Stocks survived a choppy week with mixed results. Early in the week, rising tensions surrounding Greenland and the threat of additional tariffs from the United States and Europe spiked volatility. Risk assets recovered as the rhetoric eased, but this past week should serve as a reminder that geopolitics still play center stage. Broader leadership is another big theme with small-caps, value stocks, and precious metals performing particularly well.
It was a big week for milestones. Natural gas prices rose more than 60% as frigid conditions across the United States lifted demand. Silver crossed $100/ounce for the first time. The Russell 2000’s streak of outperforming the S&P 500 was snapped at 14 straight trading days on Friday, the longest streak in 30 years.
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Market Moves
Weekly Market Snapshot:
- S&P 500: -0.4% – despite a lot of chop, the index was relatively little changed, but the story remains the rotation away from tech and into other areas of the market.
- Nasdaq 100: +0.3% – the tech-heavy index had a better week, but it’s no longer pulling the market higher the way it did in 2025.
- Russell 2000: -0.3% – small-caps have gotten off to a terrific start to the year and are currently one of the best-performing areas of the market.
- VIX: 16.1 – volatility shot higher during the first half of the week on geopolitical tensions, but calmed down as the week progressed as new tariffs got pulled off the table.
- Gold: +8.5% – there seems to be a global push away from the dollar and dollar-denominated assets; that has driven strong interest in both gold and silver here.
- 10-Year Treasury Yield: 4.23% – this yield briefly moved to its highest level since August during the Davos conference as Treasuries are growing less attractive worldwide.
Drivers:
Market sentiment turned nervous as the U.S. government took a strong arm approach to acquiring Greenland and punishing European countries that disagreed. The stand-down later in the week helped equities recover, but the damage is still being done to the dollar. If global governments continue to pivot towards de-dollarization, it could eventually produce a serious headwind to U.S. asset returns and make international stocks and precious metals more attractive.
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Economic Highlights
A couple of the notable themes that stood out this week:
Things Get Heated At Davos
The annual World Economic Forum in Davos, Switzerland has traditionally been a meeting of the major global economic powers to discuss current issues and trends. This past week, it became a hotbed of geopolitical rhetoric with several leaders hurling threats, pointed barbs, and insults at one another.
At the center was the current administration’s desire to take control of Greenland either by negotiation or force. After threats of new tariffs by the United States against most European trade partners and indications by the EU that it would place its trade agreements on hold, President Trump mid-week said that he wouldn’t be using force to takeover Greenland and would not be implementing new tariffs. In the end, it was a lot of market volatility without anything really being accomplished.
As long as Greenland remains a focus of the White House, it seems like these bouts of short-term volatility are likely to continue. It’s important to remember that threats and rhetoric don’t usually turn into policy. They can be distracting short-term noise, but not much that impacts the long-term picture. Not much has changed on the equity market front, but the risk looks sticky for the dollar and the precious metals markets. The S&P 500 hanging around all-time highs at the same time that gold & silver are soaring to new highs of their own isn’t the behavior we usually see in the markets. It could soon reach a point where one of the two has to give.
Fed’s Preferred Inflation Measure Comes In As Expected
The United States PCE price index came in at 2.8% annualized in November, in line with market expectations.1 The core rate also came in at 2.8%. As we noted last week with the CPI data releases, inflation remains in an elevated but stable state. There’s little indication at this point that inflation could approach the Fed’s 2% target anytime soon, but there’s also little indication that it’s threatening to move significantly higher right now.
Tariffs remain the biggest obstacle to inflation moderating and the latest geopolitical dust-up, which threatens to undo some existing trade partnerships, could increase pricing pressures further. For now, the market seems satisfied with inflation not rising as long as it isn’t falling. That viewpoint may be less sustainable longer-term, but it’s enough to keep it off the list of primary economic concerns for the time being.
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Consumer Sentiment Continues To Very Slowly Improve
Consumer sentiment is still around the levels of 2022 when inflation was soaring and the economy was at risk of slipping into recession. But at least sentiment is beginning to improve. Slowly.
source: University of Michigan, Trading Economics.
The University of Michigan sentiment survey hit a reading of 56.4 in January, its second straight monthly increase and the highest since August.2 For some perspective though, this reading spent much of the year in the 70s before falling off sharply last year. Sentiment has been a persistent concern for over a year. Even though GDP growth looks good and the unemployment rate is still below 5%, depressed consumer sentiment has reflected how people on the bottom side of that K-shaped economy are feeling. Affordability has been an issue since 2022 and the labor market is beginning to reflect growing concerns over job security now too. The U.S. economy can survive with conditions like this, but it becomes increasingly vulnerable with fewer participants enjoying the benefits.
Jobs Market Is Cooling But Stable
Along those same lines, jobless claims have remained around 200,000 for the last few weeks and among the lowest levels of the past couple years.3 Combined with other data, including job quits and job openings, we’re seeing a market where firings are low, but so is hiring. Ideally, we’d like to see more robust job growth that could support an economic expansion, but so far we keep seeing stagnation instead of outright contraction. It’s not really a good thing, but it’s not a bad thing either.
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The Week Ahead
A few themes to watch next week:
In Summary
The markets wrapped up a surprisingly volatile week. Geopolitical noise should begin taking a back seat again to Q4 earnings. The Fed is unlikely to produce any surprises, but the number of opinions on the future policy path are diverging. Dissent could be a key feature of the Fed for a while.
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