipment landed in Greenland on Monday. The Danish defence forces said a ‘substantial contribution’ of soldiers and the head of the country’s army were flown out to the Greenlandic capital Nuuk and Kangerlussuaq in the west of the autonomous territory, on top of the more than 200 troops already present.”

January 19 – Financial Times (Richard Milne): “For decades, the slogan most used about the Arctic was ‘High North, Low Tension’. Then came Donald Trump. The US president’s push to take over Greenland has not just shocked European leaders with what they see as a brutal assault on Denmark, a Nato ally. It has also upended decades of relative peace in the far north, and the traditional form of co-operation that has existed in the Arctic between smaller Nordic countries and larger ones such as Russia and the US. ‘Greenland is ground zero for a new world order of great powers and their spheres of domination if we’re not careful,’ said Klaus Dodds, co-author of Unfrozen: The Fight For The Future Of The Arctic. ‘What European states are recognising is that all of this is disastrous for smaller states’.”

January 22 – Associated Press (Geir Moulson, Emma Burrows and James Brooks): “Leaders of Denmark and Greenland insisted Thursday that the island’s sovereignty was non-negotiable after U.S. President Donald Trump said he had agreed with the NATO chief on the framework of a future Arctic security deal that Trump said would grant the U.S. ‘total access’ to the territory. Much about the potential deal remained unclear, though Trump said in a Fox Business interview that ‘we’re going to have total access to Greenland,’ a semiautonomous territory of NATO ally Denmark. He added that ‘we’re going to have all the military access we want’.”

Ukraine War Watch:

January 20 – Financial Times (Christopher Miller): “Russia unleashed another massive barrage of missiles and drones on Kyiv overnight, knocking out power, water and heating to much of the Ukrainian capital and plunging it deeper into crisis amid the harshest winter of the war. President Volodymyr Zelenskyy said… the Russian strikes had ‘involved a significant number of ballistic and cruise missiles’ and ‘more than 300 attack drones’.”

January 18 – Financial Times (Christopher Miller): “President Volodymyr Zelenskyy has warned that Russia is targeting Ukrainian nuclear substations, in an effort to cut off heat and power while the country suffers its coldest winter since Moscow first invaded in 2014. With temperatures hitting minus 20C, Kyiv’s energy system, weakened by months of Russian aerial attacks, is teetering under the strain of rising winter demand, heavy bombardment and a growing shortage of air defence munitions. ‘The combination of extreme cold and wave after wave of Russian attacks are pushing Ukraine’s energy system to the edge,’ Maxim Timchenko, chief executive of DTEK, Ukraine’s largest private energy company, told the FT. ‘We are facing an unprecedented threat and fighting for every megawatt’.”

Iran Watch:

January 23 – Financial Times (James Shotter and Andrew England): “Donald Trump said… that he had sent an ‘armada’ of US naval forces towards Iran, ‘just in case’ he had to take action against Tehran, in his latest warning to the Islamic republic. Speaking to reporters…, the US president reiterated previous warnings to Iran not to restart its nuclear programme, or execute people arrested during recent mass protests against the regime. ‘We have a lot of ships going that direction, just in case… I’d rather not see anything happen, but we’re watching them very closely,’ Trump said…”

January 20 – Wall Street Journal (Alexander Ward, Michael R. Gordon and Shelby Holliday): “After pulling back from strikes on Iran last week, President Trump is still pressing aides for what he terms ‘decisive’ military options, U.S. officials said… The discussions are happening while the U.S. sends an aircraft carrier and jet fighters to the Middle East. Those deployments may be the start of a broader buildup that would give Trump the firepower to strike Iran should he choose to use them. Trump has repeatedly used the word ‘decisive’ when describing what effect he would like any U.S. action to have on Iran, according to officials.”

