by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with an analysis of conflicting economic data before examining the president’s shift toward populist objectives. We also assess the stabilizing diplomatic relations between the US and Latin America, rising momentum for the extension of ACA subsidies, and new restrictions on Chinese imports of Nvidia chips. Lastly, the report includes a roundup of key domestic and international data releases for the coming period.

Mixed Signals: Economic uncertainty remains high as recent data releases provide contradictory signals. The December ISM Services PMI showed the sector expanded more than expected, reaching a 2025 high of 54.4%. Conversely, the JOLTS report revealed that job openings fell to 7.1 million in November — the lowest level in over a year. This divergence complicates the economic outlook, particularly as investors try to gauge what its overall direction will be over the next few months.

• The latest ISM Services PMI offered significant reassurance, showing a robust increase in sector activity to finish 2025. The report highlighted a sharp pickup in both new orders (57.9%) and business activity (56.0%), alongside a welcomed easing of price pressures. This data suggests that the policy uncertainty that weighed on non-tech investment spending throughout 2025 may finally be dissipating as we enter the new year.
• The decline in job openings presents a starkly different narrative. Although the data reflects labor conditions from November, it confirms that labor demand remains subdued. Not only did job openings retreat during the month, but there was also a notable slowdown in US hiring. This suggests that while business optimism may be rising, firms remain cautious about the future and are hesitant to expand their headcounts.
• Over the past year, a noticeable divergence has emerged between resilient economic activity and a softening labor market. This decoupling likely reflects an economy still adjusting to the rapid implementation of trade tariffs and the escalating integration of generative AI. Consequently, we are entering a period that reaffirms the “two-speed” market narrative, where the record-breaking performance of Wall Street stands in sharp contrast to the cooling conditions on Main Street.
• Over the coming months, a convergence in data will likely settle the debate between economic optimists and skeptics. That said, subdued layoff activity bodes well for the bullish outlook, suggesting the economy can withstand current pressures. With market valuations stretched to historic levels, a “risk-off” approach is prudent. We recommend a tactical shift toward higher-quality, less volatile assets.

Populist Pivot: As the country approaches the midterms, President Trump has begun pushing less market-friendly initiatives to placate his populist base. On Wednesday, he announced plans to prevent institutional investors from purchasing single-family homes and signaled a push for defense firms to suspend dividends and stock buybacks. These moves likely serve as the first signs of a rebranding effort as the president seeks to energize his supporters ahead of the upcoming elections.

• These actions have caught the market largely off guard. Although the president (famed for the “put” that bears his name) has a reputation for driving equities higher, his recent maneuvers suggest a pivot toward corporate accountability. This shift indicates a willingness to curb specific business practices and prioritize national objectives over investor returns.
• Advocates for affordable housing have spent years pushing for a ban on corporate home buying, a movement sparked by the fallout of the Great Financial Crisis. Following the 2008 collapse, institutional investors moved in to purchase distressed homes in massive quantities. A 2024 GAO study highlights the scale of this shift. Before 2010, no investor held a portfolio exceeding 1,000 single-family homes. Since 2015, that figure has exploded, particularly in the Sun Belt states as shown in the figure below.

• Furthermore, the president’s push to curb dividends and stock buybacks among defense contractors comes as he proposes a record $1.5 trillion in military spending. These restrictions appear designed to prevent market speculators from profiting from increased government outlays. This is a move that directly addresses a long-standing populist critique regarding corporate war profiteering.
• While there are compelling reasons for optimism in the equity markets — driven largely by expectations of continued monetary and fiscal stimulus — we have observed a notable underpricing of political risk ahead of the 2026 midterm elections. Consequently, we recommend that investors prioritize diversification into value-oriented sectors. This rotation serves as a strategic hedge against a potential shift in market sentiment, especially as both domestic and foreign policy agendas evolve rapidly.

Colombian Crisis Avoided? Tensions between Washington and Bogotá are cooling after a constructive call between the two leaders. Just days ago, markets were rattled by threats of military action against Colombia; however, President Trump’s new conciliatory tone and invitation for a White House meeting have provided much-needed relief. This diplomatic pivot is a tailwind for both US and Latin American equities, as it reduces the immediate risk of geopolitical conflict.

ACA Extension: The House is moving toward a vote to reinstate ACA tax credits for the next three years. Despite a partisan deadlock over abortion funding, nine Republicans voted with Democrats on Wednesday to advance the legislation. The White House has taken an active role in negotiations, with the president pressuring his party to compromise on Hyde Amendment protections to avoid further political fallout from rising healthcare premiums ahead of the midterms.

No Climate Agreement: The White House announced its intention to withdraw from the UN global climate agreement and to reduce funding for climate research agencies. The president justified the decision by stating the agreement no longer served US interests. This move marks a significant shift toward unilateralism, prioritizing national interests over international alliances. Consequently, progress in clean energy research and development is likely to be adversely affected.

