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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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with our perspective on the president’s nominee to lead the Federal Reserve. We then outline our views on AI in light of the recent tech sell-off. Next, we cover the eurozone’s economic resilience, the openness of US allies to investment from China, and the conclusion of the civil war in Syria. We round out the piece with a summary of key economic data from the US and global markets.

Next Fed Chair? The president announced on Friday his intention to nominate Kevin Warsh, a former Fed governor, as the next chair of the central bank. This move follows months of speculation during which several other figures were also viewed as leading candidates for the role. Financial markets have responded cautiously as Warsh’s traditionally hawkish stance on inflation appears to conflict with the president’s push for more accommodative policy, leaving investors unsure which impulse will ultimately shape Fed decisions under his leadership.

• The president’s choice follows a period in which he also weighed the appointing of Director of the National Economic Council Kevin Hassett, current Fed Governor Christopher Waller, and BlackRock Chief Investment Officer Rick Rieder. Each was, at various points over the past year, viewed as a leading contender in betting markets, with Rieder considered the frontrunner as recently as yesterday.
• While there was some concern that Warsh’s past hawkish statements could hurt his chances of leading the Fed, they may ultimately have been what won the president over. President Trump’s initial preference for Kevin Hassett reportedly backfired after pushback from Wall Street, where investors worried he might prove overly loyal, but Warsh, who has also advised the president, has been viewed as a safer choice given his support for a smaller Fed balance sheet and a lower inflation target range of 1–2% rather than 2%.
• The market’s initial reaction has included a firmer dollar and softer equity prices, as investors interpret his likely appointment as a sign that policy rates could remain elevated for now. That sentiment could shift if Warsh signals a greater willingness to lower interest rates or to take a more flexible approach to the balance sheet — perhaps by slowing the runoff of mortgage-backed securities — which would align more closely with the president’s push to ease borrowing costs and support housing affordability.
• Warsh’s arrival could directly challenge the Fed’s current communication strategy. He has publicly called for a “regime change,” arguing that the present system suffers from a credibility gap. This stance is pivotal because the existing approach has, in our view, provided markets with valuable insight into policy debates and supported Powell’s efforts to build consensus. Altering this balance could carry substantial implications for forward guidance and could pave the way for more dissent.
• We suspect that Warsh’s appointment will likely lead to a less accommodative Fed policy compared with the other candidates under consideration. Ultimately, much will depend on how closely he intends to coordinate with the White House on policy decisions. For now, we believe the market’s expectation of two rate cuts for the year appears reasonable, though the outlook remains uncertain.

Tech Concerns: A sell-off in risk assets on Thursday was driven by investor concerns that AI infrastructure investments may take longer than expected to deliver profits. The catalyst was earnings reports from two of the sector’s biggest spenders, Microsoft and Meta. While one surpassed expectations, the other fueled skepticism about the broader payoff from the AI investment surge among mega-cap tech firms. The reaction underscores a decisive market shift toward a results-focused mindset, as scrutiny of escalating capital expenditures intensifies.

• Microsoft’s earnings report served as a reality check for the AI boom, with guidance coming in weaker than expected. The company disclosed higher-than-anticipated capital expenditure and a slowdown in cloud revenue growth, signaling potential pressure on near-term profitability. The downbeat results weighed on the broader tech sector, prompting investors to reassess their exposure to companies with significant AI-related spending.
• On a brighter note, Meta demonstrated how AI can be deployed effectively. The company reported an acceleration in revenue, showcasing its success in leveraging AI to boost ad growth and user engagement. Its strong performance underscores how eager investors are to reward companies that translate AI investments into tangible profitability across their platforms.
• The sharp reactions to both Microsoft and Meta highlight a shifting investor sentiment toward AI-focused companies. Early in the AI boom, investors showed little concern over heavy infrastructure spending, as many firms financed growth with ample cash reserves. Now, with companies increasingly turning to debt to fund these investments, worries are mounting that they may be expanding capacity too quickly to justify their current valuations.
• We don’t believe the AI rally is close to being over. Thursday’s market reaction likely reflects not a loss of faith in AI itself, but rather growing investor pressure for companies to demonstrate tangible returns on their substantial AI investments. As a result, earnings performance is becoming a progressively important driver of valuations compared with previous periods. That said, we suspect the skepticism is likely to be short-lived as we still believe the sector will be able to generate strong earnings overall.
• While “pure‑play” AI stocks tend to dominate the headlines, the companies enabling the physical build‑out — such as miners, materials suppliers, and energy providers — stand to benefit from the significant power and infrastructure demands of AI data centers. These businesses often trade at more reasonable valuations than high‑profile AI names and should remain relevant given ongoing needs for energy and critical materials, even if the pace of AI expansion moderates.

