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Core Viewpoint - Stocks have erased all their gains for the year due to a significant increase in bond yields [1] Group 1 - The spike in bond yields has led to a negative impact on stock performance, resulting in a complete loss of annual gains [1]

Core Insights - The bond market is reacting negatively to renewed trade tensions and policy uncertainty, leading to higher borrowing costs [2][10] - The yield on the 10-year U.S. Treasury note has risen to approximately 4.29%, its highest level since August, driven by concerns over tariffs and inflation [3][10] - Investors are worried that escalating trade tensions, particularly a potential 200% tariff on French wine and champagne, could lead to broader economic instability [3][10] Bond Market Dynamics - Rising bond yields directly increase mortgage, loan, and business financing costs, potentially slowing economic activity and straining household budgets [4][10] - A "broader tone of bearishness" in global bond markets is evident, as investors sell government bonds due to perceived policy-related risks, which in turn drives up interest rates [5][10] - Recent U.S. economic data has been solid, reducing the likelihood of the Federal Reserve cutting interest rates, which may keep yields elevated [9] Global Influences - Concerns over Japan's fiscal path are affecting U.S. bond markets, highlighting the interconnectedness of global bond markets [8] - European investors hold significant amounts of U.S. Treasuries, totaling around $8 trillion, and may consider reducing their holdings in response to U.S. policy pressures [15][16] Investor Sentiment - The potential for a "sell America" trend is emerging, as European officials may retaliate against U.S. tariffs by selling U.S. government debt [12][14] - AkademikerPension, a Danish pension fund, has begun selling U.S. Treasuries, citing rising U.S. debt levels and political pressures as concerns [15] Policy Implications - Treasury Secretary Scott Bessent has urged against escalating tensions, emphasizing the need for calm and patience in the face of market reactions to U.S. policies [17]

Economic Indicators - The Dec ISM services index is expected to decline by -0.3 to 52.3 [1] - Nov JOLTS job openings are projected to increase by +9,000 to 7.679 million [1] - Oct factory orders are anticipated to decrease by -1.1% month-over-month [1] - Q3 nonfarm productivity is expected to rise by +4.7%, while unit labor costs are forecasted to increase by +0.3% [1] - Initial weekly unemployment claims are expected to rise by 12,000 to 211,000 [1] - Dec nonfarm payrolls are projected to increase by +59,000, with the unemployment rate expected to drop by -0.1 to 4.5% [1] - Dec average hourly earnings are expected to rise by +0.3% month-over-month and +3.6% year-over-year [1] - Oct housing starts are expected to increase by +1.4% month-over-month to 1.325 million, and building permits are expected to rise by +1.1% month-over-month to 1.350 million [1] - The University of Michigan's Jan consumer sentiment index is expected to increase by 0.6 points to 53.5 [1] Employment Data - The US Dec ADP employment change increased by +41,000, which is below the expected +50,000 [2] - The US MBA mortgage applications rose by +0.3% in the week ended January 2, with the purchase mortgage sub-index down -6.2% and the refinancing mortgage sub-index up +7.4% [2] - The average 30-year fixed rate mortgage decreased by -7 basis points to 6.25% from 6.32% in the prior week [2] Stock Market Performance - Stock indexes are mostly higher, with the S&P 500 reaching a new all-time high and the Nasdaq 100 hitting a 1-week high [4] - The S&P 500 Index is up +0.13%, while the Dow Jones Industrials Index is down -0.10% and the Nasdaq 100 Index is up +0.18% [5] - March E-mini S&P futures are up +0.10%, and March E-mini Nasdaq futures are up +0.19% [5] - The markets are pricing in an 18% chance of a -25 basis point rate cut at the FOMC's next meeting on January 27-28 [5] Bond Market - The 10-year T-note yield is down -4.5 basis points to 4.128% [7] - European government bond yields are declining, with the 10-year German bund yield dropping to a 1-month low of 2.792% [8] - The 10-year UK gilt yield fell to a 1.75-month low of 4.400% [8] Company-Specific Movements - Chip makers and data storage companies are under pressure, with Western Digital down more than -8% [10] - Mining stocks are declining, with silver down more than -4% and copper down more than -1% [12] - StoneCo Ltd is down more than -7% following the announcement of CEO resignation [13] - Monte Rosa Therapeutics is up more than +44% after announcing positive interim data from a clinical study [14] - Ventyx Biosciences is up more than +37% amid acquisition talks with Eli Lilly & Co. [15] - Amgen is up more than +3% after an upgrade from UBS [16]

