Volatility didn’t just show up last week—it took the podium. A steady drumbeat of market broadsides—geopolitics—kept traders ducking and weaving, but the market’s internal structure never quite lost its balance. The headlines were loud, the price action theatrical, and the nerves very human. That said, our technical indicators kept their composure, tuning out the spectacle and staying firmly focused on economic fundamentals—the signal, not the static. Against this backdrop, Sowell’s TAP gauges again remain balanced and fully invested, for the time being.
If you had “Presidential bid for Greenland” on your 2026 market volatility bingo card, please come collect your prize. It was a four-day week (thanks to the MLK Jr. Day break) that felt like a month, characterized by geopolitical theater, a legal broadside against a banking titan, and investors taking up the glittery other metal, gold.
Early gains for the S&P 500 were unceremoniously erased last Tuesday as the administration escalated a trade war with Europe over—yes, still—controlling Greenland. We saw a brief rebound on Thursday after the rhetoric cooled slightly, but the damage was largely done.
While the headline indices looked a bit bruised this week, the “under the hood” metrics tell a story of a market that is finally—miraculously—broadening out beyond just five guys in Silicon Valley. The heavyweights at the top of the food chain felt the most gravity, with the S&P 500 sliding 0.34% for the week, though it remains in positive territory for the year at +1.10%. The tech-heavy Nasdaq Composite managed to hold its ground slightly better, finishing the week nearly flat with a marginal 0.06% dip, bringing its year-to-date gain to +1.13%.
However, the real magic happened in the often-overlooked corners of the market. Mid-Cap stocks showed significant relative strength, pushing their YTD performance to an impressive +4.26%. Even more striking was the surge in Small-Cap stocks; while the “Magnificent Seven” were busy dodging geopolitical headlines, the smaller players sprinted ahead, posting a YTD gain of +7.58%. It seems the rally is finally learning how to share the wealth.
With geopolitical uncertainty at a fever pitch, Gold closed above $4,900/oz for the first time (15% YTD), and silver followed suit, teasing past the $100/oz mark.
Last week saw a “barbell” Treasury environment—short-term yields rose slightly while long-term yields narrowed. It’s a clear sign of a “wait and see” move from bond traders ahead of the Fed meeting.
Broadsides
The Greenland Gambit: The primary driver was the threat of a 10% tariff against eight European nations. While Wall Street clawed back some ground when the President walked back the most aggressive threats on Thursday, the “mercurial policy” premium is back in full swing.
JPMorgan vs. The White House: In a move that sent shockwaves through the financial sector, President Trump filed a $5 billion lawsuit against JPMorgan Chase and CEO Jamie Dimon. The allegation? The bank “debanked” him for political reasons. JPM stock took a 4.7% hit on the news, proving that even the “Fortress Balance Sheet” isn’t immune to a Florida court filing.
Housing’s New Rule: On Wednesday, the President signed an executive order prohibiting large institutional investors from buying single-family homes, declaring, “America will not become a nation of renters.” It’s a populist play that has REITs sweating and first-time buyers hopeful.
The Asia Front
While Intel struggled (down 17% on a soft outlook), the story wasn’t all gloom in the chip sector.
TSMC (TSM): Reported a massive Q4 profit jump of 35%, crushing forecasts and announcing plans to expand U.S. manufacturing. It seems the AI hunger is still far from satiated.
China’s Surplus: Despite U.S. tariff pressure, China recorded a staggering $1.19 trillion trade surplus for 2025. Exports rose 5.5% while imports stagnated, suggesting redirected trade routes are working.
Economic Pulse & Safe Havens
The data remains a “mixed bag” of resilient growth and sticky prices.
Inflation & Jobs: November’s PCE came in at +2.8% YoY, exactly in line with consensus but still stubbornly above the Fed’s 2% target. Meanwhile, initial jobless claims edged up to 200,000—lower than the 209,000 expected.
Leading Indicators: The LEI fell -0.3%, a steeper drop than the previous month’s -0.1%, hinting at some indicators of softening.
