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@theMarket: New Fed Head, Iran Threats Trigger Some Profit-taking
Kevin Warsh, formerly of the Federal Reserve, was chosen to lead the U.S. central bank in May. At around the same time, U.S. forces gathered in the Middle East, as the president again threatened Iran. Together, these developments triggered traders to adopt a risk-off stance.
At first glance, it appears that market participants believe Warsh is less willing to ease monetary policy if it would raise inflation. Consequently, currency traders bought the dollar and sold precious metals. Meanwhile, increased tensions in the Middle East also pushed the dollar higher and boosted oil prices.
Amid these market shifts, the Fed met this week, but the event was largely a nothing burger. The Fed is on pause, as the market expected, and will likely remain so until Kevin Warsh is appointed in mid-May. Now that the Federal Open Market Committee meeting is over, investors' attention will be focused on the fourth-quarter 2025 earnings results. Thus far, more than 78 percent of companies have beaten earnings estimates as usual.
By now, readers know the game Wall Street plays. Analysts deliberately lower their earnings estimates, allowing the companies they follow to beat expectations. This week, however, the big guys reported. Meta skyrocketed on their results, while Microsoft and Tesla cratered on theirs. Apple, despite stellar earnings, was dumped as well.
The AI fears that companies are spending way too much and getting little in the way of returns for their effort was underscored by Microsoft's disappointing earnings announcement. Once again, that event, along with news of a widening U.S. trade deficit, has cast a pall over the AI trade.
The U.S. Commerce Department announced that the nation's trade deficit for November 2025 was the largest in almost 34 years. The trade gap increased by 94.6 percent to $56.8 billion, well above expectations of below $30 billion. The culprit was a surge in capital goods imports driven by investments in artificial intelligence. That is not what the administration wants to see.
And speaking of the administration, this week the president rattled his saber once again, threatening military action unless Iran renounced its nuclear development. He also said the declining U.S. dollar was "doing great" and did not think the dollar had declined too much.
The prices of most commodities and oil spiked higher on his comments, as traders realized that not only was he comfortable with the decline, but that further downside was highly probable. As a result, the dollar fell 1.3 percent on Tuesday, while gold and other precious metals spiked higher. Since then, that trade has reversed on the news of the Kevin Walsh appointment.
From a global perspective, the current parabolic surge in commodity prices was driven by a systemic external drain on U.S. dollar-denominated assets. Foreign nations are aggressively liquidating U.S. Treasuries and moving away from the dollar toward gold, silver, and other commodities. It is one of the main reasons I remain bullish on precious metals, oil, and other commodities as the year progresses.
As the dollar weakens, we can expect to see global investors seek out a replacement, a store of value that will protect their wealth. Gold, silver, platinum, palladium, and now copper have fulfilled that role thus far. But wait, you might ask, didn't I just advise readers to sell some of those metals last week?
Yes, I did. It is a timing thing. Most precious metals have risen too rapidly; one might describe the move as parabolic, so I recommended taking profits on some investments. At the same time, hold some positions in case prices rise further. They did until Friday. Since there is no way to tell when or even if this parabolic move has peaked, I booked some gains. The declines on Friday show the wisdom of my advice. In just a matter of hours gold dropped by 7 percent-plus, silver fell by 21 percent, platinum dropped by 16 percent, and palladium declined by more than 13 percent.
In the blink of an eye, we could easily see a 30 percent decline in this space, and it could happen, as it did on Thursday night, while you are sleeping in bed. That is the nature of the beast. At some point, when I think the metals have fallen enough, I will advise you to reinvest those profits back into precious metals.
In the meantime, I suggested readers accumulate copper (through an exchange-traded fund) and copper mining stocks. At one point this week, Chinese investors (while you were sleeping) bid up the price of copper to $14,500 ton, an 11 percent increase, the highest price ever recorded. Thursday morning, prices in the U.S. rose by more than $1,400 a ton, only to slide by $1,000 in less than half an hour. By Friday, copper had joined the metals rout, falling 4.28 percent.
The moral of this tale is that you do not bet the farm when investing in commodities, or you won't have any farm left to bet. As for equity markets, the last week of January saw profit-taking, though the month was positive overall as measured by the S&P 500 Index. The Russell 2000 small-cap index outperformed, while the tech-heavy NASDAQ also rose. But not all is what it seems. If one had been invested in commodities, metals and mining, capital goods, aerospace and defense, energy , basic materials, and/or retail, one did far better even with the end-of-the-month sell-off.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
@theMarket: Headline noise equals opportunity
A Greenland invasion, the end of NATO, another tariff war, Iranian riots, threats, and counterthreats. This week saw it all. It could have been the end of the world, but it wasn’t. Savvy investors took advantage of the noise.
