🔎January 2026 Market Strategy
The seeds of doom are sown in the boom.
Today marks the 26th edition of my monthly market strategy reports. Time flies! Some predictions have aged supremely well, others not so much (yet). Either way, I enjoy organizing my macro thoughts in this condensed and regular format. It’s great for my personal learning to revisit older pieces to see how I was thinking about the macro environment back then. I hope you are also enjoying this monthly series. Let me know if you have ideas to change or amend it to make it better. And as always, the best you can do to support my work is to share it with others. :)
In my December 2025 Market Strategy, I argued that the Fed’s easing strategy will likely be bullish for sentiment initially, but not necessarily in the mid-term because its net effect on liquidity creation is questionable. I also pointed to the shrinking fiscal deficit as an underappreciated macro risk factor and I highlighted once again the crowded nature of the Debasement Trade. Let’s see how the picture has evolved since then.
TLDR Summary
The US economy is booming, currently advancing at a pace not seen since the peak of dotcom. And whether one likes it or not, Trump’s trade policy seems to be playing a key role in that. Imports are falling and exports are rising while consumption and investment keep growing. The US economy is clearly insourcing value creation, both for domestic use and for exports. I have discussed the risks and negative effects of America’s trade strategy pivot at great length in the past. So far, these negative factors don’t seem to be materializing.
As a result, stocks keep marching and bonds are staying at depressed levels. Bond investors are capitulating, but their pain hasn’t ended yet. Yields refuse to come down. Curiously, this seems to be happening now due to rising growth expectations, not stagflation fears. Investors expect an economic acceleration this year. Risk appetite was strong a month ago. Now, it’s even stronger. Impossible to know when they are finally satiated.
Investors love stocks and hate cash & bonds. And of their stocks, they prefer those that give them cyclical exposure, most importantly commodities, which seems to be one of the most crowded and hence most vulnerable asset classes. The belief into a new commodity supercycle is strong. It’s a fitting icing on the cake for the terminal stage of the Debasement Trade. I feel compelled to dedicate an entire article on commodities to address that in more detail. We’ll see if I get to that.
In my opinion, there is a psychological theme at play here in additional to cool-headed macro analysis. First, we had recession fears from the initial rapid rate cuts. These fears didn’t materialize. Then, we had stagflation fears, which are also not materializing. Now, when investors are asked about their worries, they shrug them off, saying ‘nothing ever happens anyway’. People expect a stronger economy and a stronger stock market simply because that’s what seems to be happening all the time anyway. ‘Stonks’ only go up. So, why bother? Just lever up and enjoy 20% per year forever.
I find that dangerously complacent. And I continue to believe that stocks as a whole don’t offer an attractive risk/return profile right now. Some have to play due to their circumstances. I am glad I don’t. If I had to make a guess about timing for a reality check, April tax season will likely be brutal for the stock market this year.