Trade War Watch:

January 20 – Bloomberg (Ania Nussbaum, Josh Wingrove and Samy Adghirni): “US President Donald Trump unleashed fresh social media attacks against European allies and threatened crushing tariffs on French wine… In a flurry of comments and posts early Tuesday morning, Trump took a swipe at President Emmanuel Macron for rejecting an invitation to back his latest peace initiative and suggested the US would impose duties on France’s politically sensitive agriculture sector. ‘Nobody wants him because he’s going to be out of office very soon,’ Trump told reporters…, after being informed Macron would decline his invitation. ‘I’ll put a 200% tariff on his wines and champagnes and he’ll join’.”

January 20 – Bloomberg (Ania Nussbaum): “French leader Emmanuel Macron attacked President Donald Trump’s trade strategy, arguing that Europe needs to develop more sovereignty to avoid ‘vassalization and blood politics.’ He spoke out against competition from the US ‘through trade agreements that undermine our export interests, demand maximum concessions and openly aim to weaken and subordinate Europe.’ This is ‘combined with an endless accumulation of new tariffs that are fundamentally unacceptable,” Macron said in a speech at the World Economic Forum...”

Constitution Watch:

January 21 – Wall Street Journal (Editorial Board): “Most of the nine Supreme Court Justices on Wednesday sounded as if they’re inclined to preserve a lower court injunction on President Trump’s removal of Federal Reserve Board member Lisa Cook. An exchange between Justice Brett Kavanaugh and Solicitor General John Sauer, who represented the government, illuminated the stakes. Federal law lets the President fire Fed members only ‘for cause.’ Mr. Trump cited unproven allegations of mortgage fraud, cooked up by his housing regulator, to dismiss Ms. Cook. The SG argued that courts can’t second-guess the President’s reasons. Justice Kavanaugh then pressed him on the purpose of the removal restrictions.”

January 19 – Reuters (Jason Lange and Howard Goller): “The administration of President Donald Trump would enact new tariffs almost immediately if the Supreme Court struck down sweeping global tariffs the president launched under an emergency law, U.S. Trade Representative Jamieson Greer told the New York Times… The Supreme Court could rule on the tariffs in the coming weeks, and possibly as early as Tuesday. The case is a major test of presidential power and the court’s willingness to rein in some of Trump's broad claims of authority since returning to office in January 2025.”

January 18 – The Hill (Sarah Fortinsky): “Treasury Secretary Scott Bessent… defended the Justice Department’s criminal investigation into Federal Reserve Chair Jerome Powell, describing the probe as appropriate ‘oversight’ of the independent agency. In an interview…, the secretary stressed that the investigation focuses on Powell’s handling of the renovation budget, brushing off concerns about President Trump’s commitment to Fed independence.”

January 18 – Politico (David Cohen): “Treasury Secretary Scott Bessent said… the national emergency that justified the announcement of new tariffs on eight European nations is that there would be a national emergency if tariffs were not implemented. ‘The national emergency is avoiding a national emergency,’ he said… ‘It is a strategic decision by the president. This is a geopolitical decision. And he is able to use the economic might of the U.S. to avoid a hot war. So why wouldn’t we do that’.”

U.S./Russia/China/Europe/Iran Watch:

January 18 – Financial Times (Henry Foy, Richard Milne, Laura Pitel and Ben Hall): “In vowing to impose punishing tariffs on allies who oppose his ambition to acquire Greenland, Donald Trump has dealt European leaders a brutal lesson: their painstaking efforts to appease the US president and protect the transatlantic relationship have failed. Since Trump returned to power, EU and Nato capitals have bent over backwards to find compromises, swallowing demands to spend more on defence, accepting unbalanced trade deals, changing regulations to suit the White House and ignoring barbs about Europe’s ‘civilisational erasure’. Conciliatory officials argued the approach was necessary to protect two priorities they said could not be sacrificed: maintaining US support for Nato and achieving a fair peace deal in Ukraine. But Trump’s tariff threats against the UK, France, Germany and five other allies crossed a red line that demanded a change in strategy, almost a dozen European diplomats and officials told the FT. ‘It looks like the days of trying to appease Trump are finished,’ said one senior European official. ‘The approach on handling Trump 2.0 is not working,’ said a second.”

