TO: Anyone still watching this market
FROM: The part of your brain that remembers 2008
RE: The week ending January 24, 2026
CLASSIFICATION: Uncomfortable truths

Let's start with a confession: I don't understand this market. Not in the "gee whiz, complexity" sense. In the "I have followed macro for two decades and something is fundamentally broken in the logic" sense.

Nvidia gained 1.5% after reports that Chinese officials told the country's tech giants they can prepare orders for the H200 AI chips. In contrast, Intel plunged 17% after issuing a weaker-than-expected outlook and flagging ongoing operational challenges. Same industry. Same week. One company gets a whispered order possibility from Beijing and rallies. The other admits it can't actually manufacture enough product and loses a sixth of its market cap in a day.

The semiconductor trade has become a referendum on narrative, not fundamentals.

The tech-heavy Nasdaq advanced 0.28% and settled at 23,501.24, while the blue-chip Dow lost 285.30 points, or 0.58%, closing at 49,098.71. A nearly 4% slide in Goldman Sachs weighed on the 30-stock index. The broad market S&P 500 eked out a marginal gain of 0.03% to end at 6,915.61. Nvidia and Advanced Micro Devices were among those supporting the Nasdaq and the S&P 500, climbing 1.5% and more than 2%, respectively.

Meanwhile, Goldman gets annihilated and nobody asks why. Financials cratered, utilities cratered, energy outperformed. US equities were mixed on Friday, with the S&P 500 oscillating around the flatline, the Nasdaq edging up 0.1%, and the Dow Jones falling nearly 300 points. Financials and utilities were the weakest-performing sectors, while energy stocks outperformed. What is this market telling us? Everything and nothing.

The Fed Situation

Trump wants much lower interest rates, and his administration's gone to extraordinary lengths to push the Fed in that direction. An ominous example came over the weekend with news the Justice Department had launched a criminal investigation of the central bank, which Fed Chairman Jerome Powell dismissed as an effort to intimidate him and his colleagues.

Read that again. A criminal investigation of the Federal Reserve. To pressure rate cuts. We have entered territory that would have seemed absurd three years ago and now registers as a Tuesday headline.

The Fed is expected to hold rates steady at its policy meeting at the end of January in the range of 3.5%-3.75%, after cutting rates three times last fall. The market has priced this in. That was enough to convince investors with near certainty that the Fed would hold rates steady at its January 27-28 meeting, according to futures. Wall Street now doesn't expect a rate cut until June.

But here's where it gets weird. On Jan. 8, Miran told Bloomberg Television he is looking for 150 basis points of interest-rate cuts this year to boost the cooling labor market. Describing monetary policy as restrictive, Miran said underlying inflation is likely running at 2.3%, which means Fed officials have room to cut further. "I'm looking for about a point and a half of cuts. A lot of that is driven by my view of inflation," Miran said.

Six cuts. From the guy appointed by the President. While the median dot plot shows one. The median projection on the policy rate as seen in the Fed's interest rate forecast anticipates one more 25-basis-point cut in 2026, which is quite interesting given the three dissents within the FOMC. The votes reflected the growing rift over monetary policy within the Federal Reserve.

This isn't a divided committee anymore. This is open warfare with political interference baked in.

Consumer Sentiment: The Number That Should Scare You

Consumer sentiment improved in January as near-term inflation expectations eased and geopolitical turmoil failed to dim confidence, according to a University of Michigan survey Friday. The survey's headline index came in at 56.4, up 6.6% from December though still down 21.3% from a year ago. The reading was better than the 54.0 Dow Jones consensus estimate.

The headline: "Sentiment improves!" The reality: But January's reading was still exceptionally weak, hovering below levels seen during the Great Recession.

"People have jobs, wages are up, and the stock market's healthy. So people have money and even though they don't feel good about it, they're still spending," Richmond Fed President Tom Barkin said in an interview.

They don't feel good about it, they're still spending. That's the whole economy in one sentence.

The Government Shutdown That Nobody Talks About Anymore

The House passed its remaining appropriations bills yesterday, making a shutdown less likely. "Getting all 12 appropriations bills passed by the January 30 deadline now seems virtually assured, though things can still go sideways in the Senate," said Michael Townsend, managing director of legislative and regulatory affairs at Schwab. "But it's a notable development in the wake of last fall's acrimonious, record-long 43-day government shutdown. Neither party wanted a repeat of the shutdown."

43 days. Record-long. And the market shrugged.

Crypto: The Boring Year Nobody Predicted

Last October, bitcoin hit a record high of over $126,000 before falling later in the year to lows of around 80,000, according to CoinMetrics. Now it's sitting around \88,000, chopping sideways.

