Markets Test Their Footing

👋 ICYMI

Markets digested a set of mixed economic, policy, and geopolitical headlines last week in the face of ongoing Fed positioning signals while safe havens like gold remained elevated. Investors also took note of political and institutional pressures on central-bank independence that briefly unsettled risk sentiment. Overall, the tape reflected a combination of resilient growth expectations and selective caution.

🔁 Market Movers

• 📉 Midweek Pullback on Policy Pressure

  Earlier in the week, U.S. equities saw pressure after news of an investigation involving Federal Reserve Chair Jerome Powell, raising investor concern over central-bank independence and potential policy friction.

• 📊 Inflation Eases in December

  Fresh CPI data showed core consumer prices rising at the slowest pace since early 2021, reinforcing expectations that inflation pressures are moderating. Markets reacted to the data as a signal that rate cuts could become more likely later in 2026 — though policy execution remains uncertain.

• 💼 Bowman & Jefferson Signal Fed Caution

  Two Fed officials expressed mixed views on rate policy: Michelle Bowman highlighted job-market risk and the need for readiness on cuts, while Philip Jefferson said the current stance was “well-positioned” and that future decisions would be data-dependent. Taken together, these voices suggest a Fed in balance between inflation risk and labor fragility.

👀 Signals I’m Watching

• 📊 Mixed CPI Reinforces Nuance

  Core inflation’s relatively slow yearly pace — with prices rising at 2.6% YoY — is the slowest since March 2021, yet pockets like shelter and food costs remain sticky, suggesting inflation’s path may still be uneven.

• 🤖 AI and Semiconductors Holding Up the Advance

  The chip sector’s continued leadership points to sustained AI and infrastructure demand, supporting earnings expectations and investor confidence even when broader markets wobble.

• 🏛️ Fed Messaging Moving Markets

  With Bowman urging rate-cut readiness and Jefferson signaling a balanced stance, markets are parsing nuanced Fed language to gauge the likelihood and timing of future easing.

• 🛡️ Safe Havens Still Relevant

  Gold’s elevated levels and price strength through the week reflect that even amid stock gains, hedge demand persists, likely tied to policy uncertainty and geopolitical risks.

⚠️ Red Flag to Note

Central-Bank Independence in Focus

News of a criminal investigation involving the Fed Chair and political pressure on rate policy unsettled markets briefly last week. While equities rebounded, any sustained attack on central-bank independence could undermine confidence in policy consistency and long-term financial stability — especially if it becomes tangled with geopolitical risk.

🔍 Insider Transactions I’m Watching

🚀 IPO Watch

Quiet Supply, Big Pipelines

The U.S. IPO market remains light in early 2026 as companies await macro and policy clarity. However, early filings and investor interest point to potential tech and fintech deals launching once data flow and liquidity enhance later this quarter.

📬 Closing Note

Last week’s market action highlights that resilience and nuance are both needed in investor thinking. With inflation moderating yet still uneven, Fed voices balancing optimism with caution, and AI/semiconductor demand holding up the tape, positioning for diverse scenarios makes sense. Keep risk controls tight, track key macro catalysts like inflation and jobs data, and be ready to pivot as the macro landscape clarifies further into 2026.

Until next Sunday —

George