by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with an analysis of TrumpRx and its potential implications for future government involvement in the economy. We then examine why Cuba is prepared to reopen talks with the United States, how rising tech spending is unsettling investors, and what’s behind Washington’s quiet efforts to ease tensions with North Korea. We round out the piece with a summary of key economic data from the US and global markets.

Fed Intervention: The White House has launched its first official online pharmacy, TrumpRx.gov, in a direct bid to lower prescription drug costs for Americans. The platform allows consumers to purchase medications at discounted rates, marking the administration’s most high-profile effort to tackle healthcare affordability through direct negotiations with pharmaceutical companies. While the initiative represents a tangible win for household budgets, it also highlights the federal government’s expanding influence within private markets and the broader economy.

• The TrumpRx initiative illustrates the effectiveness of governmental pressure in extracting concessions from drug manufacturers. Through the “most favored nation” executive order, the administration pushed companies — including Eli Lilly, Novo Nordisk, and Pfizer — to align US drug prices with the lower rates offered abroad. A central strategy was the threat of imposing tariffs of up to 100% on pharmaceutical imports, which prompted companies to agree to the price discounts.
• Furthermore, TrumpRx challenges pharmacy benefit managers, which often act as costly middlemen by capturing rebates and spreads while passing limited savings to patients. The government’s direct-to-consumer platform provides a transparent alternative, bypassing PBMs and insuring delivery of manufacturer discounts directly to households. This launch is just one day after Congress passed and President Trump signed a bipartisan spending bill with reforms to curb PBM power.
• The TrumpRx launch signals a broader strategy of using tariff threats as high-stakes leverage to restructure key US industries. This carrot-and-stick approach has already compelled automakers like Ford and GM, plus tech giants such as Apple, to accelerate reshoring of manufacturing and supply chains. Now it’s rippling into housing, where major builders are pitching a one-million-unit “Trump Homes” program to secure tariff relief on critical imported materials like lumber and steel.
• The government’s expanding economic footprint presents a dual-edged reality. On one hand, it offers market stability and shields strategically vital sectors, such as pharmaceuticals, semiconductors, and energy, from global volatility. On the other hand, it creates a “compliance-first” environment where industries that do not align with federal mandates face significant punitive measures.
• In the long run, this shift presents a fundamental challenge to the doctrine of shareholder primacy. For decades, corporate strategy prioritized short-term stock valuations above all else. Today, however, survival increasingly depends on national alignment and domestic investment more than on growth potential alone. We maintain a strong view that this new paradigm favors assets like precious metals, which are inherently harder to regulate and control within such a constrained environment.

Cuba’s Breaking Point: The head of the Cuban government has expressed readiness to hold talks with the United States. While making clear that Cuba does not intend to alter its political system, the government is prepared to engage in dialogue to improve bilateral relations. This push for dialogue coincides with an acute energy crisis in Cuba, triggered by a US-led oil embargo following its recent intervention in Venezuela. Talks between the two sides appear to be part of a larger US trend of forcing neighboring countries into its sphere of influence.

US-Russia New START: The United States and Russia are negotiating an agreement to extend the New START nuclear arms control treaty. Although the treaty was set to expire this week, both sides are actively seeking an extension, as neither appears willing to let it lapse. These talks are occurring amidst heightened tensions between Russia and the West over the war in Ukraine, a conflict during which Russia has issued threats of nuclear weapons use. An extension would help reduce the risk of a nuclear exchange between the world’s two largest nuclear powers.

Amazon Sell-off: The world’s largest online retailer saw its shares sell off after announcing a major ramp-up in capital expenditure. On Thursday, the company revealed plans to invest $200 billion in AI, data centers, satellites, and other large-scale projects. The move faced immediate investor pushback, driven by concerns that the massive spending may not translate into future profitability. The sell-off highlights the market’s growing sensitivity toward “build at all costs” models in the tech sector.