Talk about TACO (Trump always chickens out)! This week exemplified Trumpian scare tactics. It is remarkable how many investors were influenced, not recognizing this as another page from Trump’s novel, “The Art of the Deal.”
In any case, the ruffled feathers on both sides of the Atlantic after the president’s threat to take over Greenland or else were resolved in short order. The World Economic Summit in Davos set the stage for Trump's speech.
Behind the bluster and bravado, and the back-room negotiations, was the real issue—strategic security. Shipping lanes, undersea infrastructure, defense positioning, and more are real concerns for the U.S. and Europe regarding Greenland and the Arctic.
I call it Gunship Diplomacy mixed with a heavy dose of the new 'Donroe Doctrine’. It is all part of my thesis that Donald Trump is following in the footsteps of presidents like Jefferson, Madison, Monroe, Andrew Johnson, William Howard Taft, Harry Truman, and others who expanded America’s reach for its own gains and strategic interests either by threats or force.
The world is getting smaller, and Greenland and the Arctic, once a remote region, are in reality right next door to China, North Korea, and Russia. Those nations are attempting to expand their presence in the area, as they are in other areas of our hemisphere. It is the reason behind Donald Trump's strategy for the Golden Dome missile defense system. Like Ronald Reagan’s Star Wars initiative, the Golden Dome is all about nuclear missile attacks. It would detect and destroy ballistic, hypersonic, and cruise missiles before they launch or during their flight.
The media focused on Trump’s words rather than the substance of the issue, continuing their typical approach. Trump’s rhetoric often inflames situations, a pattern that is now recognizable.
In any case, all one had to do was look at how the rest of the world reacted. Markets in China, South Korea, and even Denmark did not fall for the noise. The panic selling was uniquely American. It was a great opportunity to buy the dip.
As for the fundamentals, the economy was still expanding in the third quarter of last year, rising at a 4.4 percent pace, slightly higher than the government’s initial estimate. In addition, personal spending rose 0.5 percent in November 2025 versus October. The Personal Consumption Expenditures Index (PCE) for November rose 0.2 percent, the same as in October, which was in line with estimates. All of which implies that inflation is in check, the economy continues to grow, and labor is showing slight moderation, with little hiring or firing.
Earnings season, in typical fashion, is turning out to be a little better than expected, with 78 percent of companies reporting beating estimates. Equities overall are still exhibiting bullish tendencies. This week’s geopolitical tape bomb was met with buying, and market breadth remains resilient. The rotation trade is still working, but the tech sector and growth stocks in general are beginning to signal oversold readings. We could see a bounce in the Mag 7 group if earnings and guidance come in better than expected next week.
The precious metals complex, especially silver, is approaching bubble territory. Typically, in equity markets, tops are processes while bottoms are events (usually due to policy intervention). Conversely, in gold, silver, platinum, etc., bottoms are a process, and tops are an event.
FOMO is white hot in the silver market, driven by the belief that the metal is in short supply, and the U.S. government has deemed it a critical metal. In the case of gold, central banks and many foreign nations are beginning to use gold to settle trade outside of the U.S. Treasury and petrodollar systems. While still bullish on all precious metals, I would not chase them here. If you own them and the miners, I would lighten up here. That does not mean selling out of your positions. Just bank some profits and possibly buy back at lower prices.
However, in the case of copper, I would see any weakness in price as an opportunity to add. In addition, I still think emerging markets, especially China’s A shares, the Shenzhen and STAR markets, have more room to run this year despite their stellar performance in 2025. As for this weekend, stay warm.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
@theMarket: Markets Churn As Trump Roars
It was a week where the White House provided a steady stream of "what ifs." Iran, Greenland, credit card caps, Fed subpoenas, and aid for home buyers were just some of the topics floated. Take it all with a grain of salt.
The overall market indexes traded in a tight range, but by the end of the week, they continued to edge higher. If you were invested in cyclical areas, you did far better than that. As I have pointed out in my last few columns, a rotation away from the concentrated group of tech stocks is well underway into cyclical areas like materials, industrials, health care, consumer discretionary, and small-cap stocks.
I think that will continue as tax cuts, increased government spending, and a reduction in tariffs take hold in the economy. Remember, this is an election year, and as such, the administration is determined to short-circuit the "affordability" issue because it has played so well in GOP election defeats in recent years.
Some examples include the president's desire to cap credit card interest rates at 10 percent for one year, which would require congressional approval. Top Republicans are already resisting such a move. However, it did not stop traders from trashing a whole host of financial stocks on this "what if" scenario.