China Limits Nvidia Chips: China’s access to advanced semiconductors is becoming increasingly constrained by both its own government and foreign suppliers. In a limited concession, Beijing has authorized the commercial import of certain Nvidia H200 chips, prohibiting their use in state or military applications. However, Nvidia has stipulated that Chinese buyers must pay upfront without the possibility of refunds. This dynamic reinforces a critical trend: Chinese companies are being pushed toward greater technological self-reliance.

View PDF

by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with an analysis of the evolving US policy toward Venezuela, following its recent action against the Maduro government. We then examine the growing US strategic interest in Greenland, assess signs of shifting housing affordability, and analyze rising tensions between Japan and China. The report also includes a roundup of key domestic and international data releases for the coming period.

 The Transition: The White House has announced its latest measures to exert influence over the situation in Venezuela. On social media, President Trump stated that the country would export up to 50 million barrels of sanctioned oil to the US, a move that could generate approximately $2.8 billion at current market prices. Meanwhile, administration officials have sought to downplay the possibility of military boots on the ground in the region. These actions provide a clear template for how the White House intends to project influence and manage regime transitions abroad.

• The decision to facilitate these oil sales comes as Washington seeks to decouple Venezuela from the US’s traditional rivals, specifically China, Iran, Cuba, and Russia. President Trump has urged the interim government to not only sever economic ties and expel suspected foreign intelligence agents but also to align closely with US energy interests.
• While there has been extensive discussion regarding the structure of the next administration, there appears to be no appetite for a military occupation due to the high political risks involved. Instead, the focus has shifted to internal leadership, where significant friction remains. The White House currently favors acting President Delcy Rodríguez as a stabilizing figure, though a vocal contingent of policymakers continues to advocate for opposition leader María Corina Machado.
• Managing the political transition in Venezuela represents a critical test of the White House’s capacity to navigate complex foreign regime changes. The outcome will establish a significant precedent, as the administration increasingly frames foreign policy through a lens of national security ahead of the 2026 agenda. Success or failure here will directly inform potential strategies for other adversarial or unstable governments, such as Cuba, and ultimately, a post-war Ukraine.
• The administration’s expansive foreign policy may be strategically aimed at consolidating access to global mineral resources. While its approach will likely differ from the more confrontational posture adopted toward Venezuela, the underlying objective appears to be reshaping the international order to secure cheaper and more reliable resource supply chains. This, in turn, directly supports the overarching ambition of expanding domestic manufacturing capacity and securing economic sovereignty.

 Greenland, Next? Following the recent military capture of Nicolás Maduro in Venezuela, international attention has shifted to the White House’s renewed interest in Greenland. (For a deeper dive into why the US is so interested in Greenland, see our previous Bi-Weekly Geopolitical Report on the topic) On Tuesday, US Press Secretary Karoline Leavitt confirmed that the president is exploring ways to acquire the territory, explicitly stating that military options remain available. While it is debated whether this is simply high-stakes bravado, the rhetoric signals a clear shift from a soft, diplomatic approach to foreign policy to a harder, more assertive approach.

• The controversy intensified as Secretary of State Marco Rubio and Senior Aide Stephen Miller confirmed the White House’s sights are set on Greenland. Rubio maintained the administration’s interest in a formal purchase, but Miller went further, questioning the legitimacy of Danish claims to the territory by calling it a colony and suggesting that Europe lacks the resolve to fight for the island.
• By threatening a sovereign ally like Denmark, the White House is signaling a break from the transatlantic relationship. This shift follows a pattern of 2025 policies where the US excluded European leaders from Ukraine peace talks and moved to dismantle EU-led digital and trade frameworks. The push for Greenland is the latest evidence that the US now prioritizes its own strategic interests over long-standing diplomatic ties with the EU.
• The administration’s recent maneuvers suggest that the EU must accelerate its path toward strategic autonomy to reduce its security dependence on the United States. This pivot will likely manifest in significantly increased defense spending and could eventually force a European-led restructuring of NATO — or even a total US exit from the alliance.
• Regarding the Western Hemisphere, the aggressive push to exert control over sovereign territories suggests that the “Modern Monroe Doctrine” we previously identified in our geopolitical outlook may be far more expansive than we initially predicted. That said, our conclusion remains the same: Those who fall within the US sphere of influence will likely receive preferential economic treatment in exchange for cooperation.
• The administration’s recent moves indicate that the 2025 surge in international equities has room to run in 2026. Specifically, we see significant upside for the European defense sector as military budgets expand in response to US unilateralism. Additionally, this modern Monroe Doctrine creates a clear path for countries within the Western Hemisphere to receive preferential trade and investment treatment — provided they align with US interests.