"2026 is going to be a year of two halves. The first half of 2026 may be tough as we deal with institutional rebalancing and a 'strategic reset' in the crypto markets, but that volatility is exactly what sets the stage for the massive rally we expect in the back half," according to Tom Lee.

Standard Chartered has a bitcoin price forecast of $150,000 for 2026, which it cut in December from a previous call of $300,000. Geoff Kendrick, the bank's global head of digital asset research, said that the price decline seen in 2025 was "within expected bounds." However, the price action has led Standard Chartered to revise its call.

The analysts who predicted $300,000 are now saying $150,000 like nothing happened. The analysts who predicted $200,000 are now talking about "digestion phases." The four-year crypto market cycle, driven by bitcoin halving events, may be over, with institutional products like ETFs changing market dynamics. The old models are dead. The new models don't exist yet. Everyone is guessing.

What to Watch Next Week

Megacap earnings results next week could lift a stock market that's broadened out to include a larger number of winners. Earnings kick into high gear next week, with four of the so-called Magnificent Seven companies set to report: Meta Platforms, Microsoft, and Tesla report Wednesday, while Apple posts Thursday.

But the group isn't looking so magnificent in early 2026. Not only are the majority of the tech behemoths down for this year, they've been under pressure for some time. Meta Platforms and Microsoft are off their 52-week highs by more than 17% and 16%, respectively. Apple is lower by 14%. Tesla is almost 10% off its high. Ironically, that diminished performance could actually prove a godsend, giving the megacaps a better chance of delivering on expectations.

The bar is low. That's the bull case.

Despite easing concerns of international investors selling U.S. assets, the benchmark 10-year Treasury note yield stays elevated at 4.24%. Though it's possible yields could return to the previous range below 4.2%, it wouldn't be surprising to see them retest Tuesday's 4.3% high, or even move above that, based on economic and political trends.

The bond market isn't buying the optimism. Gold hit fresh records. Risk metrics remain elevated. And yet the S&P ended the week basically flat, as if nothing happened.

CONCLUSION:

This market has no memory. Every day is new. Every crisis is temporary until it isn't. The Fed is under political siege, inflation is sticky, consumer sentiment is recessionary, and equities keep finding ways to close green.

I don't know what breaks the cycle. But something will. It always does.

Until then, manage your risk.

— End memo.

TO: Anyone still watching this market
FROM: The part of your brain that remembers 2008
RE: The week ending January 24, 2026
CLASSIFICATION: Uncomfortable truths

Let's start with a confession: I don't understand this market. Not in the "gee whiz, complexity" sense. In the "I have followed macro for two decades and something is fundamentally broken in the logic" sense.

Nvidia gained 1.5% after reports that Chinese officials told the country's tech giants they can prepare orders for the H200 AI chips. In contrast, Intel plunged 17% after issuing a weaker-than-expected outlook and flagging ongoing operational challenges. Same industry. Same week. One company gets a whispered order possibility from Beijing and rallies. The other admits it can't actually manufacture enough product and loses a sixth of its market cap in a day.

The semiconductor trade has become a referendum on narrative, not fundamentals.

The tech-heavy Nasdaq advanced 0.28% and settled at 23,501.24, while the blue-chip Dow lost 285.30 points, or 0.58%, closing at 49,098.71. A nearly 4% slide in Goldman Sachs weighed on the 30-stock index. The broad market S&P 500 eked out a marginal gain of 0.03% to end at 6,915.61. Nvidia and Advanced Micro Devices were among those supporting the Nasdaq and the S&P 500, climbing 1.5% and more than 2%, respectively.

Meanwhile, Goldman gets annihilated and nobody asks why. Financials cratered, utilities cratered, energy outperformed. US equities were mixed on Friday, with the S&P 500 oscillating around the flatline, the Nasdaq edging up 0.1%, and the Dow Jones falling nearly 300 points. Financials and utilities were the weakest-performing sectors, while energy stocks outperformed. What is this market telling us? Everything and nothing.

The Fed Situation

Trump wants much lower interest rates, and his administration's gone to extraordinary lengths to push the Fed in that direction. An ominous example came over the weekend with news the Justice Department had launched a criminal investigation of the central bank, which Fed Chairman Jerome Powell dismissed as an effort to intimidate him and his colleagues.

Read that again. A criminal investigation of the Federal Reserve. To pressure rate cuts. We have entered territory that would have seemed absurd three years ago and now registers as a Tuesday headline.

The Fed is expected to hold rates steady at its policy meeting at the end of January in the range of 3.5%-3.75%, after cutting rates three times last fall. The market has priced this in. That was enough to convince investors with near certainty that the Fed would hold rates steady at its January 27-28 meeting, according to futures. Wall Street now doesn't expect a rate cut until June.