Eurozone Growth: The eurozone economy expanded by 0.3% in the fourth quarter, surpassing expectations of 0.2%. The stronger-than-expected growth reflects continued economic resilience following the relaxation of tariffs introduced in 2025. Germany was among the biggest surprises, recording its first annual expansion since 2022. Momentum across the bloc is expected to strengthen this year as member nations ramp up stimulus spending on key sectors, including infrastructure and defense.

Chinese Openness: UK Prime Minister Keir Starmer is seeking to strengthen investment ties abroad, signaling a broader shift as countries look to diversify away from reliance on the United States. The move has drawn criticism from the White House, which has warned that such partnerships could carry consequences. For many leaders, the renewed interest in engaging with China appears to be a strategic effort to gain leverage in negotiations with Washington, particularly as the US presses for greater concessions.

Syria Stabilizing? The Kurdish-led Syrian Democratic Forces (SDF) have signed a comprehensive agreement to integrate their military and civilian institutions into the Syrian state, effectively bringing an end to years of self-rule. This historic move, following nearly 14 years of civil war, signals a path toward a unified government in Damascus. This integration is widely seen as a major milestone that could lead to greater long-term stability across the Middle East.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with an analysis of how the US, in its effort to maintain global influence, continues to pressure China’s allies. We then share our insights on the latest FOMC meeting and its potential implications for monetary policy. Next, we discuss the renewed emphasis on strong-dollar policy, recent reports of White House officials engaging with Canadian separatists, and Germany’s attempts to strengthen its energy infrastructure for wartime preparedness. We also include a roundup of economic data from the US and international markets.

US Interventionism: Tensions between the US and Iran intensified on Wednesday after President Trump warned that “time is running out” for an agreement. The president declared that he was sending a naval armada to the region to pressure Iranian leaders into returning to the negotiating table and accepting limits on their nuclear program. This escalation reflects the administration’s increasingly interventionist foreign policy, which seeks to undermine China by exerting pressure on its allies.

• Although the president has not detailed the terms of his desired deal, the US has presented Iran with three core demands for negotiations: a permanent halt to uranium enrichment and the disposal of its current stockpile; strict limits on the range and number of its ballistic missiles; and an end to all support for proxy groups in the Middle East, including the Houthis, Hezbollah, and Hamas.
• At present, there is no indication that Iranian leadership is ready to accept these terms. A primary obstacle remains Tehran’s refusal to dismantle its uranium enrichment program, which it maintains is for civilian use. In direct response to President Trump’s “armada” warning, Iranian Foreign Minister Abbas Araghchi stated on Wednesday that, while Iran remains open to a “fair and equitable” nuclear deal, its armed forces are prepared with “fingers on the trigger.”
• The White House is increasingly drawing on a “Venezuelan blueprint” to counter Chinese influence on its closest allies. Although the United States has already removed Maduro from power, it has warned that further action remains on the table if Caracas continues to defy Washington. At the same time, the administration appears to be pursuing a less militant but still high-pressure approach toward Cuba, restricting access to much-needed oil in an effort to force Havana back to the negotiating table with the US.
• While the US’s more interventionist foreign policies have shown some success in Iran and South America, their potential effectiveness against North Korea remains an open question. Pyongyang stands apart as the one adversary with a proven capacity to retaliate directly against a US attack. Notably, as Washington has ramped up pressure on Venezuela and Iran, there have been signs that Kim Jong Un has redoubled his efforts to build a credible nuclear deterrent.
• The recent pivot in US foreign policy, prioritizing military leverage alongside traditional diplomacy, is expected to provide sustained tailwinds for domestic defense contractors throughout the year. Consequently, allocating capital to defense equities, complemented by strategic positions in precious metals, offers investors a dual hedge against the financial volatility stemming from escalating geopolitical tensions and a fragmenting global order.

