What Happened Last Week
- Warsh Nominated: President Trump selected Kevin Warsh as the next Fed Chair nominee.
- Precious Metal Selloff: The Warsh nomination saw a historic selloff in metals and a sharp rally in the dollar.
- Risk Appetite Remains: Despite last week’s volatility, global equities remain near all-time highs.
What We’re Watching This Week
- Earnings Week Four: Two more Mag 7 companies and major pharmaceutical companies are the highlights this week.
- Global Monetary Policy: In addition to scrutinizing Kevin Warsh’s record, rates traders will watch central bank meetings in Europe, the UK, and Australia.
- Economic Data: Job openings data will help shape investors’ view of the labor market in early 2026.
Investment Management Team’s Views
Global equities eked out gains last week as markets absorbed a sharp dollar pullback to 2022 lows, two dissents at the Fed meeting that left rates unchanged, earnings from four Mag 7 companies, the announcement of the next Fed Chair, and historic volatility in precious metals. Even with heavy policy and geopolitical noise, risk appetite remained intact, with both the S&P 500 and international equities reaching new all-time highs last week. Earnings season has reinforced a generally healthy fundamental backdrop, though investors are becoming more selective in recognizing results. Looking ahead, the start of tax season and larger-than-usual refunds could provide incremental support to favored themes such as AI, precious metals, and tech-oriented emerging markets, as well as boost consumption-related metrics.
Last week’s action in currency and commodity markets may signal more volatility ahead for those asset classes. Markets initially interpreted Kevin Warsh’s nomination as Fed Chair through a hawkish lens, triggering a sharp dollar rally, heavy pressure on equities, and a historic selloff in gold and silver. While the metals move drew headlines, we view the currency action as more consequential. The dollar had already fallen to multi-year lows earlier in the week following comments from President Trump signaling comfort with dollar weakness, an indifference consistent with the administration’s goal of narrowing the trade deficit. We expect investors to use dollar rallies as selling opportunities, reinforcing a negative flow dynamic for an already expensive currency.
Sharply divergent reactions to Mag 7 earnings prints last week demonstrated heightened investor scrutiny on guidance. The market was highly focused on expense forecasting and signs of returns on massive AI spend. With a broadening market, investors have become more selective, and, generally, strong real-economy reports should continue to support the broadening trade. This week will bring reports from Alphabet and Amazon, as well as a host of healthcare names. The market is likely to focus on the cloud services outlook from the two tech firms and on any updates on obesity drugs from the pharma companies. The beleaguered software segment will look to earnings from retail darling Palantir to jolt that segment back to life. Beyond corporate earnings, markets will also digest labor data, business survey results, and meetings of several foreign central banks.