by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today first discusses one way to understand the US’s new foreign policy now that we’ve had a year to observe it in practice, taking into account the administration’s new national security strategy and analysis of peak events such as the seizure of Venezuelan President Maduro. We next review several other international and US developments that could affect the financial markets today, including rising pushback to the Justice Department’s probe of Federal Reserve Chair Powell and a presidential social media post that may signal new federal regulation of electricity prices.

US Foreign Policy: More than a week has passed since the US seizure of Venezuelan President Maduro, and it may be useful to say some words about the US’s evolving new foreign policy. Coupled with the administration’s national security strategy and its other initiatives over the last year, the action in Venezuela suggests to us that the “spheres of influence” goal so many analysts are discussing may not be the most accurate. Rather, we wonder if “neo-colonialism” may be a better way of thinking about President Trump’s foreign policy and where it’s heading.

• First, it’s helpful to understand the terminology. We see colonialism as an economic and political relationship in which the mother country has some degree of control over foreign lands to use them as guaranteed markets and/or sources of raw materials and industrial inputs. People typically see spheres of influence as more tenuous control over a particular geographical area. Finally, imperialism is an even broader, stronger control over foreign countries through military, diplomatic, and economic power.
• Many observers, especially in weaker countries or former colonies, use “colonialism” as a pejorative term, but we don’t. We use the term only descriptively — to better understand the evolving system’s political, economic, and investment implications. Indeed, one could argue that foreign policy should be judged by whether it advances the interests of the country’s people, including its working class. Past colonial systems, such as that of the British, may well have been quite positive for their own people and working classes.
• Given the administration’s focus on economic and commercial interests, it’s possible to argue that it is seeking to build a new, US-centered, neo-colonial system established and maintained by hard power. In this system, more industrial production would happen within the US, but Washington would have some degree of explicit or implicit control over other countries to ensure they serve as valuable markets or as sources of raw materials or industrial and technological components.
• If this is true, administration officials seem to want the new US neo-colonial system to be centered on the Western Hemisphere, mostly because they prefer short, easily defensible supply lines. The problem is that there are many key minerals and industrial or technological inputs outside the Western Hemisphere. For example, many critical minerals are most available in Africa or the Asia-Pacific region. The most advanced computer chips are currently produced almost exclusively in Taiwan.
• The administration may hope to eventually source all key minerals and industrial inputs from the Americas, but for the time being, any evolving US neo-colonial system would have to be broader than that, extending out in the Pacific Ocean to places like Japan, South Korea, Taiwan, and the Philippines, and across the Atlantic to at least some countries in Europe, the Middle East, and Africa.
• How would this evolving system affect the global “bloc” system that we at Confluence have discussed so much in recent years? At first, the new US system may largely overlap the current US-led geopolitical and economic bloc. However, while the bloc system implies a certain static, stable grouping of countries, the evolving neo-colonial system could be more fluid. In fact, a new tension-filled “Great Game” may emerge, where China and other countries tussle with the US to bring key countries into their system.
• As the US works to draw these countries close as a source of demand and supply, Washington will likely push to ensure that their economic policies are aligned with those of the US. If this includes pressure for improved policies such as deregulation and fiscal stability, Washington’s embrace may signal improved growth and better stock market performance.
• Over time, however, the US embrace of countries further afield, with long supply lines to the US, may be abandoned. For instance, while the US currently may want to defend Taiwan to ensure access to its semiconductor supplies, Washington is trying to develop the US’s indigenous capacity for those goods. When and if that eventually happens, the US would have much less interest in supporting Taiwan. Similar logic could apply to countries such as Japan, South Korea, and much of Europe in the long term.
• We would caution that this is still not a definitive analysis. We continue to watch the administration’s approach and try to better understand where it is going. And importantly, we are still wrapping our head around the associated investment implications. Many of our current themes are likely to continue, such as our positive view on European defense stocks and precious metals. All the same, we suspect that our analysis will reveal some additional opportunities and risks going forward.

United States-Taiwan: The Wall Street Journal today reports that Washington and Taipei are nearing a trade deal in which the current 20% import tariff against Taiwan would be cut in return for Taiwan committing to more than $300 billion in investment and other spending in the US. That sum includes and expands on last year’s $165-billion investment commitment from Taiwan Semiconductor Manufacturing Company. Importantly, the expanded investment commitment would have TSMC building as many as a dozen new cutting-edge chip plants in Arizona.

• The new Arizona fabs would produce both logic chips, which are used for artificial intelligence, and packaging chips, which provide supporting functions.
• The deal underscores the US administration’s focus on building up domestic technology manufacturing. Tech now is clearly a favored sector in the US, which will likely support the prospects for tech stocks going forward. However, its favored status could make it more susceptible to government interference over time.
• By increasing and expanding the range of advanced semiconductor manufacturing in the US, the deal also would be consistent with the administration’s goal of shortening and securing key supply chains. Consistent with the discussion above, however, it could eventually reduce the US’s reliance on Taiwanese production and reduce the US’s security interests in Taiwan.