January 23 – Politico (Nicholas Vinocur and Zoya Sheftalovich): “There’s no turning back now. That was the message from European leaders who gathered in Brussels on Thursday. And even though this emergency summit… turned into something far less dramatic because the U.S. president backed down 24 hours earlier, the quiet realization that Europe’s post-1945 rubicon had been crossed was, if anything, all the more striking for it. French President Emmanuel Macron and German Chancellor Friedrich Merz, the EU’s two most powerful leaders, who haven’t seen eye-to-eye of late, were united in warning that the transatlantic crisis had catapulted the bloc into a harsh new reality — one in which it must embrace independence. ‘We know we have to work as an independent Europe,’ European Commission President Ursula von der Leyen told reporters at the end of the five-hour gathering.”

January 19 – Reuters (Maria Martinez and Leigh Thomas): “The German and French finance ministers said on Monday that ‌European powers would not be blackmailed and that there would be a clear and united response to U.S. President Donald Trump’s threats of higher tariffs over Greenland... ‘Germany and France agree: We will not allow ‌ourselves to be blackmailed,’ German Finance Minister Lars Klingbeil said at his ministry, where he met with his French counterpart. ‘Blackmail between allies of 250 years, blackmail between friends, is obviously unacceptable,’ French Finance Minister Roland Lescure said…”

January 19 – Politico (Nette Nostlinger): “Germany’s finance minister is throwing his weight behind France on the need for a tough counterstrike against President Donald Trump’s latest attempt to press for U.S. control of Greenland. Lars Klingbeil, who is also Germany’s vice chancellor, told reporters on Monday that the European Union should prepare its so-called trade ‘bazooka’ to be ready to strike back at Washington if Trump presses ahead with his threats of increased tariffs against EU countries. ‘There is a legally established European toolbox for responding to economic blackmail with very sensitive measures. And we should now consider using these measures,’ Klingbeil said, speaking beside his French counterpart…”

January 20 – Wall Street Journal (Thomas Grove): “Russian President Vladimir Putin has sought to undermine NATO for nearly two decades. Now, as President Trump pushes to control Greenland, Moscow is cheering from the sidelines. Kremlin spokesman Dmitry Peskov appealed to Trump’s ego this week as the president pressed his pursuit of the Arctic island. ‘By resolving the issue of Greenland’s annexation, Trump will undoubtedly go down in the history books. And not only in the history of the United States, but in world history,’ he said… The spat is turning into a perilous moment for the North Atlantic Treaty Organization, which has served as the security foundation of the U.S.-led global order since World War II. Russian Foreign Minister Sergei Lavrov said… the alliance was in ‘deep crisis,’ adding that he hadn’t previously imagined a scenario in which one member of the alliance would attack another.”

AI Bubble/Arms Race Watch:

January 17 – Wall Street Journal (Jennifer Hiller): “President Trump has been fixated on lowering gasoline prices and convincing oil companies to ‘drill, baby drill’ since returning to office, but a bigger political fight is brewing over power. Electricity-cost increases are outpacing other kinds of inflation, vaulting utility bills into the political discourse across the U.S. ahead of the midterm elections. Trump administration officials gathered at the White House Friday with a group that included the governors of Pennsylvania, Ohio and Virginia to push the nation’s largest grid operator to hold an emergency power auction. They want the U.S.’s biggest technology companies to bring their own power supplies or cover the cost for new power-plant construction to stem concerns that their data centers are driving up electricity prices for everyday Americans.”

January 21 – Wall Street Journal (Lindsay Ellis): “Business leaders’ faith in the productivity-boosting powers of AI is getting a reality check—from their own workforces. Employees say AI isn’t saving them much time in their daily work so far, and many report feeling overwhelmed by how to incorporate it into their jobs. Companies, meanwhile, are spending vast amounts on artificial intelligence… The gulf between senior executives’ and workers’ actual experience with generative AI is vast, according to a new survey from the AI consulting firm Section of 5,000 white-collar workers. Two-thirds of nonmanagement staffers said they saved less than two hours a week or no time at all with AI.”