Trump also wants to reduce rising electricity prices by opening a bidding war for tech companies to fund new power plants, and he also proposed "the great health-care plan," which he claims will lower drug prices, increase transparency, and redirect federal subsidies to consumers.
On the housing front, the president wants to spend $200 billion or more in buying mortgage bonds through Fannie Mae and Freddie Mac, the two government-controlled mortgage agencies. The president hopes the move will reduce housing costs by lowering mortgage interest rates.
Speaking of interest rates, the DOJ Fed subpoena announcement was meant to put pressure on Chair Jerome Powell to vacate the office sooner rather than later. The rather uncharacteristic response from the beleaguered central bank chairman on social media prompted the White House to backpedal on that move almost immediately.
Trump also said that he wants to bar Wall Street financial institutions from buying single-family homes. Professional house flippers are believed to have artificially inflated housing prices in many communities. It is not clear to me if that would have a big impact on the housing market, but one can hope. In any case, housing stocks took off after Trump's social media post.
And while these trial balloons are floating out of the Oval Office windows, Trump's gunship diplomacy is forging full steam ahead. Venezuela was last week's story, largely replaced by threats of military action in both Iran and Greenland. While equity and bond markets took this saber-rattling in stride, the precious metals and oil markets spiked higher as the fear factor of geopolitical turmoil took hold.
To me, Trump's escapades overseas are part of the mercantilist tone of his administration. For those who missed my December 2024 column "Is mercantilism the answer to our trade imbalance," I suggest you read it. It begins with:
"For those few of us familiar with the term, mercantilism was the dominant economic system in Europe from the 16th to the 18th centuries. It was a world where it was believed that global wealth was fixed and finite. To become powerful, a nation needed to acquire as much wealth as possible. Back then, a nation's wealth was measured by how much gold and silver it accumulated."
Certainly, in mercantilist terms, the controversy over strategic metals fits the bill as does oil in the case of Venezuela and Iran when discussing wealth as fixed and finite.
Markets feel a bit tired to me. We still have not received a verdict on the tariff question, but at the end of the week, I noticed some overdue profit-taking in the mines and metals sector.
The threat of additional tariffs on metals may have fueled some of the recent gains in that space. A negative ruling by the Supreme Court might create further volatility in that area and in other cyclical sectors that have benefited most from the rotation we have seen over the last two weeks.
I would not chase equities here. Instead, there may be a buying opportunity if we pull back in areas such as small-cap stocks, industrials, and miners of gold, silver, copper, platinum, and palladium. Emerging markets are also hitting new highs. China may be worth a fresh look as well.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
@theMarket: The Markets Celebrate 2026
It was a tumultuous week on the geopolitical front for the country, but markets took it in stride. The good news is that markets continue to climb, but for how long?
Since the beginning of the year, I have seen a fair amount of rotation, something I have suggested could happen. The years of overinvestment in a handful of names appear to be coming to an end as investors go further afield in search of new purchases. For the first time since 2022, value is beginning to outperform growth. Industrials, small caps, financials, health care, defense, and materials seem to be areas where new money is gravitating.
All of this is happening under the surface, so just looking at the main averages may be deceiving. Rotation is a good thing and does not automatically mean deterioration. It may feel that way if you are one of the many who are overweight in the MAG 7, AI Five, or some variation of that theme. I suspect that in 2026, those companies that can show they can monetize their investment in AI will thrive; otherwise, not so much.
In the meantime, the price action in precious metals has been hair-raising over the past week, especially in silver, platinum, and palladium. I am talking about daily moves of greater than 5 percent in some cases. It is why I have urged readers in the past to be involved but not to bet the farm on this asset class. I hold a similar attitude toward crypto.
I am still bullish on both if the U.S. dollar continues to decline. The Trump administration's unstated policy is to weaken the dollar further. In this era of tariffs, a weaker dollar strengthens the competitive position for U.S. exports. It is that simple. As a result, global investors, including central banks, need an alternative to dollar-denominated assets. Precious metals and other commodities are one way to satisfy that need.
I believe state capitalism and the new role of the government asventure capitalist will continue to be an investment theme. There will be more companies like Intel and MP Materials that receive taxpayer investments based on their “strategic” importance. What will make one company, rather than another, the recipient of federal largesse will likely depend on the number of visits to Mar-A-Lago.