But here's where it gets weird. On Jan. 8, Miran told Bloomberg Television he is looking for 150 basis points of interest-rate cuts this year to boost the cooling labor market. Describing monetary policy as restrictive, Miran said underlying inflation is likely running at 2.3%, which means Fed officials have room to cut further. "I'm looking for about a point and a half of cuts. A lot of that is driven by my view of inflation," Miran said.

Six cuts. From the guy appointed by the President. While the median dot plot shows one. The median projection on the policy rate as seen in the Fed's interest rate forecast anticipates one more 25-basis-point cut in 2026, which is quite interesting given the three dissents within the FOMC. The votes reflected the growing rift over monetary policy within the Federal Reserve.

This isn't a divided committee anymore. This is open warfare with political interference baked in.

Consumer Sentiment: The Number That Should Scare You

Consumer sentiment improved in January as near-term inflation expectations eased and geopolitical turmoil failed to dim confidence, according to a University of Michigan survey Friday. The survey's headline index came in at 56.4, up 6.6% from December though still down 21.3% from a year ago. The reading was better than the 54.0 Dow Jones consensus estimate.

The headline: "Sentiment improves!" The reality: But January's reading was still exceptionally weak, hovering below levels seen during the Great Recession.

"People have jobs, wages are up, and the stock market's healthy. So people have money and even though they don't feel good about it, they're still spending," Richmond Fed President Tom Barkin said in an interview.

They don't feel good about it, they're still spending. That's the whole economy in one sentence.

The Government Shutdown That Nobody Talks About Anymore

The House passed its remaining appropriations bills yesterday, making a shutdown less likely. "Getting all 12 appropriations bills passed by the January 30 deadline now seems virtually assured, though things can still go sideways in the Senate," said Michael Townsend, managing director of legislative and regulatory affairs at Schwab. "But it's a notable development in the wake of last fall's acrimonious, record-long 43-day government shutdown. Neither party wanted a repeat of the shutdown."

43 days. Record-long. And the market shrugged.

Crypto: The Boring Year Nobody Predicted

Last October, bitcoin hit a record high of over $126,000 before falling later in the year to lows of around 80,000, according to CoinMetrics. Now it's sitting around \88,000, chopping sideways.

"2026 is going to be a year of two halves. The first half of 2026 may be tough as we deal with institutional rebalancing and a 'strategic reset' in the crypto markets, but that volatility is exactly what sets the stage for the massive rally we expect in the back half," according to Tom Lee.

Standard Chartered has a bitcoin price forecast of $150,000 for 2026, which it cut in December from a previous call of $300,000. Geoff Kendrick, the bank's global head of digital asset research, said that the price decline seen in 2025 was "within expected bounds." However, the price action has led Standard Chartered to revise its call.

The analysts who predicted $300,000 are now saying $150,000 like nothing happened. The analysts who predicted $200,000 are now talking about "digestion phases." The four-year crypto market cycle, driven by bitcoin halving events, may be over, with institutional products like ETFs changing market dynamics. The old models are dead. The new models don't exist yet. Everyone is guessing.

What to Watch Next Week

Megacap earnings results next week could lift a stock market that's broadened out to include a larger number of winners. Earnings kick into high gear next week, with four of the so-called Magnificent Seven companies set to report: Meta Platforms, Microsoft, and Tesla report Wednesday, while Apple posts Thursday.

But the group isn't looking so magnificent in early 2026. Not only are the majority of the tech behemoths down for this year, they've been under pressure for some time. Meta Platforms and Microsoft are off their 52-week highs by more than 17% and 16%, respectively. Apple is lower by 14%. Tesla is almost 10% off its high. Ironically, that diminished performance could actually prove a godsend, giving the megacaps a better chance of delivering on expectations.

The bar is low. That's the bull case.

Despite easing concerns of international investors selling U.S. assets, the benchmark 10-year Treasury note yield stays elevated at 4.24%. Though it's possible yields could return to the previous range below 4.2%, it wouldn't be surprising to see them retest Tuesday's 4.3% high, or even move above that, based on economic and political trends.

The bond market isn't buying the optimism. Gold hit fresh records. Risk metrics remain elevated. And yet the S&P ended the week basically flat, as if nothing happened.

CONCLUSION:

This market has no memory. Every day is new. Every crisis is temporary until it isn't. The Fed is under political siege, inflation is sticky, consumer sentiment is recessionary, and equities keep finding ways to close green.

I don't know what breaks the cycle. But something will. It always does.

Until then, manage your risk.

— End memo.