January 19 – Financial Times (Sam Fleming and Myles McCormick): “The ‘surprisingly resilient’ global economy is at risk of being disrupted by a sharp reversal in the AI boom, the IMF warned…, as world leaders prepared for talks in the Swiss resort of Davos. Risks to global economic expansion were ‘tilted to the downside’, the fund said… Nonetheless, it predicted US growth would strongly outpace the rest of the G7 this year, forecasting an expansion of 2.4% in 2026 and 2% in 2027. Tech investment had surged to its highest share of US economic output since 2001, helping drive growth, the IMF found. ‘There is a risk of a correction, a market correction, if expectations about AI gains in productivity and profitability are not realised,’ said Pierre-Olivier Gourinchas, IMF chief economist.”

January 19 – Wall Street Journal (Will Parker): “Commercial real-estate construction is poised for little or no growth this year. Data centers are the notable exception. Higher interest rates, steeper material prices and a tight labor force provide significant headwinds to new construction this year. Spending to build offices, hotels, apartment buildings and warehouses is projected to fall in 2026, according to… FMI Corp… But data centers… are a bright spot. Construction of these properties is less deterred by those higher costs because of still unmet demand from hyperscalers. Amazon.com, Google and Oracle and other top users of data centers continue to finance billions of dollars of new AI-focused development… ‘The cash is not an issue for these people,’ said Jay Bowman, partner at FMI. Spending on construction of data centers will rise by 23% in 2026 compared with the year prior, according to FMI estimates. That would lift them to more than 6% of all nonresidential building construction, up from 2% in 2023.”

Bubble and Mania Watch:

January 20 – Bloomberg (Levin Stamm): “This week’s sudden stock market pullback might be catching a lot of investors off guard. Fund managers were the most bullish since July 2021 while protection against a stock correction had tumbled to an eight-year low, according to a survey from Bank of America Corp. conducted before the weekend’s escalations over Greenland. Cash levels have tumbled to a record low while equity allocation climbed to the highest since December 2024 with 48% of managers overweight. That boosted the survey’s sentiment measure to the highest in over four years. The findings also pushed BofA’s Bull and Bear indicator to a ‘hyper-bull’ level, which indicates investors need to load up on risk hedges and safe havens. Instead, nearly half of participants said they do not have protection against a sharp fall in equity prices, the highest level since 2018.”

January 18 – Wall Street Journal (Hannah Erin Lang): “The Magnificent Seven is now the Mag Five. Or is it the Fab Four? Investors are no longer grouping the market’s big tech stocks together in quite the same way. The fortunes of what was once Wall Street’s favorite band of megacap names have diverged in the past year, as professional and ordinary investors alike take a more cautious view of the artificial-intelligence spending boom. Only Alphabet and Nvidia outperformed the S&P 500 in 2025. And so far this year, five Mag Seven stocks are faring worse than the broader benchmarks.”

January 18 – Bloomberg (Charlie Wells): “From London to Paris and New York City to Sacramento, debt-hit governments are scrambling to bolster their fragile balance sheets. Increasingly, they’re training their sights on the rich to help bail them out. Across swathes of the western world, political parties of varied stripes are homing in on wealth taxes as a neat fix to rising fiscal problems. They’re jacking up existing levies, planning new ones and contemplating exit taxes to halt the rising flow of departures to more fiscally attractive countries and states, hitting those on the way out with a big bill if they leave.”

Inflation Watch:

January 19 – Bloomberg (Brendan Murray): “President Donald Trump’s duties on imported goods are paid almost entirely by American importers, their domestic customers and ultimately US consumers, a study from a German think tank concluded. ‘Foreign exporters did not meaningfully reduce their prices in response to US tariff increases,’ a report… by the Kiel Institute for the World Economy said. ‘The $200 billion surge in customs revenue represents $200 billion extracted from American businesses and households.’ The study found that only about 4% of the tariff burden is shouldered by foreign firms, with a ‘near-complete’ pass-through of 96% to US buyers that pay the levies and then must either absorb them or raise selling prices.”

