@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.