The Week Ahead: A Gauntlet
Buckle up, because this week is the heavy-duty, industrial-strength version of a news cycle. We have the Fed interest rate decision on Wednesday, where Jerome Powell will try to explain how he’ll navigate 2.8% inflation and a “Greenland-sized” trade risk. Meanwhile, the Magnificent Seven—Microsoft, Meta, Tesla, and Apple—are on deck to prove whether their AI valuations are backed by cash or just vibes. We’ll also get a 360-degree view of the economy through Boeing (production recovery), NextEra (green energy shifts), Visa (consumer spending), AT&T (telecom stability), and oil giants Exxon and Chevron. Between Case-Shiller home prices and the Productivity report, by next Friday we’ll know exactly what kind of momentum 2026 is bringing.
“We are in the midst of a rupture, not a transition. Over the past two decades, a series of crises in finance, health, energy, and geopolitics have laid bare the risks of extreme global integration. But more recently, great powers have begun using economic integration as weapons. Tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited. You cannot live within the lie of mutual benefit through integration when integration becomes the source of your subordination.”
— Canadian Prime Minister Mark Carney, World Economic Forum in Davos, January 23, 2026
Making Sense of Geopolitics and Portfolio Risk in 2026
Phillip Wool, Ph.D.
“Peace is not the absence of conflict, but the ability to cope with conflict by peaceful means.”
—Ronald Reagan
Speaking with investors in January, one of the most common questions an advisor hears is “What kind of market should clients prepare to navigate in the new year?” Judging by news headlines and market action over the first few weeks of 2026, it’s a safe bet that “geopolitics” has featured in many an advisor’s outlook. In one short month—against the backdrop of a Russian assault on Ukraine entering its fourth year—we’ve witnessed a covert mission by US forces to capture Venezuela’s president, a state-imposed Internet blackout amidst explosive protests in Iran, not to mention an escalating push by the White House to mount a hostile annexation of Greenland. Feed all of that drama into a 24-hour news cycle, and it’s easy to imagine doomscrolling investors might have some concerns about the risk of global political instability spilling over into their portfolios.
Today’s Geopolitical ‘Headline Risk’ Looks Tame Over a Longer History
But how big is the risk, really? That might sound like a tough thing to gauge for a topic as broad and seemingly abstract as “geopolitics,” but in this Age of Big Data—as we’ve seen before—it’s often possible to find new tools for grappling with questions like this. When it comes to the economics of geopolitical tension, one of the best resources is a pair of economists at the Federal Reserve Board of Governors, Dario Caldara and Matteo Iacoviello, who’ve built an intriguing signal that measures the incidence of adverse geopolitical events based on newspaper text. One nice thing about their approach is that it captures news sentiment: exactly what one imagines is driving investors’ fears about the impact on their portfolios.
Another benefit of Caldara’s and Iacoviello’s measure is that it can be applied to data going back well over a hundred years, as we’ve plotted above.
Likely the first thing that comes across when we peek at the chart is that despite Russia–Ukraine, the past year’s Middle East conflict, and now the Trump Administration’s escapades with respect to Venezuela and Greenland all feeling very dramatic, none of this seems to come close to the magnitude of shocks like 9/11 and the Cuban Missile Crisis, let alone the extreme trauma associated with a pair of World Wars in the first half of the last century. While most of us will have strong memories of how stocks reacted at the onset of Russia’s attack on Ukraine, and some of us will remember the financial stress in the wake of September 11th and the subsequent war in Iraq, very few of us were navigating portfolios amidst the truly existential ups and downs of the Cold War. In that sense, zooming out like this delivers a potentially comforting perspective: namely, that we may just be living in a safer world than any of the generations of investors who came before us.