 Home Affordability: US mortgage rates have retreated to their lowest levels since September 2024, signaling a meaningful easing of borrowing costs. This decline coincides with a sustained slowdown in home price appreciation, which has recently fallen below the rate of inflation for the first time since 2023. These improved conditions are expected to bolster the economy as households leverage lower rates to refinance existing debt and consolidate high-interest obligations.

Samsung Price Hikes: Surging demand for AI is beginning to drive up costs across multiple sectors. On Tuesday, Samsung reported that intense competition for chip procurement has increased production costs for its latest Galaxy smartphones, a trend now extending to televisions and home appliances. This escalation serves as a prime example of how the AI boom is creating spillover effects and is increasingly acting as a catalyst for goods-related inflation.

Iran Protests: The Iranian president has instructed security forces to avoid targeting peaceful protesters as the government moves to prevent further civil unrest. This directive follows nationwide demonstrations sparked by a sharp devaluation of the country’s currency, which has deepened public distrust. Now in their second week, the protests have resulted in at least 36 deaths. The US is monitoring the situation closely as it considers its policy response and the possibility of intervention.

Japan and China Ties: Tokyo is weighing a response to Beijing’s recent ban on dual-use exports and potential curbs on rare earth elements. Japan’s strongest countermove lies in its near-monopoly on high-end photoresists and chip-packaging materials, where it controls 90% of the global market. However, it may be reluctant to use it due to its export dependence on China. The dispute highlights the deepening security ties between the US and Japan at a time when analysts are increasingly wary of a potential conflict over Taiwan in the coming years.

View PDF

by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with several additional observations on the US seizure of Venezuelan President Maduro, with a focus on potential next steps. We next review several other international and US developments that could affect the financial markets today, including the announcement of a more powerful artificial intelligence chip from semiconductor giant Nvidia and a modified international tax treaty that should help shield US multinationals from big tax hikes.

United States-Venezuela: The Wall Street Journal yesterday issued a report showing the Central Intelligence Agency’s role in the US seizure of President Maduro was even wider than previously known. Early reports said the CIA’s clandestine service inserted agents into Venezuela last August to secretly keep track of Maduro, while also cultivating a source within Maduro’s inner circle. According to the new WSJ report, the CIA’s analysis directorate was also instrumental in recommending that Vice President Delcy Rodriguez be left in charge after Maduro’s seizure.

• The CIA’s pivotal role in the Venezuelan action suggests it is already well on its way toward rebuilding its traditional clandestine skillset and analytical prowess, stepping back from the military-operational focus it took on during the War on Terror. That suggests the CIA is well positioned to be a key instrument of US power as the country moves back toward shadowy, rough-and-tumble, “hard power” foreign relations.
• In fact, it would not be a surprise if the Agency already has similar teams in places such as Bogota, Managua, Mexico City, and Havana.

United States-Mexico-Venezuela: It would be no surprise if the US now tries to force the remaining Venezuelan government to stop providing low-cost oil to Cuba, with the aim of destabilizing its Communist government and forcing regime change there. However, new data from Kpler shows that Mexico became Cuba’s top oil supplier in 2025, representing 44% of its total imports, while Venezuela only provided about 34%. That implies that any US effort to change the government in Havana will require putting economic or other pressure on Mexico.

• Because of Mexico’s sizable stock market, many US investors have exposure to it and have already had to deal with major trade-policy changes and US tariff hikes over the last year. If the US now imposes economic or financial pressure on Mexico to end its oil exports to Cuba, investors might have to deal with a new round of uncertainty.
• Nevertheless, we think that Washington’s new focus on dominating Latin America and bringing its economic policies more in line with the US could ultimately be good for many stocks in the region. In the interim, however, the shift in US policy could spark additional volatility in Latin American equities.

Venezuela: Within Venezuela itself, reports today say the remaining Chavista government has launched a crackdown to stifle any social support for Maduro’s seizure. The government declared a state of emergency yesterday, and the reports today say armed Chavista paramilitaries known as colectivos are patrolling the streets of Caracas. Several journalists have already been arrested. The crackdown could prevent social unrest and maintain order, but it could also help solidify the continued rule of the Chavistas and make them more resistant to US demands.

China-Japan: Beijing today issued a global ban on companies providing goods with both civilian and military uses to the Japanese armed forces. According to the announcement, the ban applies to any company anywhere in the world, raising the stakes for any firm that sells to both the Japanese military and has operations in China. The move marks the latest Chinese retaliation for Prime Minister Takaichi’s statement late last year that a Chinese blockade of Taiwan would require Japan to intervene militarily.