Japan Elections: The Asian nation is set to hold snap elections this weekend that will determine whether Prime Minister Sanae Takaichi retains her position and secures a mandate to advance her policy agenda. She remains highly popular, with recent polls indicating her party could capture more than 60% of the vote. A decisive victory could renew downward pressure on the yen as investors grow increasingly concerned about inflationary risks tied to expanding government debt.

Calming North Korea: The US plans to restore humanitarian aid to North Korea, a move intended to de-escalate recent tensions and maintain diplomatic relations. This outreach comes as Pyongyang accelerates its weapons program, which it frames as a deterrent against potential regime change. Washington also aims to prevent North Korea from deepening its strategic reliance on Russia and China. Despite these maneuvers, we assess that North Korea remains an underpriced geopolitical risk in global markets.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our perspective on the recent market unwind and the key factors driving it. We then review Treasury Secretary Scott Bessent’s testimony before Congress and the implications for policy and markets. Next, we discuss Vice President JD Vance’s push to establish a floor on strategic mineral reserves and President Macron’s advocacy for a stronger euro. We round out the piece with a summary of key economic data from the US and global markets.

The Market Unwind: Several asset classes that saw sharp run-ups recently have begun pulling back as investors reassess global risk sentiment. Over the past two weeks, volatility has spiked in precious metals. Silver, which had recently surged past $100 per ounce, has now retreated toward $70. Domestic equities have similarly cooled amid a broad sell-off in major tech names. This shift reflects a “reality check” on AI hype, evolving expectations for central bank policy, and lingering geopolitical tensions.​

The AI Factor This sharp sell-off in tech stocks reflects growing investor “capex fatigue,” with many questioning whether the massive build-out will deliver high-margin returns. On Wednesday, despite Alphabet’s strong Q4 earnings, shares fell after management stated that 2026 capital expenditures will nearly double 2025 levels. The reaction underscores investor impatience for tangible results over further spending.

The Warsh Factor The nomination of Kevin Warsh to take over as Federal Reserve chair has triggered a sharp unwinding of the currency-debasement trade, fueled by renewed confidence in the Fed’s independence. Although President Trump emphasized that he would not have chosen Warsh if rate hikes were on the table, markets have interpreted the pick as a shift toward a more disciplined balance sheet policy. Investors now anticipate a less accommodative Fed under Warsh than previously expected.

Geopolitics Factor The easing of geopolitical tensions abroad has also fueled the retreat from safe-haven assets. US and Chinese leaders spoke ahead of scheduled negotiations on Wednesday, discussing trade and the war in Ukraine, which sparked optimism for constructive talks. Additionally, after recent signs of escalation, the US and Iran appear set to meet on Friday for nuclear discussions.

The recent unwinding of some positions may prove temporary, as we believe key underlying themes such as the expanding influence of AI, sustained central bank purchases of precious metals, and ongoing global fragmentation into regional blocs will remain intact despite recent volatility. Nevertheless, we maintain that the most prudent defense against these shifts is to ensure broad diversification across sectors (reducing overexposure to technology) and geographies, which should contribute to a more resilient and balanced portfolio.

Bessent Testifies: On Thursday, Treasury Secretary Scott Bessent met with lawmakers to discuss the state of the economy and the White House agenda. Over the three hours of testimony, remarks covered the role of the Federal Reserve, the impact of tariffs, US crypto policy, as well as other topics. While the testimony was at times very testy, particularly with Democratic lawmakers, it had no material impact on the markets. That said, his remarks provided key insights into the administration’s economic agenda.

Fed Independence Bessent’s comments suggest that while the White House publicly supports Federal Reserve independence, it may simultaneously seek to rein it in. He specifically targeted the Fed’s credibility, arguing for increased accountability after the central bank allowed inflation to exceed its targets and faced scrutiny over renovation funding. His critique appears to signal a push for greater executive oversight of the central bank.

Tariffs Additionally, Bessent’s testimony signaled that the White House is doubling down on its trade agenda rather than retreating. When challenged on a 2024 note where he previously characterized tariffs as inflationary, he pivoted, citing a San Francisco Federal Reserve study that suggests tariffs do not drive broad-based inflation. By reframing tariffs as a tool for economic resilience, his comments suggest the administration remains open to further trade duties if it deems it necessary.