I won't review the news from Venezuela over the past week. Everything readers needed to know concerning Trump's Gunboat (maybe, gunship?) Diplomacy in Venezuela was published in two of my columns in mid-November. My explanation and predictions have indeed come to pass. The bottom line from an investment view is that repairing and developing that country's energy production will take years. The only short-term winners will be U.S. Gulf Coast refiners, and their stock prices already reflect the news.
Notice how the president's actions on Venezuela, followed by his desire to increase defense spending by half to $1.5 trillion in 2027, have effectively wiped affordability and the Obamacare insurance premiums issues from the headlines. His Gunship diplomacy is now focused on Greenland, while his resurrection of the Monroe Doctrine in the Western Hemisphere is keeping allies and enemies alike off balance. As a tactician in a mid-term election year, his antics are brilliant. What it says about America will likely be determined by an increasingly populist society during the election process.
As I have explained previously, we are still experiencing the global end-of-year flow of funds, which has culminated in the stock market hitting record highs over the last week or so. The latest non-farm payroll number for December came in slightly lower than estimated, adding 50,000 jobs versus the 70,000 estimated. That is the kind of number the Fed wants to see to keep inflation on track.
We are still awaiting the Supreme Court decision on tariffs, which many expected to be announced today, January 9. It wasn't. Whatever their decision, it is a toss-up how markets will react. If the tariffs are thrown out, the persistent price inflation caused by these policies will be reduced. That will boost consumer spending and growth. At the same time, the deficit will increase because less tariff revenue will flow into the U.S. Treasury, which has been used to reduce the deficit. If, on the other hand, the court backs the president, expect expectations of higher inflation, lower growth, and more tariffs to rise.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
@theMarket: Santa Is on the Roof
For those who have been wondering whether the Santa Claus Rally would occur this year, it appears that Santa is already on the roof. The stock market gained almost all of this holiday-shortened week on lighter volume. Can we expect the same next week?
Normally, investors can expect gains of 1-2 percent between now and the end of the first week in January. Markets were closed early on Wednesday and reopened on Friday. Six straight days of gains were a good start with the S&P 500 Index hitting a new record high.
I have advised readers not to put too much credence in these gains. The upward pressure on stocks stems more from global fund flows than from anything specific to the stock market. Still, it is a bit like having a snowfall on Christmas. It makes the holiday season a little more cheerful. And I hope you all had a wonderful week!
The big news had to be the third quarter release of Gross Domestic Product (GDP). Following a 3.8 percent gain in the second quarter, GDP grew by 4.3 percent on an annualized basis last quarter. That was way beyond economists' estimates.
The gains were largely driven by robust consumer spending, but since then, momentum has faded amid a rising cost of living. The administration is steadfast in its belief that GDP will rise by 3 percent in 2026. The Congressional Budget Office has estimated that the government shutdown could shave anywhere from 1-2 percent off GDP in the fourth quarter.
That may be so, but a word of caution on the government data. There is no guarantee that the recent data released by the Bureau of Labor Statistics is as accurate or unbiased as it was in the past. Just so you know, the Congressional Budget Office has estimated that the government shutdown could shave anywhere from 1-2 percent from GDP in the fourth quarter.
While U.S. stocks did well this year, the real outperformers in 2025 were precious metals and other commodities. Over the festive dinner table this year, the topic of conversation among friends and relatives was not about crypto for a change. No, this year it was about gold and silver prices. "And what about palladium and platinum?"
Readers know that was my favored asset class throughout the year. The numbers speak for themselves: gold gained 70 percent, palladium 62 percent, silver 150 percent, and platinum 150 percent. A combination of central bank buying, inflation, tariff fears, and weakness in the dollar has catapulted this group to record high after record high.
Recently, new buying has surfaced due to the Section 232 investigations prompted by the White House. These investigations are a first step in determining whether tariffs should be applied to this asset class. If the answer is yes on tariffs, then expect more gains. But it is not just the rabbit and the hare (precious metals) that have attracted my interest; there is a turtle in this race that I am watching as well.
Copper, while "only" up 35-40 percent this year, appears to me to have a bright future. As a mining guy back in the day, I know that most often, where there are copper deposits, there is also silver and gold. The three metals are highly correlated, although only silver and copper have industrial uses.
In the case of copper, its uses are endless. This lowly metal is everywhere. A great conductor of electricity and heat, it has been part of human history for thousands of years. Today, the combination of mining outages and the need for massive quantities of copper to build new power grids, energy infrastructure, electric vehicles, and AI data centers should support copper prices in the coming years.
There is not much I can say about the coming week. It should be a replay of this past week — few players, less volume, fewer trading days, and higher global cash flows. That should propel markets to higher highs, but remember the party should end at least temporarily by the middle of January. Happy New Year to one and all.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