US Semiconductor Industry: Semiconductor giant Nvidia yesterday unveiled its newest chips for artificial intelligence, known as Vera Rubin, months earlier than expected. According to CEO Jensen Huang, the earlier-than-expected release was necessary because of the hugely complex computing required by AI and the immense demand for advanced processors to train and operate AI models. If investors take the news to mean that Nvidia remains well positioned to keep growing as the AI market evolves, it could lead to further gains in Nvidia’s stock price.

US Energy Industry: In an interview yesterday, President Trump suggested he might have the federal government subsidize US oil companies that help rebuild Venezuela’s energy infrastructure. Recent studies show that rebuilding the country’s energy facilities and boosting their capacity again could take up to $90 billion over the next six or seven years. The hint at possible subsidies is a further illustration of how the new US administration is increasingly comfortable with greater government involvement to steer economic activity.

US Industrial Metals Market: US copper prices closed at a new record high yesterday, with contracts for January delivery closing at $5.9245 per pound. They have jumped another 1.1% so far today to $6.0400 per pound. After rising 41% last year, US copper prices have now added another 6.3% so far in 2026. The rise in price largely reflects expectations of limited supply growth while demand surges due to electrification and AI — factors which help explain why copper miners currently make up a large portion of our Global Hard Assets portfolio.

Global Corporate Taxation: The Organization for Economic Cooperation and Development’s 2021 deal on minimum corporate taxes was amended yesterday to give special exemptions to US companies. The deal agreed by 145 countries still sets the minimum corporate income tax rate at 15% to avoid a “race to the bottom,” but there will now be safe harbors for multinationals whose parent company is located in a jurisdiction judged to meet “minimum taxation requirements.” The deal also includes new simplification measures, further cutting the costs for US firms.

View PDF

by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with some observations on the US seizure of Venezuelan President Maduro on Saturday. We next review several other international and US developments with the potential to affect the financial markets today, including the latest sign that economic decoupling between the US and China continues and indications that China’s aggressive effort to build up its inventories of critical minerals is having a negative impact on Europe’s economy.

United States-Venezuela: By now, the US’s early-Saturday capture of Venezuelan President Maduro has been heavily reported, so we won’t go into a detailed discussion of it. Rather, we will make a few observations about the geopolitical implications for investors going forward. Our bottom line is that the actual implications for Venezuela and its enormous oil reserves remain in question at this moment. What is clear is that the US administration has provided a very direct signal as to how it intends to approach foreign policy going forward.

• Despite President Trump’s assertion that the US would “run” Venezuela until a transition of power could be implemented, Secretary of State Rubio has sketched out a relationship that is more like a US guardianship, in which the US would oversee and exert pressure on the Venezuelan government to transition toward democracy and capitalism. The extent of US involvement in the Venezuelan government is a key question going forward.
• Just as important, the fact that China, Russia, and other adversary countries could only offer rhetorical support to Maduro will likely undermine their geopolitical power. China has recently been able to flex its geopolitical muscles based on its control of key mineral and technological supplies — and may do so again here to retaliate — but the US operation against Venezuela has underscored how China still can’t project military power to force the US to back down in Latin America.
• In any case, the US action underscores the administration’s focus on dominating the Western Hemisphere, as it laid out in its National Security Strategy in December. Officials have presented several different justifications for the action in Venezuela, from fighting drug trafficking and terrorism to re-establishing democracy and punishing Maduro for nationalizing US energy assets. That’s consistent with the National Security Strategy’s focus on economic relations, which we’ll delve more into in future reports.
• Beyond seizing Maduro and subjecting him to the US justice system, the action is a signal to other left-wing governments in Latin America, especially Bogota, Managua, and Havana. The implication for Cuba is especially stark. If the US now forces Venezuela to restrict its energy exports to Cuba, its regime would become increasingly fragile, and that could set up a similar operation against Cuba. If you’ve been wanting to visit Havana, it would be no surprise if you could do so visa-free a year from now.
• The move against Venezuela also signals that the US will be prepared to pressure other Latin American countries to align their economic policies with those of the US. In the near term, that could force deregulation and other improved policies on governments in the region, potentially providing a boost to Latin American stock markets.
• In terms of market reactions, global oil prices as of this writing are down less than 1%, consistent with an expectation for an eventual rise in Venezuelan oil production and exports, but no appreciable change in the near term. On the other hand, major US energy stocks are surging, probably reflecting optimism about compensation for Venezuela’s past nationalization of their assets and future work rebuilding the country’s oil infrastructure.

United States-China: President Trump on Friday signed an executive order forcing HieFo Corp., a Delaware-registered firm, to divest its holdings of US semiconductor assets, on the basis that HieFo’s ownership by a Chinese citizen could endanger US national security. The move shows that US-China decoupling in terms of capital flows and foreign ownership remains in place, presenting risks for investors.