Group 1 - The dollar index rose by +0.15% on Friday, driven by weakness in the euro and yen, which fell to 1.5-week lows against the dollar [1] - The US Dec S&P manufacturing PMI remained unchanged at 51.8, aligning with expectations [1] - The markets are pricing in a 15% chance of a -25 basis point rate cut at the FOMC's next meeting on January 27-28 [2] Group 2 - The dollar is under pressure as the Fed increases liquidity by purchasing $40 billion a month in T-bills, which began in mid-December [3] - Concerns about President Trump's potential appointment of a dovish Fed Chair are bearish for the dollar, with Kevin Hassett seen as the most likely candidate [3] - The Eurozone Dec S&P manufacturing PMI was revised downward by -0.4 to 48.4 from a previously reported 49.2, contributing to bearish sentiment for the euro [4] Group 3 - The Eurozone Nov M3 money supply increased by +3.0% year-on-year, surpassing expectations of +2.7% year-on-year, marking the highest growth in four months [5] - Swaps indicate a 0% chance of a +25 basis point rate hike by the ECB at the next policy meeting on February 5 [5] - The USD/JPY rose by +0.08% as the yen slid to a 1.5-week low against the dollar, influenced by dollar strength and higher T-note yields [5]

Core Viewpoint - The outlook for investors in 2026 includes considerations of market volatility, Fed policy, equity risks, and the potential for attractive income from bond yields [1] Group 1: Fed Policy - The Federal Reserve's policy will play a crucial role in shaping market conditions and investor strategies moving forward [1] Group 2: Equity Risks - There are significant risks associated with equity markets that investors need to be aware of as they plan their investment strategies [1] Group 3: Bond Opportunities - Bond yields are expected to remain attractive, providing potential income opportunities for investors despite market volatility [1]

Core Viewpoint - The stock market has experienced significant gains over the past three years, but concerns are rising about a potential market crash in 2026, primarily driven by inflation and rising bond yields rather than AI stocks [1][2]. Inflation Concerns - Inflation peaked around 9% in 2022, and despite the Federal Reserve's efforts, the latest Consumer Price Index (CPI) shows inflation at approximately 2.7%, still above the Fed's target of 2% [5]. - Many economists believe the actual inflation rate may be higher due to incomplete CPI reporting, which could lead to consumer perceptions of persistent high prices [6]. Federal Reserve's Dilemma - The Federal Reserve faces a challenging situation where lowering interest rates could support the labor market but risk increasing inflation, while raising rates could control inflation but harm employment and slow economic growth [7]. Bond Yields and Market Fragility - Higher inflation is likely to lead to increased bond yields, with the U.S. 10-year Treasury bill currently yielding around 4.12%. Yields approaching 4.5% or 5% could create market instability [8]. - Rising yields result in higher borrowing costs for consumers and the government, which can negatively impact stock valuations as the cost of capital increases [9][10]. Future Inflation Projections - Some Wall Street banks predict inflation will rise above 3% in 2026 before declining, with JPMorgan Chase forecasting 3% inflation peaking and Bank of America predicting a peak of 3.1% [11]. - If inflation peaks and shows signs of deceleration, the market may stabilize; however, high inflation can become entrenched, leading to persistent high prices that affect consumer behavior [12]. Market Timing Advisory - Predicting inflation trends in 2026 is uncertain, and attempting to time the market is discouraged. A sustained rise in inflation and yields could significantly impact market stability [13].