 FOMC Pause: The Federal Reserve left its benchmark interest rate unchanged at 3.5–3.75% following its two‑day policy meeting. The decision seems to signal a clear improvement in overall economic conditions, a trend that policymakers expect to continue through at least the first half of the year as new tax cuts take effect. While markets likely viewed the move as a show of confidence, we believe the Fed is also creating space for the incoming chair to set policy according to his own view of the economy.

• The Fed statement showed several notable changes from the previous release. The language now characterizes economic activity as growing at a solid rather than a moderate pace, job gains were described as low rather than having slowed, and the unemployment rate appeared to be stabilizing while inflation remained elevated but not rising. The committee also removed references to downside risks to both inflation and employment outcomes.

• While the statement reflected a more positive outlook, they also suggested that the Fed does not feel compelled to adjust policy at this time. In the press conference, Chair Powell noted broad support for holding rate steady, despite two dissents on the committee. He also did not indicate any concern that current labor market conditions or inflation required additional policy action.
• The neutral tone of the Fed statement and the press conference suggests a committee comfortable maintaining the status quo through the next several meetings. This “steady-hand” approach appears strategic. By holding rates firm, Chair Powell provides his eventual successor, set to take over this summer, the maximum possible flexibility to steer monetary policy. This transition period will allow the incoming chair a clean slate to implement their own vision without being immediately boxed in by inherited momentum.
• Consequently, we anticipate that the Federal Reserve will maintain current interest rates until a new chair takes over. This period of stability should bolster the US dollar, as sustained yield differentials continue to attract foreign capital. Furthermore, this “higher-for-longer” environment is likely to drive a flight to quality, with investors favoring large-cap, established corporations with proven track records of navigating volatility and strong earnings.

Strong-Dollar Policy: Treasury Secretary Scott Bessent dismissed speculation that the US plans to intervene in currency markets to support the yen, saying such action is “not under consideration.” His comments followed a New York Fed “rate check,” a move often seen as a precursor to formal intervention, which had fueled market rumors. Following his remarks, the dollar strengthened while the yen retreated. The episode comes as Japan adopts a strategy of tactical silence in its efforts to stabilize its currency.

 Canada Separatists: White House officials have reportedly met with members of the Canadian separatist movement as tensions between the United States and China continue to rise. The Alberta Prosperity Party, which advocates for the province’s independence, has held three meetings with US officials since April and is seeking a $500 billion credit swap line should a future referendum succeed — though none has yet been scheduled. The White House maintains that no formal cooperation exists.

 Defense Spending Spillover: Germany is exploring ways to utilize its defense budget to bolster energy infrastructure. By leveraging a defense-related debt brake exemption, the government aims to establish a $2.4 billion resilience fund designed to “war-proof” the national energy grid. This initiative highlights how the current European defense buildup is generating significant spillover effects, driving investment into adjacent industrial sectors like energy and civil protection.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with an analysis of why the US dollar continues its slide against major global currencies. We then provide a briefing on the leading contenders to head the Federal Reserve as the transition from Chair Powell nears. From there, we pivot to the surge in silver prices across Chinese markets, growing apprehension among Middle Eastern nations regarding potential US strikes on Iran, and North Korea’s latest efforts to bolster its nuclear deterrent. We also include a roundup of economic data from the US and international markets.

Dollar Drop Continues: The US dollar slid against major currencies amid growing concerns that the White House may not be fully committed to a strong-dollar policy. On Wednesday, the greenback fell to its lowest level since 2022, extending a four-day decline. The sell-off accelerated following comments from the president that he was unconcerned by the currency’s recent weakness. This shift in tone has fueled speculation that the administration may be tolerating, or even encouraging, a weaker dollar as it looks to protect the US bond market.