China-European Union: A top official with Novelis, the EU’s top aluminum recycler, has warned that China is aggressively buying up scrap aluminum from the EU’s recycling system and using it as a low-cost input for aluminum products that it then sends back to the EU. Now that the EU has essentially lost its primary aluminum production, the official warns that the Chinese action could also destroy the bloc’s scrap production industry.

• The situation illustrates how the EU is increasingly concerned about the risks from China’s aggressive economic policies.
• More broadly, a range of recent reports has shown that China is rapidly building up its reserves of critical minerals and industrial inputs, from oil to copper. Today’s report suggests it may also be bulking up its inventories of aluminum. Some observers speculate that the inventory buildup aims to set the stage for a potential war over Taiwan.
• Broader still, such commodity hoarding is what we have long expected as the US steps back from its traditional role as the global hegemon and the world fractures into relatively separate geopolitical and economic blocs or spheres of influence. That should buoy the prices of hoarded commodities and is a key reason why Confluence launched its Global Hard Assets portfolio many years ago.

United Kingdom-European Union: UK Prime Minister Starmer yesterday declared that it is in his country’s national interest to align more closely with the EU, although he stopped short of calling for a reversal of Brexit or rejoining the EU’s common market. Starmer’s statement comes as he struggles to re-invigorate British economic growth and bring down elevated consumer prices. Lacking progress on those efforts, his ruling Labour Party continues to bleed public support.

Germany: The share price of banking giant Deutsche Bank today rose above the firm’s book value for the first time since 2008, marking not only the slow improvement in Europe’s banking environment since the Great Financial Crisis but also the institution’s long struggle to put its legal and operational struggles behind it.

France: The Financial Times today carries an article discussing how French business leaders have now become much more comfortable meeting with politicians from the resurgent far-right National Rally party. Such meetings were once considered taboo, but now that the Rally looks like it could take the presidency in the 2027 elections, business leaders want to influence it. While far-right parties often support populist economic policies, the Rally’s engagement with business could potentially lead to further deregulation if it does take power.

Russia-Baltics: Officials from countries around the Baltic Sea have reported damage to undersea communications cables six times in the last six days, prompting fears that Russia has launched a new campaign of sabotage against the North Atlantic Treaty Organization. Such cable sabotage had stopped for most of the last year since NATO launched its “Baltic Sentry” program of enhanced naval patrols.

• If they really are attributed to Russia, the new attacks could reflect Kremlin efforts to scuttle the US-backed effort to reach a peace deal in Ukraine.
• In any case, the incidents serve as a reminder that pressure from Russia and the continuing Russia-Ukraine war are still important risks to the global investment environment.

View PDF

by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Note to readers: the Daily Comment will go on hiatus after today and will return on January 5, 2026. From all of us at Confluence Investment Management, we hope you enjoy your holiday and have a Happy New Year!

Our Comment today opens with an important summary of the US’s new foreign policy delivered late Friday by Secretary of State Rubio. We next review several other international and US developments that could affect the financial markets today, including signs that the US is ratcheting up its military pressure on Venezuela and a hawkish statement from Cleveland FRB President Hammack, who will be a voting member of the Federal Reserve’s policymaking committee in 2026.

US Foreign Policy: Secretary of State Rubio on Friday provided a detailed briefing on the administration’s foreign policy, confirming several dramatic changes that we think will have big implications for investors. Rubio’s review fleshed out many ideas in the White House’s recent National Security Strategy, which will be the focus of our first Bi-Weekly Geopolitical Report after the New Year.

• Among Rubio’s most important messages was a call for the US to de-escalate tensions with China in favor of “mature” management of the bilateral relationship. According to Rubio, “China is going to be, is, and it will continue to be a rich and powerful country and a factor in geopolitics. Our job is to find opportunities to work together with the Chinese Communist Party and the Chinese government.” Rubio instead stressed threats from Latin America and the US’s dependency on foreign supply chains.
• Rubio had been a leading China hawk before joining the administration, so his statement confirms that the tough-on-China segment of President Trump’s political coalition has now been sidelined.
• Over time, that could create political risk for the White House. As we’ve shown in many reports, the Chinese Communist Party’s political and strategic interests will likely spur it to keep building its overall power — economic, technological, diplomatic, and military, including the massive buildup of its arsenal of nuclear missiles aimed at the US. Strategic logic suggests China’s interests will expand globally, forcing it to work to undermine the US. If China someday is seen to dominate the US, voters in the US could be angered.
• On the other hand, a US decision to pursue détente with China would probably be bullish for US and Chinese stocks. After all, such a decision to tamp down tensions would remove a lot of bilateral geopolitical risks. However, if US foreign policy continues to retrench into a focus on the Western Hemisphere and supply-chain security, the power vacuum abroad would probably ensure continued good returns for foreign defense stocks and precious metals.

