Market Intelligence Brief (MIB)

The core facts:

December CPI showed headline inflation at 2.7% YoY (in line with expectations) and core CPI at 2.6% YoY (below 2.7% consensus). Monthly core rose just 0.2% vs. 0.3% expected. Shelter inflation remains sticky at 3.2% YoY but is trending lower.

Why it matters:

Third consecutive month of cooling core prices confirms the Fed’s disinflation progress is intact. Markets now price 95% probability of a hold at Jan 27-28 FOMC, with two cuts expected in 2026 starting June. The cooler print gives the Fed flexibility to ease without reigniting inflation fears.

US Impact:

HIGH — Direct Fed policy implications; supportive for rate-sensitive sectors; 10Y yield fell to 4.175%.

What to monitor:

PPI data Wednesday (Jan 14); Fed speakers this week; Jan 27-28 FOMC meeting.

The core facts:

President Trump announced a one-year cap on credit card interest rates at 10%, effective January 20, 2026. The proposal sent Capital One (-6%), Visa (-4.7%), Mastercard (-5.2%), and JPMorgan (-4.2%) sharply lower. JPMorgan CFO Jeremy Barnum signaled banks will “push back” on the policy.

Why it matters:

Analysts estimate the cap could cost the banking industry $20-30B annually in lost interest income. Banks are expected to respond by restricting credit availability to only prime borrowers, potentially tightening financial conditions for subprime consumers.

US Impact:

HIGH — Direct hit to financial sector earnings; credit availability implications for consumers; systemic policy risk.

What to monitor:

Bank earnings this week (BAC, WFC, C, MS); legal challenges to the executive order; bank guidance on credit policies.

The core facts:

Federal prosecutors warned of indicting Fed Chair Jerome Powell over testimony regarding a $2.5B Fed headquarters renovation. Powell called the investigation a “pretext” by the Trump administration to pressure the Fed into cutting rates. Global central bankers rallied to Powell’s defense.

Why it matters:

The investigation raises fundamental questions about Fed independence, a cornerstone of US monetary policy credibility. Markets initially sold off sharply Monday before recovering, but the uncertainty is driving safe-haven demand. JPMorgan CEO Jamie Dimon emphasized the importance of Fed autonomy.

US Impact:

HIGH — Systemic risk to Fed credibility; safe-haven asset flows; VIX elevated on policy uncertainty.

What to monitor:

DOJ investigation developments; Powell’s continued leadership; any congressional response.

The core facts:

Gold reached an all-time high near $4,620/oz amid concerns over Fed independence, geopolitical tensions (Iran protests, tariff threats), and central bank buying. Silver surged to $85.64/oz. UBS, Bank of America, and JPMorgan all target $5,000 gold by year-end.

Why it matters:

Central banks bought 220 tonnes in Q3 2025 (+10% YoY), with no signs of slowing. Gold’s parabolic move reflects structural demand as a hedge against policy uncertainty and potential dollar weakness. Mining stocks (NEM, GOLD) rallying in sympathy.

US Impact:

HIGH — Signals risk-off sentiment; benefits precious metals miners; inflation hedge demand rising.

What to monitor:

Central bank gold purchases; Fed policy trajectory; geopolitical developments in Iran and trade policy.

The core facts:

President Trump announced a 25% tariff on any country doing business with Iran, “effective immediately.” The move targets China and India as major Iran trading partners. WTI crude moved toward $61/bbl on supply disruption concerns.

Why it matters:

The tariff threat comes amid massive anti-government protests in Iran, raising fears of broader regional instability. If enforced, the policy would significantly escalate trade tensions with China and India while potentially disrupting global oil supply chains.

US Impact:

HIGH — Trade policy escalation; energy price implications; geopolitical risk premium rising.

What to monitor:

Implementation details; China/India response; Iran protest developments; Supreme Court tariff ruling (possible Jan 14).

The core facts:

L3Harris Technologies announced a $1B investment from the Pentagon to spin off its Missile Solutions business via IPO in H2 2026. The deal marks the first direct government-to-supplier investment partnership. The company will expand capacity for PAC-3, THAAD, Tomahawk, and Standard Missile programs.

Why it matters:

The deal signals Trump administration’s commitment to defense industrial base expansion despite earlier threats to block buybacks. Citigroup raised LHX price target to $389. The partnership model could be replicated across other defense contractors.

US Impact:

HIGH — Defense sector catalyst; new funding model for military industrial base; supports Trump’s $1.5T defense spending goal.

What to monitor:

Missile Solutions IPO filing; similar deals for other defense contractors; FY2027 defense budget negotiations.

The core facts:

Stifel’s chief equity strategist Barry Bannister warned that the “K-shaped” economy (stocks up, only wealthy spend more) is economically unsustainable. The wealthiest 10% of Americans now generate nearly half of all US consumer spending.