United States-Iran: To pressure Tehran to stop its violent repression against anti-government protestors, President Trump yesterday said he would immediately impose an additional 25% import tariff on any country doing business with Iran. Based on data from the first half of 2025, some 100 countries could be at risk of the added tariffs. However, the most exposed would likely be China, Turkey, Pakistan, and India, all of which could face a new round of trade disruptions and financial market volatility.

 US Monetary Policy: Several top Republicans in Congress have criticized the administration’s criminal investigation of Fed Chair Powell, with at least two Republicans in the Senate signaling that they would hold up the president’s next nominations to the central bank over the probe. The sudden pushback may force the administration to shelve its probe and simply wait until Powell’s term runs out in mid-May. Even then, however, we think the White House would continue to push the Fed to slash interest rates when a new chair is in place.

• JPMorgan Chase CEO Jamie Dimon this morning added his opinion, saying that “anything that chips away” at the central bank’s independence “is not a good idea.”
• Dimon also warned that political interference with the Fed would cause inflation and interest rates to rise, contrary to President Trump’s goal of lowering rates.

 US Critical Minerals Industry: Louisiana-based gallium producer Atlantic Alumina yesterday said the Pentagon has bought $150 million of preferred equity in the firm and will make further investments in the near future. The deal is the latest in a string of US government investments in firms producing minerals that are critical to advanced technology and defense goods. The aim is to break China’s near monopoly on producing many of the minerals — an aim that has boosted investor interest in critical minerals firms and other miners and processors.

US Housing Industry: New York Gov. Kathy Hochul today will reportedly propose exempting most new housing projects from the New York State Environmental Quality Review Act. If the reform is approved by state legislators, it would mark the latest state or local effort to make it faster and cheaper to build new housing supply by cutting regulations. If such state and local efforts hit critical mass, they could be positive for national homebuilders.

US Electricity Market: In a social media post last night, President Trump said he never wants “Americans to pay higher Electricity bills because of Data Centers.” Rather, he insisted that big tech companies building data centers “must ‘pay their own way.’” Given the president’s other proposed market interventions to address “affordability,” the statements may raise concerns that he will intervene in the electricity market to push down consumer bills ahead of the mid-term elections in November — a move that could roil technology and utility stocks.

European Union: New data from European trade body CLEPA shows auto parts manufacturers on the Continent eliminated over 100,000 jobs over 2024 and 2025, twice the total loss during the coronavirus pandemic. According to the organization, the losses reflect weak European auto demand and ultracompetitive pricing by Chinese auto exporters. The figures illustrate the dire straits faced by Europe’s auto sector and point to the possibility of further trade tensions between the EU and China.

United Kingdom: Air Chief Marshal Sir Richard Knighton, chief of the defense staff, told a parliamentary committee yesterday that the British armed forces are underfunded and that “We are not as ready as we need to be for the kind of full-scale conflict that we might face.” The statement shows how European countries probably will not be able to defend themselves against Russian threats in the near term, even if they want to rearm quickly. That suggests European defense firms will continue to see growing revenues, profits, and stock prices for years to come.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with yesterday’s extraordinary news that the Justice Department has launched a criminal investigation against Federal Reserve Chair Powell. We next review several other international and US developments with the potential to affect the financial markets today, including the latest on President Trump’s effort to cajole US energy firms to invest in Venezuela’s oil sector and the president’s desire to temporarily cap credit card interest rates.

US Monetary Policy: Fed Chair Powell last night said he is being investigated by the Justice Department for crimes related to his testimony last summer about the reconstruction of the central bank’s headquarters. Powell insisted the probe is intimidation aimed at forcing him to slash interest rates to serve President Trump’s political purposes. As we noted last summer, our personal observation of the project suggests it is much bigger than the “renovation” most media describe. In a project that big, it should be easy for prosecutors to find some malfeasance.

• The move against Powell comes even though his term ends in May. Unleashing such an attack on him with so little time left in his term underscores how focused the White House has become on the mid-term elections this fall.
• In any case, our quantitative analysis does not suggest that short-term interest rates need to be slashed. We have long predicted that political pressure will force the Fed to cut interest rates more in 2026 than in 2025, but with the cuts coming mostly in the second half. Now, if Powell is forced to resign early, dramatic rate-cutting could come even earlier, despite the risk of boosting consumer price inflation.
• Most observers of the situation have focused on the Fed losing its independence to set interest rates, but the White House may also be hoping to influence the Fed’s purchase of assets. For example, administration officials would probably like to be able to direct the Fed to buy particular assets for their own political purposes.
• The potential change in the Fed chair has rekindled concerns about excessively low interest rates and currency debasement, prompting new weakness in the dollar and a jump in gold So far this morning, the greenback has depreciated about 0.4%. Gold prices have jumped 2.8% to a new record high of about $4,628 per ounce.