Japan: Former Defense Minister Itsunori Onodera of the ruling Liberal Democratic Party said in an interview Sunday that Japan must take a fresh look at its policy to never possess, manufacture, or host nuclear weapons, suggesting that the country is too reliant on the US’s uncertain pledge to defend Japan. That marks the latest in a string of comments by people close to the government that show Tokyo is getting tempted to develop its own nuclear arms, as are South Korea and several key countries in Europe.

China-European Union: Beijing today imposed anti-dumping tariffs of 21.9% to 42.7% on certain dairy products from the EU, claiming EU subsidies on the goods hurt Chinese producers. However, since China opened the dumping probe shortly after the EU opened one against Chinese electric vehicles, Beijing’s action appears to be retaliation aimed at forcing the EU into a compromise on its electric vehicle tariffs. Beijing also has ongoing dumping probes into EU pork and brandy, suggesting EU producers of those products could also be at risk.
Argentina: Deregulation Minister Federico Sturzenegger said in an interview over the weekend that President Milei’s libertarian government will use its increased seat count in the legislature to make much faster progress on key reforms in 2026 than in 2025. According to Sturzenegger, Milei’s government will work toward cutting taxes, reducing government spending, and deregulating the economy, all of which would confirm investors’ greater enthusiasm for Argentine stocks since the autumn elections.

United States-Venezuela: The US on Saturday said it stopped an oil tanker in international waters off the coast of Venezuela, days after President Trump announced a “blockade” of all sanctioned tankers entering and leaving Venezuela. That marks the second US interception of a tanker traveling from Venezuela in the last few weeks. The move suggests the US intends to continue ratcheting up pressure on Venezuelan President Maduro to resign. In turn, that keeps alive the risk of an armed conflict that could be destabilizing to global financial markets.

• The US Coast Guard today is also reportedly trying to chase down another tanker as it moves away from Venezuelan waters. Importantly, the US is justifying some of the interdictions by saying the tankers are flying false flags and aren’t necessarily under formal US sanctions.
• In any case, the rising tensions are buoying precious metals prices so far today. Near gold futures are currently trading at $4,430.2, up 1.3% for the day.

United States-Denmark-Greenland: President Trump yesterday named Louisiana governor Jeff Landry to be his special envoy for Greenland, after which Landry issued a statement saying that he will be honored to work “to make Greenland a part of the US.” In response, the Danish government called in the US ambassador to issue a formal protest. The appointment suggests the US administration now intends to renew its pressure on Denmark to cede Greenland. In turn, that will likely further worsen US-EU tensions and could weigh on EU stock prices.

US Monetary Policy: In an interview with the Wall Street Journal, Cleveland FRB President Beth Hammack said she sees no need to change interest rates for several months now that the central bank cut rates at its last three meetings. According to Hammack, there is still too much risk of resurgent price inflation to cut rates again at the moment. Hammack’s statement is consistent with our view that while the Fed will likely cut interest rates more aggressively in 2026 than in 2025, most of the cuts will likely come in the second half of 2026.

US Fiscal Policy: In a big policy reversal for Gov. Gavin Newsom, the California state Medicaid program said it will stop accepting adults with “unsatisfactory” immigration status and will require immigrants already in the program to pay a $30 monthly premium to keep their health coverage starting in mid-2027.

• The move reverses a 2022 policy of providing state-supported healthcare to all low-income Californians on the belief that it would reduce costly emergency-room visits and be good for the economy. However, the policy sparked rapid cost increases and strong pushback from conservatives.
• The new move will likely help reduce California’s healthcare costs but will put added economic pressure on immigrants, potentially pushing many to leave the country and further crimping the US labor market.

US Aerospace and Aviation Industries: The Wall Street Journal today carries a long article highlighting the growing incidence of “fume events” on airliners, where toxic fumes from synthetic engine oils and other fluids are siphoned into the cabin. The article shows how the fumes sometimes lead to serious illness or even death, leading to big lawsuits against firms such as Boeing. The article, which follows an initial report by the Journal in September, could spark increased lawsuits, regulation, and reputational damage for aircraft makers and airlines.

View PDF

by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with an assessment of the latest CPI data and its implications. We then turn to critical geopolitical and legislative developments, including the proposed US-TikTok joint venture, the Bank of Japan’s pivotal rate decision, and the progress in French budget negotiations. Finally, we include a roundup of essential domestic and international data releases to monitor.

Foggy CPI: November’s CPI report outperformed forecasts, with headline and core inflation cooling to 2.7% and 2.6%, respectively, down from September’s 3.0%. This slowdown was primarily driven by easing price pressures in hotels, airlines, and apparel, which offset the increase in energy costs. However, the report’s reliability is being debated; data collection hurdles stemming from the government shutdown suggest these figures might not reflect the full economic reality.

