Investors are confronting a different world, marked by the Trump administration's aggressive push for a new global order, renewed attacks on the Federal Reserve, increasingly controversial immigration actions and much more.
Why it matters: It's not even the end of the first month of the year. Throw out your 2026 outlooks.
What they're saying: It's hard to parse the market's response to the firehose of news, as any selloff could be "a routine wave or a tidal shift, or worse, a tsunami," Steve Sosnick, chief strategist at Interactive Brokers, tells Axios.
State of play: Since the beginning of the year, investors have been met with:
- Venezuela: The capture of Nicolás Maduro led to a spike in volatility and a drop in energy prices.
- Greenland: President Trump threatened to take control of Greenland and then proposed additional tariffs on European nations that did not support the effort, which triggered in part the broadest U.S. asset selloff since 2020. He then walked back the threats on Greenland and the tariffs.
- The carry trade: Japanese bond yields spiked, hurting one of the most lucrative trades used by Wall Street to turn profits.
- Trump vs. Powell: The Department of Justice launched an investigation into Federal Reserve chair Jerome Powell, sparking concerns about Fed independence. The market, meanwhile, is still waiting to hear who the next Fed chair might be.
- Canada vs. the U.S.: Canadian Prime Minister Mark Carney dropped tariffs on Chinese EVs and said that "not every partner will share all our values" in a speech at Davos, in a recognition that China may not be the country that Canada needs to worry most about.
- Trump vs. corporate America: The president is suing the nation's largest bank, JPMorgan Chase, and its CEO, Jamie Dimon, for $5 billion.
- The immigration crackdown. The killing of two people in Minnesota has triggered a response from the CEOs of the largest public companies in the state, which could signal the start of a return to corporate activism.
Between the lines: Every time investors think they have a hold on the macro picture this year, it changes.
Zoom in: The recent hesitancy in the stock market's rally reflects this:
- The S&P 500 is up just 1% so far this year.
- And the top basket of tech stocks, the Magnificent 7, is down 0.4% year to date as investors are also getting more skeptical about the AI trade.
Yes, but: A rotation into other stocks is exactly what investors who are worried about an AI bubble have been calling for.
- It's early: Big Tech could still easily lead the market this year. The next earnings reports from the tech giants, which start this week, will help clarify the near-term outlook for these stocks.
What we're watching: The market has so far paid only scant attention to geopolitical tensions, attacks on the Fed and other policy moves from Washington.
- How long will that complacency last?
The bottom line: The market is on shaky ground without the strong performance of tech stocks to carry it through if there are additional bouts of policy-driven volatility.