January 22 – Associated Press (Christopher Rugaber): “The Federal Reserve’s preferred inflation gauge ticked up in November in the latest sign that prices remain stubbornly elevated, while consumers spent at a healthy pace. Consumer prices rose 2.8% in November from a year earlier…, up from a 2.7% annual pace in October… Core prices also increased 2.8% in November from a year ago, slightly higher than October’s 2.7%. Consumer spending climbed 0.5% in November from the previous month…, a solid increase that hits at an economy growing at a healthy pace in the final three months of last year.”

January 18 – Bloomberg (Maggie Eastland): “Nvidia Corp. supplier Micron Technology Inc. said an ongoing memory chip shortage has accelerated over the past quarter and reiterated that the crunch will last beyond this year due to a surge in demand for high-end semiconductors required for AI infrastructure. ‘The shortage we are seeing is really unprecedented,’ Micron Executive Vice President of Operations Manish Bhatia said… High-bandwidth memory required to make artificial intelligence accelerators is ‘consuming so much of the available capacity across the industry that it’s leaving a tremendous shortage for the conventional side of the industry, for phones or PCs,’ Bhatia said.”

January 20 – Bloomberg (Craig Trudell): “The auto sector is bracing for yet another potential supply chain disturbance, this time spurred by the rush to build data centers that train and develop artificial intelligence models. A shortage of memory chips caused by the data center boom already is leading some industry participants to acknowledge more than 100% price hikes, UBS analysts… wrote... Disruptions could kick in starting in the second quarter, he warned. ‘We would not rule out some material downside risk’ to global vehicle production, Lesne said.”

January 22 – Wall Street Journal (Liz Young): “A Trump administration crackdown on foreign truck drivers threatens to take tens of thousands of truckers off the road. Some of the country’s largest trucking companies say the measures could help reverse a prolonged downturn in the trucking industry by reducing the number of drivers and pushing up rates. ‘Capacity reduction is clearly under way,’ said Adam Miller, chief executive of Knight-Swift Transportation Holdings…”

Federal Reserve Watch:

January 21 – Bloomberg (Alex Harris): “A key question is emerging as investors await President Donald Trump’s nominee as the next Federal Reserve chair — how the candidate will manage the central bank’s $6.6 trillion balance sheet. Much of the focus has been on whether Trump’s choice will slash borrowing costs deeply, as the president has pressured current Fed Chair Jerome Powell to do for months. But the other big issue is whether the central bank should keep buying Treasury bills to maintain its balance sheet at present levels, or attempt once again to remove more liquidity from financial markets. The choice has direct consequences for major markets that are crucial for how the world’s largest financial institutions borrow and lend to each other for day to day activities. Former Fed Governor Kevin Warsh… has been critical of the current strategy at the central bank. ‘One key differentiator for Warsh is that he strongly favors a smaller Fed balance sheet,’ said Wells Fargo strategist Angelo Manolatos… By contrast, Rieder said in a June interview with… the Fed should end its balance-sheet runoff to avoid overtightening liquidity and destabilizing funding markets.”

January 21 – Bloomberg (Josh Wingrove, Saleha Mohsin and Joshua Green): “President Donald Trump’s search for a new Federal Reserve chair is becoming a hunt for an elusive unicorn candidate as blowback from his attacks on the central bank complicates the decision. Trump is trying to check several boxes in a replacement for the current chair, Jerome Powell: He wants a loyalist who will pursue steep interest-rate cuts, command credibility both with Wall Street and the president’s MAGA base, and have a shot at Senate confirmation — all with the telegenic, central-casting factor that Trump seeks.”