• The primary concern stems from significant data gaps within the report. Due to the lapse in appropriations, the BLS was unable to retroactively collect price data for October and November, leaving several categories incomplete. The October index was calculated by carrying forward September’s figures — consistent with standard contingency procedures — while the November index was derived using those October carry-forwards as the baseline. 
• Speculation is mounting that these data gaps have artificially suppressed the headline CPI figures. Particular scrutiny has fallen on the shelter component, which accounts for nearly one-third of the total index weight. Because the BLS lacked primary data for this category over the two-month period, the index remained virtually unchanged. This stagnation suggests that the reported cooling may be a byproduct of missing inputs rather than a genuine shift in the housing prices.
• Financial markets offered a mixed response to the shutdown-impacted report. Stocks performed well, buoyed by hopes that the 2.7% reading would secure a January rate cut. However, the bond market was far less convinced. Investors there largely stood pat, wary that the “missing” data may have artificially lowered the result. For bondholders, the report seemed to be more of a non-event that will require further verification from the upcoming December release.
• While the recent data is a positive signal for inflation, it likely will not justify a rate cut as early as January given the current composition of the FOMC. We believe Fed officials will require further softening in the labor market in order to feel comfortable allowing rates to fall meaningfully. However, the Fed’s overall stance on rates could shift significantly with the appointment of a new Fed chair.

TikTok Partnership: The US has reached an agreement regarding TikTok that allows its Chinese parent company, ByteDance, to maintain direct control over US operations through a partnership with Oracle, MGX, and Silver Lake. For now, this deal resolves the standoff sparked by legislation that threatened a nationwide ban. However, because ByteDance retains ownership, the arrangement may still face future legal or political challenges. Ultimately, we view this compromise as a significant sign of easing tensions between Washington and Beijing.

China’s AI Maneuvers: China has successfully scaled its AI chip production by retrofitting legacy ASML lithography systems. This strategy will allow Beijing to circumvent stringent export restrictions intended to stifle its semiconductor development. By repurposing older equipment to manufacture advanced chips, China is demonstrating a growing capacity for self-reliance as it competes with the US in the AI race. This breakthrough will likely compel the US to further prioritize AI within its national security strategy.

Bank of Japan: The yen (JPY) slid against the dollar on Friday despite the Bank of Japan raising interest rates to 0.75% — the highest level in nearly 30 years. Although the central bank signaled a willingness to continue the hikes into next year, Governor Kazuo Ueda’s reluctance to provide specific guidance on the terminal rate has sparked market concern. Investors fear the tightening cycle may be shallower than anticipated, fueling worries that monetary conditions will remain accommodative for longer than expected.

FedEx Positive Result: The shipping giant, widely considered a barometer for global trade and broader economic health, has raised its full-year outlook. This upward revision follows a surge in revenue driven by robust US shipment volumes and improved margins on international freight. Such a spike in logistics activity is traditionally viewed as a leading indicator of economic expansion, reinforcing expectations for a strong rebound in the coming quarter.

EU Lending to Ukraine: The European Union has committed to a 90 billion EUR ($105.6 billion) loan for Ukraine to bolster its defense against the Russian invasion. This pledge arrives as the bloc continues to debate the legalities of seizing frozen Russian assets. The timing is critical and is occurring as Russia, Ukraine, and the US engage in negotiations to end the conflict, with the EU eager to secure its influence in the process. Notably, the loan is structured to be repaid only once Russia provides war reparations, a condition intended to grant Kyiv significant leverage in upcoming peace talks.

French Budget Talks: The French government will not reach a budget agreement before the end of the year. Prime Minister Sébastien Lecornu has struggled to secure sufficient parliamentary support for his fiscal plan, prompting the government to prepare a “special law” — essentially an emergency rollover of the 2025 budget — to prevent a shutdown in 2026. This prolonged fiscal impasse is expected to exert upward pressure on French bond yields and deepen the country’s climate of political uncertainty.

View PDF

by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens by assessing the president’s 2026 policy shift and its potential market impact. Following a deep dive into the AI-related volatility surrounding Oracle, we will then evaluate high-stakes geopolitical and legislative developments, specifically the US healthcare bill, Tricolor’s fraud crisis, and US arms shipments to Taiwan. Finally, we include a roundup of essential domestic and international data releases.

 The President Speaks: With next year’s midterm elections approaching, President Trump is seeking to frame his first year as a success. In a recent address, he highlighted his key achievements, including a crackdown on illegal immigration, policies that lowered the cost of essentials like groceries and travel, and the negotiation of new trade deals to secure foreign investment. He also announced a symbolic $1,776 Christmas bonus for active-duty troops. His address reflects a strategic shift from an offensive to a defensive posture, as he looks to protect his agenda.