Cryptocurrency Lastly, Bessent suggested that the administration may not prioritize the protection of crypto investors. When asked if he would intervene to support bitcoin, he clarified that the Treasury would not influence markets to artificially boost prices, noting that it lacks the authority to use public funds for such a bailout. These comments likely reflect the administration’s narrow focus on stablecoins — a preference largely driven by their utility in absorbing short-duration government debt.

Based on the Treasury secretary’s comments, it appears that the White House intends to remain actively engaged in managing the economy. This is likely to include using targeted trade restrictions to support reshoring, keeping the Federal Reserve operating within defined limits, and narrowing the administration’s crypto agenda toward stablecoins rather than the broader digital asset class. As a result, we continue to believe that firms broadly aligned with the White House’s policy priorities could perform well in this environment.

Vance Price Floor: At a ministerial meeting on critical minerals, the vice president endorsed the creation of a preferential trade zone. This proposal includes a price floor designed to insulate domestic markets from predatory practices, specifically “dumping” by nations like China, which often price out local competitors. This initiative underscores a growing global trend toward economic blocs as a primary defense against foreign industrial competition.

Strong Euro Policy: French President Emmanuel Macron is expected to advocate for euro appreciation against the dollar at next week’s EU summit, arguing it would enhance economic resilience and the currency’s global standing. While his specific policy proposals remain unclear, his position echoes the White House’s long-held view that the euro is undervalued, potentially opening the door to coordinated efforts to bolster it. If Macron secures support for this initiative, it should prove favorable for European equities.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our perspective on the recent sell-off in tech stocks. We then examine rising tensions between the US and Iran. Next, we address the proposed solutions by homebuilders to improve housing affordability, Texas’s renewed scrutiny of data center projects, and reports of Russian efforts to intercept allied satellites. We round out the report with a summary of key economic data from the US and global markets.

AI Disruption: On Tuesday, tech stocks sold off following the release of new AI software that could threaten the core businesses of several major firms. Anthropic, the creator of the Claude chatbot, unveiled an AI-powered automation tool capable of handling routine legal tasks such as contract reviews, NDA triage, compliance workflows, legal briefings, and template responses. The company also introduced a similar tool for customer service and sales. The announcement has intensified concerns that traditional business models may soon be disrupted by AI.

• The sell-off in tech shares reflects growing concerns that recent AI breakthroughs could eventually impact the hyperscalers. Companies like Microsoft, Amazon, and Alphabet provide the computing infrastructure that is powering many of the firms now at risk. Investors worry that if these clients become obsolete, their demand for cloud computing could decline, ultimately hurting the hyperscalers themselves.
• While the risk to hyperscalers may not pose an immediate threat, it could deepen valuation concerns among investors. In recent quarters, these companies have significantly increased spending on data center expansion, with some even taking on debt to meet anticipated future demand. If their client base begins to shrink due to AI-driven disruption, it could further fuel worries about a potential AI bubble.
• Heightened concerns over potential disruptions are narrowing investor focus toward immediate bottom-line earnings. This represents a stark pivot from last year’s tolerance for aggressive expansion and infrastructure scaling. As the market’s patience for “growth-at-any-cost” wears thin, we anticipate significant volatility if industry leaders fail to deliver on these sharpened expectations.
• At this time, we believe the AI rally still has momentum, though some signs of fatigue have begun to emerge. We continue to recommend diversification as the best course of action to hedge against concentrated exposure to the tech sector. In our view, expanding investments across other industries as well as countries can provide valuable protection during periods of market volatility, particularly if AI-related expectations are eventually revised lower.

Iran Escalation: Tensions between the United States and Iran have intensified ahead of upcoming nuclear talks. On Tuesday, a US Navy ship reportedly shot down an Iranian drone that approached the USS Abraham Lincoln in the Arabian Sea. The incident coincided with another confrontation in which Islamic Revolutionary Guard Corps vessels allegedly harassed US-flagged ships in the Strait of Hormuz. Together, these events underscore the escalating hostilities between the two nations as they prepare for high-stakes negotiations.