January 21 – Reuters (Steve Holland Nandita Bose): “U.S. President Donald Trump said he has interviewed several strong candidates for Federal Reserve chair, but complained that nominees tend to ‌change once they take office. ‘Everyone that I interviewed is great. Everyone could do, ‌I think, a fantastic job. Problem is they change once they get the job,’ Trump said…”

U.S. Economic Bubble Watch:

January 21 – Bloomberg (Ben Steverman): “The share of total wealth held by the richest Americans is now at the highest level since World War II. The top 1% of households controlled 31.7% of the nation’s wealth in the third quarter of 2025, according to Federal Reserve data. That amounted to $55 trillion, nearly as much as the bottom 90% combined. Wealth inequality is on the rise… The main driver of the recent surge is three consecutive years of significant stock market gains. While the affluent are more heavily exposed to stocks and other financial investments, the wealth of middle- and working-class families tends to be concentrated in their homes, whose values have lagged after a pandemic-era surge…”

January 22 – Associated Press (Paul Wiseman): “Powered by strong consumer spending, the U.S. economy grew at the fastest pace in two years from July through September… a slight upgrade of its first estimate. America’s gross domestic product… rose at a 4.4% annual pace in the third quarter…, up from 3.8% in the April-June quarter and from the 4.3%... initially estimated. The economy hasn’t grown faster since third-quarter 2023.”

January 22 – Associated Press (Matt Ott): “The number of Americans who applied for unemployment benefits inched up last week but U.S. layoffs remain historically low despite signs of a softening labor market. U.S. filings for jobless aid for the week ending Jan. 17 rose by 1,000 to 200,000, up from 199,000 the previous week…”

January 21 – CNBC (Diana Olick): “Mortgage refinancing jumped sharply higher for the second straight week, as interest rates fell further… Last week, applications to refinance a home loan rose 20% compared with the previous week… Applications were 183% higher than the same week one year ago. Applications for a mortgage to purchase a home rose 5% for the week and were 18% higher than the same week one year ago.”

China Watch:

January 22 – Bloomberg: “China’s central bank injected a record amount of funds into the banking system through longer-dated liquidity tools in January, reinforcing its commitment to monetary easing and supporting markets with ample liquidity. The People’s Bank of China has pumped a net 1 trillion yuan ($144bn) of medium to long-term liquidity into banks so far this month, the most on record…”

January 21 – CNBC (Anniek Bao): “China’s sharp investment downturn is amplifying credit risks across the economy, particularly homebuilders, real estate, banks and construction sectors, Fitch Ratings has warned… Fixed-asset investment in China, or FAI, declined 3.8% in 2025 to 48.52 trillion yuan ($6.8 trillion) — the first annual decline in decades — as a deepening property slump and tighter constraints on local governments’ borrowing have hampered one of China’s traditional growth drivers… The rating agency downgraded China’s sovereign rating to ‘A’ from ‘A+’ in April on concerns over weakening finances and rising public debt.”

January 17 – Financial Times (Edward White): “China’s flagship overseas infrastructure finance programme the Belt and Road Initiative increased by three-quarters to a record $213.5bn in 2025 as Beijing sought to take advantage of wavering US influence around the world by pouring funding into development projects. The surge in new investment and construction deals was dominated by gas megaprojects and green power, according to research by Australia’s Griffith University and the Green Finance & Development Center in Shanghai. Beijing signed 350 deals last year, up from 293 worth $122.6bn in 2024.”

January 18 – Bloomberg: “China’s home prices fell in December, closing another tumultuous year for the real estate industry as its debt crisis persists. New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.37% from November, when they slid 0.39%... Resale home values, which are subject to less government intervention, slid 0.7%, the most in 15 months. China’s property downturn has weighed on the economy for more than four years, tipping more cash-strapped builders into distress.”

January 19 – Reuters: “China’s securities regulator has asked brokers to remove client-dedicated servers from data centers in local exchanges, a move that will deprive rapid-trading ‘flash boys’ of an edge against other investors… High-frequency traders in China have long used servers situated at data centers run by futures and stock exchanges and owned by brokers to execute trades as the physical adjacency shaves off milliseconds or even microseconds. The tightening measure comes as the ‌Chinese securities regulator steps up efforts to discourage market speculation and protect small investors…”

Central Banker Watch:

January 20 – Bloomberg (Tom Rees): “Bank of England Governor Andrew Bailey warned of the ‘substantial’ threat of spillovers from US President Donald Trump attacking the independence of the Federal Reserve. Bailey said… an intervention by other central banks in support of Fed Chair Jerome Powell was ‘pretty unprecedented’ but was needed given the US’s global influence. ‘There is very substantial scope for spillover,’ he told lawmakers… ‘There are substantial externalities and potential spillovers from things that go on in the US, and particularly, I would say from a threat to the independence of the Federal Reserve’.”