US Bond Market: In 55 investment grade deals, US corporations issued $95 billion of bonds last week, marking the highest weekly volume since May 2020 and the busiest start to a year on record. The surge reportedly reflects firms trying to lock in rates before a mountain of issuance related to artificial intelligence in 2026. With the new threats to Fed independence, even more firms may be tempted to issue bonds and lock in rates in the coming weeks.

United States-Venezuela: At a meeting on Friday afternoon, President Trump urged the executives of top US oil companies to invest $100 billion into rebuilding Venezuela’s oil industry. However, the officials generally pushed back, largely on grounds that there is still too much risk of their assets being seized. Of course, today’s relatively low oil prices are probably also a concern.

• Meanwhile, Treasury Secretary Bessent said the administration could ease some sanctions on the Venezuelan oil industry as soon as this week.
• Bessent also said the US would press the International Monetary Fund, the World Bank, and other international institutions to ease their measures against Venezuela to get the country’s oil flowing faster.
• All the same, as we have noted before, even if the US seizure of President Maduro and reduced sanctions lead to revived Venezuelan oil output, significant amounts of new supply may not become available for years.

United States-Greenland-Denmark: The Financial Times yesterday quoted several Nordic diplomats and officials as saying the North Atlantic Treaty Organization has no intelligence that Greenland is often surrounded by Chinese and Russian warships. The statements contradict recent assertions by President Trump. Nevertheless, separate press reports today say Trump has ordered the US special forces to develop plans for a military seizure of the island from Denmark.

• Some US officials have recently insisted that the president’s threats of military action to seize Greenland merely constitute pressure tactics to convince Denmark to sell the territory at a low price.
• Nevertheless, actions such as the seizure of Venezuelan President Maduro and the formal investigation into Fed Chair Powell suggest a similarly aggressive move to take Greenland cannot be ruled out. In such an event, the security situation between the US and Europe would change immediately, likely sparking significant market volatility.

United States-China: With little notice, the US late last week dropped its proposed ban on Chinese and some other foreign-made drones. The U-turn may reflect domestic resistance to crimping the supply of the products, but press reports suggest the key reason was to avoid antagonizing Beijing ahead of President Trump’s summit with General Secretary Xi this spring. If so, the development helps confirm our view that the administration’s evolving foreign policy will include lowering tensions with China, which is likely bullish for US and Chinese stocks.

United States-Iran: Anti-government protests continued throughout Iran over the weekend, with the death toll rising to at least 500. Meanwhile, press reports say the White House is mulling multiple strategies, including military strikes, if Tehran kills more of the protestors. The sources say most of the strategies being considered are non-kinetic, but given the president’s willingness to use force in places like Venezuela, investors probably should consider the risk of a US strike against Iran, a potential Iranian retaliation, and the market volatility that would likely follow.

Japan: Prime Minister Takaichi is reportedly mulling dissolving the lower house of parliament for a snap election early next month. Takaichi’s goal would be to capitalize on her 70% approval rating and boost the narrow majority now held by her Liberal Democratic Party and its coalition partner, the Japan Innovation Party. The risk is that Takaichi’s coattails may not be as strong as she thinks, and the LDP and JIP could lose seats. Nevertheless, the prospect of a more stable majority for the pro-business Takaichi may be a positive for Japanese stocks.

US Regulatory Policy: President Trump, in a social media post on Friday, called for capping credit card interest rates at 10% for one year, reviving a promise he made during his reelection campaign in late 2024. It isn’t yet clear how far the president would go to implement the cap, but it would be consistent with the administration’s willingness to intervene in the markets and the president’s new focus on affordability. Any such cap could be negative for financial assets.

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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 the president’s latest home affordability initiatives. We also examine the escalating political infighting over presidential powers, today’s critical tariff ruling, and Meta’s strategic decision to invest in nuclear energy. Additionally, we address the implications of Russia’s recent use of hypersonic missiles in Ukraine. The report also includes a comprehensive roundup of key domestic and international data releases.

Housing Affordability: President Trump has directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities (MBS) in an aggressive bid to lower mortgage rates and improve home affordability. This directive follows his Wednesday announcement of a proposed ban on large institutional investors purchasing single-family homes, a move aimed at reducing corporate competition for prospective homebuyers. Collectively, these actions represent a dual-track strategy to build populist support ahead of the 2026 midterm elections.