• As nuclear talks approach, the White House appears intent on pressing Iran to accept a set of reported concessions aimed at preventing further escalation. Washington’s three principal demands are: a permanent end to uranium enrichment on Iranian soil and the disposal or removal of existing enriched uranium stockpiles, strict limits on the range and number of Iran’s ballistic missiles, and a halt to Tehran’s support for regional proxy groups such as the Houthis, Hezbollah, and Hamas.
• While Iran has stated that it does not seek a conflict with the US, it has already signaled a willingness to push back in the negotiations. In the run-up to the talks, Tehran has reportedly demanded changes to both the venue and the format, pressing for the meetings to be moved from Istanbul to Oman and for direct, bilateral discussions with the United States focused on nuclear issues rather than a broader, regionally framed dialogue involving other Middle Eastern states.
• As of now, tensions may be starting to ease. Iran’s demands do not appear to have met significant resistance from the White House, which has agreed to move the venue to Oman and is still determining whether other Middle Eastern leaders will participate in the talks. However, it is still unclear what concessions Tehran is willing to make in order satisfy the US wishes to end Iran’s nuclear program.
• Rising tensions between Iran and the United States reflect the broader geopolitical risks that continue to affect financial markets. We believe the most effective protection against these rising risks is to invest in precious metals, which have historically served as safe-haven assets. That said, we remain cautiously optimistic that the two countries will ultimately reach an agreement that prevents further military escalation.

Trump Homes: Several national homebuilders are reportedly in early-stage discussions on a potentially significant “Trump Homes” initiative. The proposal aims to develop up to one million entry-level homes via a rent-to-own model. While the White House has not formally endorsed the plan, it signals a broader, active dialogue between the administration and industry on innovative ownership pathways. We believe firms that pivot toward these national objectives will likely secure a competitive advantage through increased federal support.

Data Center Resistance: Growing concerns over grid reliability have prompted Texas regulators to scrutinize the rapid expansion of data centers. The Electric Reliability Council of Texas (ERCOT) plans to revisit 8.2 gigawatts’ worth of approved projects to verify that they won’t jeopardize the state’s power supply. This move is designed to ensure that these high-capacity sites can operate without threatening the stability of the grid or being forced offline during energy spikes.

Russian Spies: European security officials have accused Moscow of intercepting at least a dozen Western satellites using its own space-based assets. The interceptions are seen as a serious national security risk, raising concerns that hostile actors could not only access sensitive communications but also disrupt satellite operations, potentially altering trajectories or causing crashes. The incident is widely viewed as an example of hybrid warfare extending into space, and it is likely to reinforce expectations of higher defense spending by governments.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with the surprise announcement of a new US-India trade deal, which has given a big boost to Indian stocks and the rupee today. We next review several other international and US developments with the potential to affect the financial markets today, including polls showing that Japan’s ruling party could win next week’s parliamentary elections in a landslide, providing welcome political stability, and a new European Union probe into illegal Chinese trade practices, which will likely worsen EU-China relations.

United States-India: President Trump and Prime Minister Modi yesterday said they have struck a new trade deal under which the US will cut its tariff on Indian imports to just 18% from a total of 50% previously, while India pledges to end all imports and trade barriers against US imports, stops buying Russian oil, and commits to purchasing $500 billion of US goods.

• As with other administration trade deals, few details have been released, and it isn’t clear how enforceable the deal is.
• All the same, the deal will likely stabilize US-India relations and probably allow trade flows to rebound in the near term. Coupled with last week’s US-European Union trade deal, that could further boost the Indian economy and stock market.
• Indeed, Indian stock prices are up about 2.5% so far today. The rupee today has jumped about 1.4% against the dollar, marking its strongest daily appreciation in seven years.