• The US dollar’s decline appears to have been driven by potential currency intervention from the New York Federal Reserve. On Friday, officials reportedly conducted a “rate check,” surveying the market to gauge liquidity and pricing for a potential intervention. This move follows rising speculation that the US might coordinate currency actions with Japan for the first time in 15 years.
• Rising Japanese bond yields and a weakening yen are creating a potential ripple effect for the US financial system. Speculation is mounting that Japanese pension funds and financial institutions may begin repatriating capital by offloading foreign bond holdings in favor of domestic assets. This large-scale reallocation would likely put upward pressure on US Treasury yields, prompting the US to seek alternative policy remedies to maintain market stability.
• The US support for intervention likely reflects the White House’s growing anxiety regarding long-term Treasury yields. Since taking office, the current administration has signaled its desire for lower rates, as they serve as the primary benchmark for domestic lending. Consequently, the prospect of Japan, the world’s largest foreign holder of US Treasurys, liquidating holdings to fund yen stabilization presents a systemic risk.
• While recent White House comments have been interpreted as a departure from the “Strong Dollar” policy, they actually signal a strategic move toward selective intervention. Its readiness to intervene, including adding potential support for the yen, proves that it is following a pragmatic, outcome-oriented approach. The key insight is that the administration now ranks Treasury yields above dollar dominance, which is why it is not concerned about the dollar’s decline.
• The administration’s apparent preference for a weaker dollar reinforces our conviction in broad portfolio diversification. While precious metals such as gold and silver have rallied significantly over the past few months, they continue to offer essential protection against currency debasement. Furthermore, we see a compelling case for increasing international equity exposure. A softer dollar has historically acted as a tailwind for foreign markets and has enhanced total returns for US-based investors.

New Fed Frontrunner: The race for the next Federal Reserve chair has been upended, with BlackRock’s Rick Rieder now the clear market favorite. Prediction markets like Polymarket now price Rieder’s probability near 50%, a surge propelled by endorsements from former frontrunner Kevin Hassett and the apparent favor of the president. With a final decision imminent, Rieder’s reputation as a pragmatic “bond king” is triumphing over the academic pedigrees of more traditional candidates.

• The momentum behind Rieder’s candidacy stems directly from the president’s deep-seated desire to reform the Federal Reserve. The president has persistently argued that the central bank lacks credibility due to perceived failures in fulfilling its dual mandate. To realign its priorities, he has championed a doctrine of closer policy coordination with the executive branch, with the overarching aim of prioritizing lower interest rates to drive economic expansion.
• The president’s search for a new Fed chair highlights the difficult balance between appointing a trusted agent of his agenda and a candidate deemed credible by the markets. For instance, the White House backed away from Kevin Hassett amid tepid Wall Street support and Senate confirmation risks. Concurrently, former Fed Governor Kevin Warsh’s prospects have faded as his history of hawkish policy positions undermines the credibility of any shift toward the president’s growth-focused, dovish priorities.
• While current Fed Governor Christopher Waller is still a leading contender for chair, his staunch loyalty to Fed orthodoxy may be his biggest liability. Waller has demonstrated intellectual independence following his advocacy of using JOLTS to guide rate decisions, which has paved the way for more accommodative policy. However, his refusal to join fellow governor and current CEA Chair Stephen Miran in pushing aggressive cuts may have signaled to the White House that he is too loyal to the “Fed system.”
• As a relative unknown, Rick Rieder’s lack of a defined policy record may be his greatest asset, making him difficult to pigeonhole. In a recent interview, he aligned himself with the current FOMC consensus, signaling support for two rate cuts this year. However, he also introduced a distinct policy nuance, arguing the Fed should take more active measures to support the housing market, which he views as a key constraint on affordability.

Silver Boom: A Chinese silver fund has suspended trading after its share premium soared beyond the value of its underlying assets. This halt coincides with a domestic frenzy for the metal, fueled by rising global prices and exacerbated by Chinese export restrictions that have pushed local prices above the global average. While the frenzy signals acute market stress, it does not yet point to broader systemic risk.

Gulf Allies Resist: Saudi Arabia has declined a US request to utilize its airspace for potential military action against Iran. The decision aligns with a similar recent refusal from the United Arab Emirates, underscoring a collective regional reluctance to support an offensive operation. This reluctance stems from profound concerns about the regional fallout of a destabilized Iran and from a clear desire to avoid being implicated in a strike, which substantially hinders US planning for military intervention.