• The president’s current strategy seems designed to circumvent the lame-duck syndrome that historically afflicts second-term presidents. As we noted in our earlier piece on managing an economic slowdown, presidents typically lose popularity heading into their second term. In fact, historical trends show that approval ratings most often bottom in year six, which, for the incumbent, will be next year.

• The administration’s drop in popularity comes at a critical time as key policies are currently stalled in court. The Supreme Court is skeptical of the president’s authority to impose broad tariffs, and his move to nationalize AI standards has triggered a backlash from state governments. These legal and political challenges threaten to leave much of his first-year agenda unresolved.
• Despite the threat posed by recent Democratic gains, the president is currently struggling with a “war within.” His recent move to impose 50% tariffs on Brazil was blocked by the Senate, while his plan to centralize AI regulation has repeatedly failed to gain Republican support. Adding to the friction, moderate Republicans have joined forces with Democrats to bypass leadership and advance an extension of healthcare subsidies, further complicating the administration’s year-end agenda (see more below).
• That said, the outlook is not entirely negative for the president. As the net approval ratings chart above illustrates, his popularity is projected to stabilize in the coming months, allowing him to build momentum ahead of the election. Furthermore, although his approval rating at 43.6% can improve, he is currently outperforming his two most recent predecessors — Barack Obama (42.7%) and George W. Bush (43.6%) — at the same point in their presidencies.
• As we look toward 2026, we anticipate that the president will push for policies designed to stimulate growth and enhance affordability. This may also mean that the president may be less aggressive in imposing new tariffs. This more predictable, defensive posture should be a net positive for equities, offering businesses a stable regulatory environment and households the confidence to increase consumption.

 Oracle Problems: Concerns regarding the rapid expansion of AI infrastructure are intensifying following a shift in Oracle’s financing. On Wednesday, it was reported that Blue Owl, a longtime financier of cloud computing firms, has withdrawn its backing for Oracle’s Michigan data center project. While the project is still expected to proceed, Blue Owl’s departure has sparked fresh anxieties regarding Oracle’s debt levels and the long-term sustainability of the AI build-out.

• Oracle has recently become a proxy for the burgeoning AI bubble. The market began paying close attention to the company following a reported jump in orders that wildly exceeded expectations, triggering a 36% single-day stock surge. However, since that peak, concerns have emerged regarding the company’s ability to meet those targets. Questions remain surrounding the profitability of these deals, as well as the company’s rumored reliance on a handful of suppliers.
• Growing skepticism toward AI is increasingly weighing on the technology sector. The central concern is the industry’s structural pivot from a traditionally capital-light model to one that is highly capital-intensive. This escalation in investment has fueled fears that the cost of infrastructure may erode future profitability. According to estimates from Apollo Global Management, capital expenditures for the Magnificent 7 have skyrocketed, rising from just over 40% of operating cash flow in 2024 to more than 60% today.
• The tech sector’s growth story is far from over. Recent market trends show a clear preference for companies with robust balance sheets that avoid the high costs of the debt market. Large cap tech stocks, in particular, maintain an edge over smaller firms by better managing economic volatility. Moreover, because the US government views AI leadership as a matter of national security, the sector likely benefits from an implicit “federal backstop” if growth were to falter significantly.
• We view sector diversification as essential for navigating current market turbulence. Drawing a parallel to the post-tech bubble era, value stocks are again offering a vital outlet for capital preservation. Recent data confirms this shift, with investors rotating heavily into defensive plays, most notably healthcare, which have outperformed to close the year.

 Affordable Care: House Republicans have passed the Lower Health Care Premiums for All Americans Act, framing it as a market-based alternative to the expiring Affordable Care Act (ACA) subsidies. While the bill faces steep opposition in the Senate, its passage signals that healthcare affordability will be a defining political flashpoint heading into the 2026 midterm elections. We believe this issue has the potential to significantly influence the congressional landscape next year.

Tricolor Holdings: The founder and top executives of the now-bankrupt Tricolor have been charged with fraud following allegations that they misled lenders. The company reportedly falsified records to portray delinquent auto loans as current, a move that is expected to intensify scrutiny of subprime consumer debt. As investors assess the potential for rising defaults — particularly within the private credit markets — this crackdown serves as a warning sign. While we do not see immediate systemic risks, we remain vigilant.

Taiwan Weapons Sale: The US government has approved the potential sale of over $10 billion in arms to Taiwan. While still subject to congressional approval, the weapons package would be the largest ever offered to the island. The move is likely to provoke a strong reaction from China, which views such sales as interference in its internal affairs, and signals that underlying tensions between the two superpowers remain high despite a recent period of calm.

View PDF