Why it matters:

Stifel forecasts aggregate labor income will fall in 2026, which would slow real personal consumption (~70% of GDP). Combined with valuation risk, this outlook does not support a fourth consecutive year of double-digit S&P 500 gains. High-income consumer confidence is declining fastest.

US Impact:

HIGH — Consumption sustainability risk; wealth effect concerns; market valuation warning.

What to monitor:

Retail sales data (Jan 15); consumer confidence surveys; labor income trends.

The core facts:

Markets price 95% probability of Fed hold at Jan 27-28 FOMC. Morgan Stanley projects cuts in June and September 2026. KPMG expects three cuts starting June to reach 2.75%-3.0% range by year-end.

Why it matters:

The path of rate cuts will be critical for rate-sensitive sectors (housing, banks, small caps). Today’s cooler CPI supports the case for H2 easing but doesn’t change near-term trajectory.

US Impact:

MODERATE — Confirms market expectations; supports duration positioning in fixed income.

The core facts:

Full-year 2025 added only 584K jobs—the weakest non-recession year since 2003. Healthcare accounted for 69% of job growth. December added just 50K jobs (vs. 70K expected). Long-term unemployment (26%+ weeks) is at highest level since February 2022.

Why it matters:

White-collar hiring remains frozen, with entry-level positions particularly affected by AI displacement fears. ZipRecruiter expects improvement only in H2 2026. The labor market is in “low hiring, low firing” mode.

US Impact:

MODERATE — Supports Fed easing case; consumption sustainability concerns.

The core facts:

University of Michigan survey shows highest-third income earners saw 32.1% confidence decline in 2025 vs. 27-30% for lower income groups. Job stability concerns are “particularly elevated” among higher-income, more educated consumers.

Why it matters:

Since the top 10% drive nearly half of US spending, their declining confidence threatens consumption growth. This compounds the K-shaped economy concerns raised by Stifel.

US Impact:

MODERATE — Wealth effect risk; discretionary spending outlook weakening.

The core facts:

The Supreme Court is expected to rule on the legality of Trump’s sweeping tariff authority, potentially as early as January 14. The court did not issue a ruling Friday as some expected.

Why it matters:

A ruling striking down tariff authority would fundamentally reshape trade policy and could provide relief to import-dependent sectors. An upholding would entrench current policy. Binary event risk for portfolios exposed to trade policy.

US Impact:

MODERATE — Binary policy event; outcome unclear; significant for trade-exposed names.

The Numbers:

Q4 EPS $5.23 (beat $5.00 est.) | Rev $46.77B (beat $46.2B est.) | Investment banking fees missed—debt underwriting down 2% vs. +19% expected | 2026 NII guidance $103B (above $100B consensus)

The Problem:

Despite strong trading performance and beat on headline numbers, investment banking fees disappointed. More importantly, CFO Jeremy Barnum signaled banks will “push back” on Trump’s credit card rate cap—indicating the policy creates material earnings risk.

The Ripple:

Entire financial sector sold off: COF -6%, V -4.7%, MA -5.2%. Sets cautious tone ahead of BAC, WFC, C, MS earnings this week.

What It Means:

Bank earnings quality is overshadowed by credit card rate cap policy risk. Watch for other banks’ guidance on credit policies and NII impact when they report.

The Numbers:

Q4 EPS $1.55 (beat $1.53 est.) | Rev $14.61B (slight miss) | FY26 profit guidance midpoint below consensus | Announced 30 Boeing 787-10 orders (first-ever, deliveries 2031)

The Problem:

FY26 guidance disappointed despite solid Q4 results. Market concerned about capacity growth and margin pressure in competitive environment.

The Ripple:

Boeing received positive news from the 787 order; airline sector broadly weaker on guidance concerns.

What It Means:

Even airlines meeting expectations are being punished for conservative guidance. Market prioritizing forward visibility over backward-looking beats.

What they’re saying:

Ariel Investments’ John Rogers, in a January 13, 2026 interview, predicted a “small recession” by the end of 2026 with the Dow falling 15-20% from current levels. He cited the disconnect between strong equity markets and struggling average Americans facing high living costs.

The context:

This aligns with Stifel’s K-shaped economy warning. Rogers is a respected long-term value investor, and his recession call adds to growing concerns about consumption sustainability.

What they’re saying:

CNN reported January 13 that the Fed is unlikely to cut rates imminently despite weak sentiment, citing “tentative signs of stabilizing” in the labor market. Morgan Stanley has pushed rate cut expectations to June-September.

The context:

A more cautious Fed stance keeps recession risk elevated by limiting monetary support. However, the “stabilizing” characterization of labor markets is more optimistic than other recession narratives.

What they’re saying:

CNBC declared a “hiring recession” in a January 13 report, noting that 2025’s 584K job additions marked the weakest non-recession year since 2003. White-collar hiring remains frozen, with entry-level positions particularly affected by AI displacement fears.

The context:

ZipRecruiter expects improvement only in H2 2026. The “hiring recession” framing, while not a formal recession, highlights significant labor market stress concentrated in higher-wage sectors.