Japan Watch:

January 23 – Reuters (Leika Kihara and Makiko Yamazaki): “The Bank of Japan retained its hawkish inflation forecasts… and stressed it will remain vigilant to price risks from a weak yen, signalling that policymakers intend to keep raising still-low borrowing costs in a politically charged atmosphere. The yen slumped despite the hawkish tone, before suddenly spiking in a move that put traders on high alert for possible currency intervention by Japanese authorities to prop up the ailing currency.”

January 20 – Bloomberg (Mia Glass): “The slump in Japanese bonds deepened Tuesday, sending yields soaring to records as investors gave a thumbs down to Prime Minister Sanae Takaichi’s election pitch to cut taxes on food. The 40-year rate rocketed past 4% to a fresh high since its debut in 2007 and a first for any maturity of the nation’s sovereign debt in more than three decades. The jump in 30- and 40-year yields of more than 25 bps was the most since the aftermath of President Donald Trump’s Liberation Day tariffs onslaught in April last year… Since Takaichi took office in October, the 20- and 40-year yields have risen about 80 bps.”

January 20 – Bloomberg (Haslinda Amin, Erica Yokoyama, and Takashi Umekawa): “Japanese Finance Minister Satsuki Katayama called on market participants to calm down after an intense day of bond selling pushed up long-term government debt yields to the highest levels in decades with ripples reaching other global markets. ‘Since last October, our fiscal policy has consistently been responsible and sustainable, not expansionary, and the numbers clearly demonstrate that,’ Katayama said…”

January 21 – CNBC (Lim Hui Jie): “Japan’s exports growth in the final month of 2025 missed analysts’ estimates, rising 5.1% year on year, as shipments to the U.S. saw a double-digit decline… Exports to the U.S. in December, however, resumed their decline, dropping 11.1%, after an 8.8% jump in the prior month… Shipments to mainland China, Japan’s largest trading partner, climbed 5.6%, while exports to Hong Kong surged 31.1% compared to the same period last year. Exports to the wider Asia region gained 10.2%.”

Leveraged Speculation Watch:

January 18 – The Telegraph (Szu Ping Chan): “Hedge funds have placed a £100bn bet on gilts that the Bank of England believes has left Britain dangerously exposed to a bond market meltdown. Andrew Bailey will face questions from MPs this week after Threadneedle Street expressed alarm over trades that allow hedge funds to borrow huge amounts of cash from banks using gilts as collateral. The Governor of the Bank of England has warned that volatility in the bond market is unavoidable. Officials are now concerned that trading by hedge funds could pose risks to the financial system. They face less regulatory scrutiny than banks but control a growing share of global money.”

January 19 – Bloomberg (Nishant Kumar): “Chris Hohn broke the hedge fund profit record last year as rising stocks and global market volatility helped the industry rack up $543 billion worth of gains, also an all-time high. Hohn’s equity-focused TCI Fund Management made $18.9 billion… The gains exceeded Ken Griffin’s Citadel’s record set in 2022 and surpassed the $15 billion that John Paulson generated in 2007 on his bet against subprime mortgages, which was later described as the ‘greatest trade ever’.”

Social, Political, Environmental, Cybersecurity Instability Watch:

January 20 – Financial Times (Eva Xiao and Lee Harris): “Global insured losses of more than $127bn from natural disasters were dominated by more than $100bn occurring in the US in 2025 after the Los Angeles fires, according to a new industry report… Overall global economic losses stemming from disasters, including thunderstorms and earthquakes, totalled about $260bn, according to the review by insurance broker Aon. But more than half of those losses remain not covered by insurance…”

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