Japan: New opinion polls suggest the ruling Liberal Democratic Party and its coalition partner, the Japan Innovation Party, are set to win the February 8 parliamentary elections in a landslide. Not only are the parties expected to win a comfortable majority in the lower house, but they could win a two-thirds supermajority that would allow them to push through legislation even if the opposition-controlled upper house rejected it. The promise of a strong, stable government under Prime Minister Takaichi should be positive for Japanese stocks going forward.

European Union-China: The European Union today said it is probing whether China provided unfair subsidies to Goldwind, the world’s largest turbine manufacturer, for its activities in the production and sale of wind turbines in the EU. The probe is only the latest EU investigation into unfair trade practices by Beijing and will likely boost EU-China trade tensions even as some other countries try to improve ties with China to hedge their bets against changing US policies.

China: Several major Chinese electric-vehicle makers saw their share prices plummet yesterday after releasing weak January sales figures. The group, including BYD, Xpeng, and Nio, all reported domestic sales declines after the government ended a popular sales tax exemption and other subsidies for EVs. The results suggest the Chinese EV industry could face a difficult year at home and have even more incentive to push foreign sales of its products, threatening auto manufacturers around the world.

Australia: The Reserve Bank of Australia has hiked its benchmark short-term interest rate by 25 basis points to 3.85%, marking its first rate hike since 2023. According to RBA Governor Michele Bullock, the rate hike was aimed at addressing excessively high consumer price inflation and may be followed by further hikes. In response, the Australian dollar has appreciated about 0.8% today to $0.7007. Australian stocks are up approximately 0.9% so far today.

France-United States: In a major escalation, cybercrime prosecutors today raided the Paris office of X and summoned Elon Musk for a “voluntary interview” regarding the firm’s operations. The ongoing probe has recently focused on X’s Grok chatbot and its role in generating sexualized deepfake images. The probe is also looking into charges of political interference and other violations of French and European media law. The new raid is sure to worsen US-French political tensions again and could invite new tariff threats from the US.

France: The center-right government of Prime Minister Lecornu survived a no-confidence vote in the National Assembly yesterday, allowing Lecornu to push through a deficit-cutting budget for 2026. The budget, which includes extending special tax hikes, is expected to cut the government’s deficit to about 5.0% of gross domestic product, versus an estimated 5.4% of GDP in 2025. Just as important, passage of the budget should ease domestic political tensions until campaigning starts for the presidential election in 2027.

Global Artificial Intelligence Investment: German industrial equipment giant Siemens today said it will invest $1 billion in new US manufacturing facilities to boost its output of the power-generation equipment needed to handle surging US electricity demand associated with the boom in AI investment. The investment will include steps to re-start the production of gas turbines, which are in very short supply. The news illustrates how the boom in AI investment is giving a boost to related industries, which is one reason we are currently positive on industrial stocks.

Bolivia: In an interview with the Financial Times, newly installed President Rodrigo Paz said his team is developing a package of laws to boost foreign investment in natural resources. The new laws would include a standard 50/50 risk sharing deal for developing the country’s natural resources. The business-friendly reforms may help unlock Bolivia’s large reserves of critical minerals, such as lithium, which are essential to many new electronic industries.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with an update on today’s markets where some asset values are rebounding from their sell-offs late last week, while others have remained weak. We next review several other international and US developments with the potential to affect the financial markets, including a positive statement about Iran from President Trump, which has weighed on global oil prices so far today, and the latest on what is likely to be a very short federal government shutdown over continued budget squabbles.

Global Financial Markets: So far this morning, prices for precious metals and other safe haven assets appear to be stabilizing or even rebounding from their sharp declines late last week, even as prices for risk assets including equities and industrial metals continue to weaken. As of this writing, prices for gold, silver, platinum, and palladium are all at least 0.7% higher, while bitcoin prices are up 1.2%. However, major US stock indexes are down as much as 1.5%.