Market Performance - The S&P 500 Index closed down -0.74%, the Dow Jones Industrials Index down -0.63%, and the Nasdaq 100 Index down -0.84%, marking a retreat to 1.5-week lows [1][2] - March E-mini S&P futures fell -0.71%, and March E-mini Nasdaq futures fell -0.89% [1] Sector Performance - Weakness in chip stocks and data storage companies contributed to the broader market decline [2] - Mining stocks also slid, with gold prices falling to a 2.5-week low and silver prices plunging more than -9% [2] Economic Indicators - US weekly initial unemployment claims unexpectedly fell -16,000 to a 1-month low of 199,000, indicating a stronger labor market than anticipated [3] - Better-than-expected Chinese economic data showed the Dec manufacturing PMI rose +0.9 to 50.1, and the Dec non-manufacturing PMI rose +0.7 to 50.2, supporting global growth prospects [4] Seasonal Trends - Historical data indicates that the S&P 500 has risen 75% of the time in the last two weeks of December, with an average increase of 1.3% [5] - Market attention is focused on upcoming US economic news, with expectations for the Dec S&P manufacturing PMI to remain unrevised at 51.8 [5] Global Market Overview - Overseas stock markets showed mixed results, with the Euro Stoxx 50 closing down -0.08% and China's Shanghai Composite closing up +0.09% [6]

Market Performance - The S&P 500 Index is down -0.33%, the Dow Jones Industrials Index is down -0.35%, and the Nasdaq 100 Index is down -0.34% [1] - Stock indexes are experiencing declines, with the S&P 500 and Dow Jones reaching 1-week lows, and the Nasdaq 100 hitting a 1.5-week low [2] - Trading activity is subdued with volumes below normal due to market closures in Germany and Japan for the New Year's holiday [3] Sector Performance - Weakness in chip stocks and data storage companies is contributing to the broader market decline [2] - Mining stocks are also sliding, with gold prices falling to a 2.5-week low and silver prices dropping more than -7% [2] Economic Indicators - US weekly initial unemployment claims unexpectedly fell by -16,000 to a 1-month low of 199,000, indicating a stronger labor market than anticipated [3] - Better-than-expected Chinese economic data supports global growth prospects, with the December manufacturing PMI rising +0.9 to 50.1, and the non-manufacturing PMI increasing +0.7 to 50.2 [4] Seasonal Trends - Seasonal factors are bullish for stocks, with historical data showing the S&P 500 has risen 75% of the time in the last two weeks of December, averaging a 1.3% increase [5] - Market focus for the holiday-shortened week will be on US economic news, with expectations for the December S&P manufacturing PMI to remain at 51.8 [5] Global Market Overview - Overseas stock markets are mixed, with the Euro Stoxx 50 down -0.08% and China's Shanghai Composite up +0.09% [6]

Market Overview - The S&P 500 Index is down -0.12%, the Dow Jones Industrials Index is down -0.25%, and the Nasdaq 100 Index is down -0.11% [1] - Stock indexes are slightly lower as the market struggles for direction in thin year-end trading, with higher bond yields negatively impacting stocks [2] Economic Indicators - The October S&P Case-Shiller composite-20 home price index rose +0.3% month-over-month and +1.3% year-over-year, exceeding expectations [3] - The December MNI Chicago PMI increased by +9.2 to 43.5, also stronger than anticipated [3] Seasonal Trends - Historical data indicates that the S&P 500 has risen 75% of the time in the last two weeks of December, with an average increase of 1.3% [4] Upcoming Economic Data - The minutes from the December 9-10 FOMC meeting will be released, and initial weekly unemployment claims are expected to rise by 1,000 to 215,000 [5] - The December S&P manufacturing PMI is anticipated to remain unchanged at 51.8 [5] - The markets are currently pricing in a 16% chance of a -25 basis point rate cut at the next FOMC meeting on January 27-28 [5] International Market Performance - The Euro Stoxx 50 index reached a 1.5-month high, up by +0.76%, while Japan's Nikkei Stock 225 fell to a 1-week low, down -0.37% [6]