Even so, recognizing that there are indeed big ups and downs in the plot above, some investors will look at those gyrations and be tempted to time the market, seeking safety in cash when tensions are rising. Thinking more deeply about the history of geopolitical shocks and how they’ve impacted the US stock market, our prospective market timer might wish to reconsider. Based on data from the chart above, we performed a neat little exercise, identifying the 10 biggest one-month jumps in geopolitical risk since 1900: a set of months that includes events within both World Wars, the 9/11 attacks, the outbreak of the Korean War, the Gulf War, and the Cuban Missile Crisis. We then simulated a very simple strategy, going long the S&P 500 Index the month after each such jump and holding for the next five years. The average annualized rise in the market over those stretches was just under 7%. According to data compiled by Professor Robert Shiller at Yale University, that turns out to be meaningfully above the 5.7% annual price return the S&P 500 experienced over the full period, from January 1900 to December 2025. The takeaway? A simple buy-and-hold approach—even amidst big geopolitical risk—can be hard to beat!
Disclosure: This material is for informational purposes only and should not be considered investment advice. An investor should consult with their financial professional before making any investment decisions. The opinions contained herein are subject to change without notice and do not necessarily reflect the opinions of Rayliant Investment Research. Indices cannot be invested in directly and are unmanaged.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
WEEK AHEAD
January 26-30, 2026
3G’s: Greenland, Grumbles, and Gold
If you had “Presidential bid for Greenland” on your 2026 market volatility bingo card, please come collect your prize. It was a four-day week (thanks to the MLK Jr. Day break) that felt like a month, characterized by geopolitical theater, a legal broadside against a banking titan, and investors taking up the glittery other metal, gold.
Early gains for the S&P 500 were unceremoniously erased last Tuesday as the administration escalated a trade war with Europe over—yes, still—controlling Greenland. We saw a brief rebound on Thursday after the rhetoric cooled slightly, but the damage was largely done.
While the headline indices looked a bit bruised this week, the “under the hood” metrics tell a story of a market that is finally—miraculously—broadening out beyond just five guys in Silicon Valley. The heavyweights at the top of the food chain felt the most gravity, with the S&P 500 sliding 0.34% for the week, though it remains in positive territory for the year at +1.10%. The tech-heavy Nasdaq Composite managed to hold its ground slightly better, finishing the week nearly flat with a marginal 0.06% dip, bringing its year-to-date gain to +1.13%.
However, the real magic happened in the often-overlooked corners of the market. Mid-Cap stocks showed significant relative strength, pushing their YTD performance to an impressive +4.26%. Even more striking was the surge in Small-Cap stocks; while the “Magnificent Seven” were busy dodging geopolitical headlines, the smaller players sprinted ahead, posting a YTD gain of +7.58%. It seems the rally is finally learning how to share the wealth.
With geopolitical uncertainty at a fever pitch, Gold closed above $4,900/oz for the first time (15% YTD), and silver followed suit, teasing past the $100/oz mark.
Last week saw a “barbell” Treasury environment—short-term yields rose slightly while long-term yields narrowed. It’s a clear sign of a “wait and see” move from bond traders ahead of the Fed meeting.
Broadsides
The Asia Front
While Intel struggled (down 17% on a soft outlook), the story wasn’t all gloom in the chip sector.
Economic Pulse & Safe Havens
The data remains a “mixed bag” of resilient growth and sticky prices.
The Week Ahead: A Gauntlet
Buckle up, because this week is the heavy-duty, industrial-strength version of a news cycle. We have the Fed interest rate decision on Wednesday, where Jerome Powell will try to explain how he’ll navigate 2.8% inflation and a “Greenland-sized” trade risk. Meanwhile, the Magnificent Seven—Microsoft, Meta, Tesla, and Apple—are on deck to prove whether their AI valuations are backed by cash or just vibes. We’ll also get a 360-degree view of the economy through Boeing (production recovery), NextEra (green energy shifts), Visa (consumer spending), AT&T (telecom stability), and oil giants Exxon and Chevron. Between Case-Shiller home prices and the Productivity report, by next Friday we’ll know exactly what kind of momentum 2026 is bringing.
“We are in the midst of a rupture, not a transition. Over the past two decades, a series of crises in finance, health, energy, and geopolitics have laid bare the risks of extreme global integration. But more recently, great powers have begun using economic integration as weapons. Tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited. You cannot live within the lie of mutual benefit through integration when integration becomes the source of your subordination.”