• We see two main catalysts for last week’s sell-offs: President Trump’s appointment of Kevin Warsh, who has a hawkish reputation, to be the new head of the Federal Reserve, and concerning data in the latest earnings reports of two key technology companies.
• The differentiated market action today suggests that investors remain concerned about volatility and economic challenges if US monetary policy ends up being less dovish than previously expected and if companies misallocate capital amid the boom in artificial intelligence. The rebound suggests they may now be regaining their interest in traditional safe-haven assets despite the risk of relatively high interest rates going forward.

United States-Iran: In an interview Saturday night, President Trump said he thinks the Iranian government is negotiating “seriously” about its nuclear program as the US continues to build up its military assets in the Middle East for a potential strike against Tehran. The president’s statement has raised hopes that a strike won’t be carried out and that US sanctions against Iran’s oil could eventually be lifted. That prospect has pushed global oil prices down some 4.8% so far this morning, with Brent currently trading at about $66.08 per barrel.

• Separately, the Financial Times today carries a story saying that several major European oil companies — including Shell, BP, TotalEnergies, Eni, and Equinor — are expected to slow their stock buybacks by 10% to 25% when they release their 2025 earnings reports later this month.
• The expected action reportedly reflects the firms’ continued struggle to deal with excess oil supplies and low oil prices. Naturally, reduced stock buybacks will likely be a headwind for the companies’ stock values going forward.

US Fiscal Policy: Senators on Friday passed a deal stripping the funds for the Department of Homeland Security from a broader bill financing the rest of the federal government through the end of the fiscal year on September 30. Under the deal, DHS will be funded at last year’s level for two weeks to allow more negotiations for its budget. The bill still needs to be passed by the House early this week, so technically, we’re in a partial government shutdown. However, it is likely to be resolved soon, with little if any impact on the economy or financial markets.

China: The official purchasing managers’ index for manufacturing fell to 49.3 in January, short of expectations and down from 50.1 in December. The non-manufacturing PMI fell to 49.4 from 50.2. Like most major PMIs, China’s is designed so that readings over 50.0 point to expanding activity. The data therefore suggests the Chinese economy is contracting again, largely due to weak demand among domestic consumers and businesses.

• Weak domestic demand will likely give firms even more incentive to boost exports, potentially creating new trade frictions with the US and European countries.
• In any case, China’s weak domestic demand is probably weighing on current economic activity in many countries and could become more of a headwind for Chinese stocks.

India: Announcing the government’s proposed budget for the 2026-2027 fiscal year at the weekend, Finance Minister Nirmala Sitharaman said India will boost its capital investment in cutting-edge manufacturing by 9% to shield the country from increased protectionism in global trade flows. The proposal illustrates how the US’s new, protectionist trade policies and changed approach to foreign affairs have prompted many countries to adopt more stimulative economic policies — policies that could further boost the prospects for foreign stocks going forward.

Japan: According to new data from the Health Ministry, there were 2.57 million foreigners working in Japan at the end of October, up 11.7% from the previous year and enough to mark the 13^th straight record high. While the surge in foreign workers has helped firms deal with Japan’s shrinking domestic workforce, it also helps explain the electoral success of conservative, anti-immigrant politicians and growing demands for new restrictions.

South Korea: In an initial estimate, January exports totaled $65.85 billion, up 34% from the same month one year earlier. That marks a significant acceleration from the annual growth of just 13% in the year to December. The strong increase in January represented both a higher number of working days and surging semiconductors exports. South Korean exports are seen as a bellwether for global and US economic activity. The data therefore suggests the economy has entered 2026 with plenty of momentum, which probably bodes well for global stock markets.

European Union: In a speech today, former European Central Bank President Mario Draghi again urged EU countries to form a federation with deeper integration in areas such as defense, industrial policy, and foreign relations. According to Draghi, such a federation may be needed to keep the EU from disintegrating under pressure from the US and China.

• While there is little prospect of such a major change in the near term, we think Draghi’s statement does reflect the Europeans’ growing realization that they need to make major economic and political changes to regain competitiveness and influence.
• To the extent that those changes are implemented, they could prompt better economic growth or otherwise be positive for investors.

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