• This move is expected to stimulate lending activity, providing a timely boost to a housing market that has recently shown signs of softening. Following the announcement, mortgage-backed securities rallied sharply, while lenders saw their outlook improve on expectations of higher origination volume. The spread between mortgage-backed securities and 10-year Treasury yields also tightened, reflecting anticipated growth in demand.
• That said, the impact of this change on the housing market is more nuanced than it appears. Prior to the president’s announcement, Fannie Mae and Freddie Mac had already begun increasing their purchases of MBS. While this successfully narrowed the spread between mortgage rates and the benchmark 10-year Treasury yield, it has yet to spark significant demand. Consequently, nominal home prices are continuing to rise at their slowest pace since 2015.
• The current disconnect in the housing market stems from the fact that recent interest rate declines have yet to reach a critical “tipping point.” As living costs rise and home prices continue to set new records, buyers have grown less sensitive to modest improvements in borrowing costs. To genuinely reinvigorate housing demand, a more substantial correction may be required, whether through a meaningful decrease in property values or a targeted stimulus to help buyers manage steep entry barriers.
• This context helps explain why the president’s proposed restrictions on institutional home buying could carry significant weight in addressing affordability. Although institutional investors represent a small segment of the national market, their influence has been concentrated in Sun Belt states. By focusing on these high-impact regions, the policy seeks to stabilize housing costs for residents in key swing states and core supporter areas, where home prices remain out of reach for many prospective buyers.
• Forcing these investors to sell their holdings could exert downward pressure on home prices. If coordinated with increased MBS purchases by Fannie Mae and Freddie Mac, this two-part approach could meaningfully improve housing affordability for many voters. While we anticipate that an order to ban institutional investors from the housing market would likely face legal challenges, we believe the administration may still prioritize it.

Presidential Pushback: As the midterms approach, the president is encountering significantly greater resistance from within his own party than he has in the past. This tension was on clear display Thursday when several Republican senators joined with Democrats to pass legislation curtailing the president’s authority to escalate military action in Venezuela. This growing rift is likely to fuel greater political uncertainty, particularly on foreign policy, as the president adopts an increasingly assertive stance toward Latin America and the broader Western Hemisphere.

• In a 52-47 vote on Thursday, the Senate passed an act to restrict the president’s ability to escalate military action in Venezuela without congressional approval. While unlikely to become law (it would need to pass the Republican-controlled House and survive a near-certain veto), the vote represents a direct rebuke from within his own party. In response, the president attacked the senators involved and suggested they should be voted out of office.
• This congressional pushback complicates the president’s efforts to pursue an expansive foreign policy agenda. In addition to Venezuela, administration rhetoric has suggested a willingness to use force in other nations — particularly those linked to drug trafficking — and possibly as a means to acquire Greenland. A public vote that questions his authority could now turn the scope of presidential power into a contentious political issue ahead of the midterms, a scenario the White House would prefer to avoid.
• Furthermore, the Senate’s vote threatens to undermine the administration’s primary source of leverage as it seeks to project greater authority across Latin America. Without the credible threat of continued US military intervention, acting Venezuelan officials may find the space to push back against American demands. This shift could weaken the president’s ability to influence neighboring countries and consolidate regional support for his broader agenda.
• This growing resistance from the president’s own party provides a moderating influence on his foreign policy. By asserting its role in war-making decisions, Congress is effectively lowering the ceiling for military escalation in Latin America. This move toward greater oversight is likely to soothe commodity markets, reducing the uncertainty and volatility that often accompany unilateral military actions.

Tariff Ruling: The Supreme Court is set to rule on the scope of President Trump’s authority to unilaterally implement tariffs. The decision, due today, is likely to clarify the extent of presidential power to impose tariffs without congressional approval and could raise questions about how to handle revenue already collected from these duties. While market expectations suggest the justices will place some limits on this executive authority, we suspect the president may seek alternative legal pathways to maintain the tariffs if constrained by the ruling.

Meta Goes Nuclear: Facebook’s parent company is aggressively securing nuclear power to fuel its AI ambitions, as it has recently announced a major partnerships with Vistra and SMR innovators like Oklo. These agreements underscore the critical role of energy infrastructure in the AI race. As data center density increases, the demand for 24/7 power will benefit a wide array of energy sources, positioning nuclear and natural gas as indispensable partners to solar and wind in meeting the tech industry’s soaring electricity needs.

Russia Ramps Up: Thursday’s Russian strike involving the Oreshnik hypersonic missile represents a dangerous new phase in the war. Impacting a strategic facility near Poland, the attack highlights Vladimir Putin’s willingness to leverage nuclear-capable hardware to influence ongoing peace talks. Although the conflict appears to be moving toward a resolution, Russia’s reliance on high-end weaponry suggests it fully intends to dictate the terms of regional security long after the fighting stops.

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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 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.

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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 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.

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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.

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