Despite headlines hinting at fading demand for US assets, the idea of a broad 'Sell America' trend is overstated. While renewed tariff threats and strains in the transatlantic alliance have added fresh volatility, these appear to be short-term noise rather than signs of a structural shift. Market behavior after the April 2025 tariff tantrum points to resilience, not retreat. The latest Treasury International Capital (TIC) data shows that foreign holdings of US equities remain on track to rise $2.8t in 2025 and foreign ownership of Treasuries has climbed to a record $9.4 trillion in November. Treasury auctions also continue to show healthy demand from US and foreign buyers. Taken together, the data reinforces our view that concerns about a sweeping 'Sell America' trade are greatly exaggerated.
Highlights:
- Consumer confidence plunged in January to 84.5—the lowest since May 2014—with both the Present Situation and Expectations Indexes dropping sharply. Concerns about inflation and weak job prospects were cited across all demographics.
- US trade deficit widened sharply in November, doubling to $56.8b from $29.2b in October. The rebound reflects normalization after October’s unusually low deficit and has pushed the Atlanta Fed GDPNow estimate for 4Q down from 5.4% to 4.2% QoQ, annualized.
- The PPI for final demand came in stronger than expected at 0.5% MoM—its highest monthly increase since last September—and climbed 3.0% YoY. Trade services were the major driver of December’s gain, growing 1.7%
- Focus of the Week: Next week, attention will turn to the labor market. The week begins with the Job Openings and Labor Turnover Survey on Tuesday, followed by jobless claims and unit labor costs on Thursday. Friday brings the all-important January employment report, and we expect the monthly increase in nonfarm payrolls to rise to 70,000 (from 50,000 last month). Friday will also feature updated payroll guidance from the Bureau of Labor Statistics, along with revised employment estimates for 2025.
The risk of a prolonged government shutdown has lessened, with the White House and Senate Democrats striking a deal on Thursday. Senate Democrats had threatened to withhold support of the final six-bill funding package given its inclusion of DHS (and ICE) funding ahead of the deadline on Friday, January 30. Following a failed procedural vote (which eight Senate Republicans joined in defeating), the White House and Senate Democrats reached an agreement to carve out DHS funding from the package. The deal would see the other five bills advance, and a 2-week CR provided for DHS to allow for further negotiations on ICE reform. The package will still need approval from both the House and Senate. With the House in recess until Monday, we could see a short government shutdown over the weekend; however, we view the pressure from Trump as a positive for House passage.
The S&P 500 is roughly flat week-to-date as positive remarks from Chair Powell acknowledging some signs of labor market stabilization were offset by mixed reactions to 4Q25 earnings,particularly within the Technology sector. In fact, software has declined by 12% YTD and is now the worst-performing S&P 500 industry as monetization of AI within software specifically has fallen short of elevated market expectations. However, fundamentals within theindustry remain robust. Given the recent sell-off, relative valuations for the industry are now at the lowest level vs. the S&P 500 since 2015, and EPS growth within the space is expected to outpace theS&P 500 for full-year 2026. Therefore, we see opportunities within the software industry overall, although selectivity remains critical.
After three straight rate cuts, the Fed held its policy rate at 3.50%–3.75%—a range officials view as within estimates of neutral—citing reduced risks around both inflation and the labor market. The decision drew broader support than December’s rate cut, though Gov. Miran and Waller dissented, favoring further easing. At his press conference, Chair Powell sidestepped questions about recent political criticism, instead emphasizing the economy’s resilience and reiterating expectations that tariff-related inflation will peak in Q2 or Q3. While policy remains on hold, he stressed that no one on the committee views a rate hike as the next move. For markets, it was a non-event—consensus expected the Fed to remain on hold for several meetings before delivering two cuts by year-end.
This was another record-breaking week in gold (up 18% YTD), silver (up 40%), and platinum (up 10%). As we noted on Monday, we encourage investors not to get carried away by the momentum. Gold's long-standing popularity in times of global turbulence has a flip side: when geopolitical risks subside, investor appetite for gold may also diminish. A durable Russia-Ukraine ceasefire, as well as a diplomatic resolution to US-EU tensions over Greenland, are two plausible scenarios for the next 6 to 12 months that could reduce gold’s appeal. We cannot offer a price target for gold because this market is too dependent on investor sentiment.
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