North Korean Deterrent: North Korea has signaled its intent to expand its nuclear arsenal, a move widely interpreted as a defensive posture against potential US intervention. Following the removal of Maduro in Venezuela, Kim Jong Un appears to be prioritizing deterrence to secure his leadership. The escalation highlights a deepening deficit of trust, which could lead to a further destabilization of the global landscape.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a renewed threat of US tariff hikes against South Korea, illustrating how global trade tensions could rekindle at any time. We next review several other international and US developments with the potential to affect the financial markets today, including a new free-trade deal between the European Union and India and a US decision to limit Medicare payments to health insurers — a move that has put intense downward pressure on health insurance stocks.

United States-South Korea: President Trump late yesterday said he will hike the US tariff on South Korea’s imports to 25% to punish the country for its slow approval of the bilateral trade deal reached by Washington and Seoul last year. The tariff hike would apply to all goods covered by Trump’s reciprocal tariffs, along with cars, lumber and pharmaceutical goods. As with the president’s weekend threat to impose new tariffs against Canada, the development shows that trade tensions remain a potential threat to financial markets.

United States-Iran: Reports yesterday said the USS Gerald R. Ford aircraft carrier and her strike group have arrived in the Middle East, greatly enhancing the US military presence in the region if President Trump wants to launch his threatened attack on Iran to retaliate for its brutal crackdown on protestors. There is no certainty that such an attack will happen, but investors should be aware that it remains possible. If it happens, there is some risk that it could spark a regional war that would disrupt the global economy and financial markets.

European Union-India: Officials from the EU and India today signed a free-trade deal that is expected to cut or remove tariffs on more than 96% of EU exports to India, including machinery, autos, and alcohol. However, sensitive agricultural exports on each side won’t be affected. For EU exporters, the deal is expected to yield savings of about 4 billion EUR ($4.8 billion). The deal is also expected to help boost EU exports to India, helping Brussels diversify its foreign sales away from the US as the trans-Atlantic relationship sours.

Canada-China: Top Chinese mining company Zijin Mining Group yesterday announced that it is buying Canadian miner Allied Gold in an all-cash deal valued at about $4 billion. The deal, which still requires shareholder and regulatory approval, illustrates how Prime Minister Carney has quickly moved to boost ties with China as a counterweight to the increasingly fraught relationship between the US and Canada. Of course, such deals probably raise the chance that the Trump administration will impose new tariffs or trade barriers on Canada in retaliation.

United Kingdom-China: The British government is reportedly planning to place tighter curbs on Chinese agencies and companies operating in the UK. The enhanced scrutiny will likely focus on China’s Ministry of State Security, the Chinese Communist Party, and state-owned Chinese firms operating or investing in sensitive sectors. The move comes despite UK Prime Minister Starmer’s effort to improve relations with China in order to diversify British trade away from the US, illustrating the risks inherent as countries embark on that strategy.

United Kingdom: As top Conservative Party politicians continue to defect to the right-wing populist Reform UK Party, pulling the Conservative Party to the right, several moderate Conservative officials yesterday launched a new centrist movement called Prosper UK to drag the Conservatives back toward the centrists. The officials said Prosper UK is also designed to counter the way the Labour Party has been pulled to the left. The development is further evidence that the British political system is fracturing, which will likely paralyze policy going forward.

US Monetary Policy: The Fed’s policy committee begins its latest conclave today, with its decision expected tomorrow at 2:00 PM ET. Based on interest-rate futures trading, investors are almost unanimous in expecting the officials to hold their benchmark fed funds rate unchanged at 3.50% to 3.75%, after cutting rates at each of the previous three meetings. We expect that the officials will resume cutting rates at some point this year, but we continue to think that the bulk of any further cuts will be backloaded in the second half of the year.

US Health Insurance Industry: The administration yesterday said it would hike Medicare reimbursements to health insurers by a paltry 0.09% in 2027, versus their 5.0% increase in 2026. In response, health insurance giants UnitedHealthcare and Humana both saw their share prices fall by at least 10%. CVS and Elevance saw their share prices drop by more than 5%. The news illustrates how any firm that relies on federal reimbursement or fees, including defense contractors, is now at risk as the administration refocuses on cutting government spending.

US Airline Industry: Today marks the beginning of a new era as Southwest Airlines finally abandons open seating for assigned seating. For Southwest customers who love the airline’s extensive flight network (like yours truly), the move will put an end to the “seating roulette” that most travelers endured until now.

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