— Canadian Prime Minister Mark Carney, World Economic Forum in Davos, January 23, 2026
Making Sense of Geopolitics and Portfolio Risk in 2026
Phillip Wool, Ph.D.
“Peace is not the absence of conflict, but the ability to cope with conflict by peaceful means.”
—Ronald Reagan
Speaking with investors in January, one of the most common questions an advisor hears is “What kind of market should clients prepare to navigate in the new year?” Judging by news headlines and market action over the first few weeks of 2026, it’s a safe bet that “geopolitics” has featured in many an advisor’s outlook. In one short month—against the backdrop of a Russian assault on Ukraine entering its fourth year—we’ve witnessed a covert mission by US forces to capture Venezuela’s president, a state-imposed Internet blackout amidst explosive protests in Iran, not to mention an escalating push by the White House to mount a hostile annexation of Greenland. Feed all of that drama into a 24-hour news cycle, and it’s easy to imagine doomscrolling investors might have some concerns about the risk of global political instability spilling over into their portfolios.
Today’s Geopolitical ‘Headline Risk’ Looks Tame Over a Longer History
But how big is the risk, really? That might sound like a tough thing to gauge for a topic as broad and seemingly abstract as “geopolitics,” but in this Age of Big Data—as we’ve seen before—it’s often possible to find new tools for grappling with questions like this. When it comes to the economics of geopolitical tension, one of the best resources is a pair of economists at the Federal Reserve Board of Governors, Dario Caldara and Matteo Iacoviello, who’ve built an intriguing signal that measures the incidence of adverse geopolitical events based on newspaper text. One nice thing about their approach is that it captures news sentiment: exactly what one imagines is driving investors’ fears about the impact on their portfolios.
Another benefit of Caldara’s and Iacoviello’s measure is that it can be applied to data going back well over a hundred years, as we’ve plotted above.
Likely the first thing that comes across when we peek at the chart is that despite Russia–Ukraine, the past year’s Middle East conflict, and now the Trump Administration’s escapades with respect to Venezuela and Greenland all feeling very dramatic, none of this seems to come close to the magnitude of shocks like 9/11 and the Cuban Missile Crisis, let alone the extreme trauma associated with a pair of World Wars in the first half of the last century. While most of us will have strong memories of how stocks reacted at the onset of Russia’s attack on Ukraine, and some of us will remember the financial stress in the wake of September 11th and the subsequent war in Iraq, very few of us were navigating portfolios amidst the truly existential ups and downs of the Cold War. In that sense, zooming out like this delivers a potentially comforting perspective: namely, that we may just be living in a safer world than any of the generations of investors who came before us.
Even so, recognizing that there are indeed big ups and downs in the plot above, some investors will look at those gyrations and be tempted to time the market, seeking safety in cash when tensions are rising. Thinking more deeply about the history of geopolitical shocks and how they’ve impacted the US stock market, our prospective market timer might wish to reconsider. Based on data from the chart above, we performed a neat little exercise, identifying the 10 biggest one-month jumps in geopolitical risk since 1900: a set of months that includes events within both World Wars, the 9/11 attacks, the outbreak of the Korean War, the Gulf War, and the Cuban Missile Crisis. We then simulated a very simple strategy, going long the S&P 500 Index the month after each such jump and holding for the next five years. The average annualized rise in the market over those stretches was just under 7%. According to data compiled by Professor Robert Shiller at Yale University, that turns out to be meaningfully above the 5.7% annual price return the S&P 500 experienced over the full period, from January 1900 to December 2025. The takeaway? A simple buy-and-hold approach—even amidst big geopolitical risk—can be hard to beat!
Disclosure: This material is for informational purposes only and should not be considered investment advice. An investor should consult with their financial professional before making any investment decisions. The opinions contained herein are subject to change without notice and do not necessarily reflect the opinions of Rayliant Investment Research. Indices cannot be invested in directly and are unmanaged.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.