Stocks are weird right now. Honestly, if you looked at the headlines coming out of the World Economic Forum in Davos this week, you’d think the sky was falling, yet the S&P 500 keeps hovering near record highs. It’s this strange tug-of-war. On one side, you have traders obsessing over every syllable President Trump utters about housing reform and credit card caps; on the other, you’ve got a tech sector that basically refuses to stop growing because of the "AI supercycle."
Monday is a holiday for Martin Luther King Jr. Day. Markets are closed. That gives everyone a second to actually breathe and look at the data before Netflix and Intel drop their earnings later this week.
The Trump Factor and the Credit Card Freakout
Most people are talking about the proposed 10% cap on credit card interest rates. It’s a huge deal. When the news hit, companies like Mastercard (MA) and Visa (V) took a visible hit. Why? Because investors are terrified it’ll make lending to anyone without a "perfect" credit score totally unprofitable.
The logic is simple: if banks can’t charge enough to cover the risk of a default, they just won't lend. This "One Big Beautiful Bill Act" that's floating around is meant to help consumers, but it’s making the financial sector very twitchy. We saw JPMorgan Chase and PNC Financial report mixed results recently, and the vibe wasn't exactly "party time."
Then you have the Fed.
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Jerome Powell is out in May. Trump hasn't officially picked a successor, but the name Kevin Hassett is everywhere. Markets think Hassett would be a "dove"—meaning he’d slash rates faster than a clearance sale. But the 10-year Treasury yield just hit 4.23%, its highest since September. This tells us the "bond vigilantes" aren't convinced inflation is dead yet.
Why the Nasdaq Doesn't Seem to Care
You've probably noticed the Nasdaq Composite is in its own world. It’s up over 50% since this bull market started back in April 2025. History is actually on its side here. Since the 90s, the second year of a bull market usually averages a 17% return.
The AI Earnings Wall
This week is the first real test for the "AI or Bust" narrative. We have Intel (INTC) and Netflix (NFLX) reporting.
- Intel: They’ve been riding high on government subsidies and Nvidia's crumbs, but now they have to show the "AI PC" is actually a thing people are buying.
- Netflix: They missed last time because of some tax drama in Brazil. This time, investors want to see if the ad-tier growth is still explosive enough to justify the valuation.
It's basically a "winner-takes-all" environment. J.P. Morgan analysts are calling it "market polarization." Basically, if you aren't doing something with AI or semiconductors, you're sort of just sitting in the corner. Nvidia, Microsoft, and Alphabet are still the ones holding the entire index on their shoulders.
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US Stock Market News: The Recession That Never Was?
Remember everyone saying we’d be in a recession by now? It hasn't happened. GDP is forecast to grow about 2.5% this year. That’s actually better than what most "experts" predicted.
But there’s a catch.
The labor market is doing this "low-hire, low-fire" dance. Companies aren't doing mass layoffs like it's 2008, but they aren't exactly hiring your cousin who just graduated college either. The unemployment rate for recent grads has spiked to around 8.5%. That's a lot of talent sitting on the sidelines while companies wait to see if AI can do the entry-level work instead.
What Most People Get Wrong About 2026
The biggest misconception is that the Fed "must" cut rates because the President wants them to. Honestly, the Fed is independent—at least for now. If inflation stays sticky around 2.8% or 3%, they might just sit on their hands.
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Goldman Sachs thinks we might see a cut in June and September, but that’s a long way off. If you're betting your whole portfolio on "cheap money" coming back by Valentine's Day, you might want to rethink that.
Tangible Assets are Making a Comeback
Because of all this uncertainty, people are actually buying gold and real estate again. Gold is up about 7% already this year. It’s the "I don't trust the government or the banks" trade. When the VIX (the "Fear Gauge") spikes toward 17 like it did last Wednesday, people run for the shiny stuff.
Practical Steps for Your Portfolio
Don't just stare at the screen. Here is what's actually happening and how to handle it:
- Watch the "Belly" of the Curve: Intermediate bonds (3-7 years) are looking attractive because they balance the risk of inflation with a decent yield.
- Earnings over Hype: Stop buying "AI" companies that don't have revenue. Wait for the Intel and Microsoft reports to see who is actually making money, not just talking about it.
- Diversify Out of Tech: If the credit card cap happens, banks might suffer, but "Consumer Staples" (the stuff you buy at the grocery store) usually hold up.
- Keep an Eye on Davos: Any specific mentions of "housing reform" could send real estate stocks (REITs) on a roller coaster.
The US stock market news cycle is moving at light speed. One tweet or one earnings miss can wipe out a month of gains. Stay liquid, stay skeptical of the hype, and remember that even in a bull market, not every stock is a winner.
Check the PCE inflation data coming out on Friday—it’s the Fed’s favorite metric and will likely dictate whether the next move is a "buy the dip" or a "run for the hills" moment.