Navigating Geopolitics, Tariffs, and Building Resilience in 2026

“Nothing changes on New Year’s Day.” This famous line from a 1983 U2 song captures a truth often overlooked in financial markets — while the calendar may flip, the underlying macro and market trends rarely undergo dramatic shifts overnight. 2026 has begun much like 2025 ended: Broadening of markets continued, as global stock markets continued their upward trajectory,1 supported by expected strong earnings growth,2 anchored inflation expectations,3 and optimism around potential central bank policy easing.4 Yet, as was the case last year, investors face a proverbial “wall of worry,” none of which we believe is likely to derail the market advance. These include, but aren’t limited to: Persistent geopolitical tensions and new flashpoints such as the developments in Venezuela, Greenland, and Iran, questions surrounding the independence of the Federal Reserve (Fed), and the legality of the Trump administration’s tariffs. Meanwhile, the US economy enters the year on a sound footing, resilient, and with important signs that productivity has improved.5 Concerns over Fed independence return The Trump administration’s Department of Justice is opening an investigation into the US Fed and raised the possibility of a criminal indictment connected to Fed Chair Jerome Powell’s testimony regarding cost overruns associated with the Fed’s building renovation. Powell pushed back publicly and strongly, releasing a video in which he argued that the building costs are merely a pretext. The independence of the central bank is critical. That should not be a bold or controversial statement. It is a foundational principle of modern macroeconomic management and a cornerstone of financial market confidence. The market reaction to this news has been muted. Stocks were generally stable,6 and the US dollar surprisingly advanced in the week.7 We believe that the muted reaction is justified for now as the market appears to have grown accustomed to the jawboning from the administration. It also raises the probability that Chair Powell will remain on the Federal Open Market Committee (FOMC) even after his term as Chair ends. He would be the third Chairman to break convention and do that. Ironically, the upshot could be a Fed that is more hawkish than was previously expected. This is an important and changing story. We’ll be watching inflation expectations closely. They remain within the Fed’s perceived “comfort zone,” despite a sizeable increase early in the week.8 Energy markets remain stable despite Venezuela conflict Recent events in Venezuela and Iran have made big headlines. Questions about potential global impacts are being raised. Typically, geopolitical developments have only disrupted markets when they either damage global economic activity — via a growth or supply shock — or provoke a shift in policy by the world’s major central banks. In Venezuela’s case, neither outcome seems likely. The same is true in the Middle East, provided the Strait of Hormuz remains open. Venezuela’s diminished oil production capacity9 and the overall robustness of world oil supply10 have kept energy markets stable. While Venezuela reportedly has more oil reserves than Saudi Arabia, there’s little likelihood that Venezuelan production rises meaningfully for years at best. Thus, the muted reaction in oil makes sense to us. Unsurprisingly, precious metals, including gold and silver, have advanced11 as investors sought potential safe havens. We think both have the potential to move higher if geopolitical concerns, including those in Iran and Greenland, persist. Supreme Court delays tariff ruling The US Supreme Court delayed its ruling on the legality of the tariffs that President Trump issued last year under the International Emergency Economic Powers Act (IEEPA). A ruling is expected in the coming weeks. Regardless, overall US tariff levels are unlikely to decline substantially even if the IEEPA tariffs are struck down. Other statutes grant the president broad authority to impose tariffs, meaning those previously enacted under the IEEPA could be reimposed under different legal frameworks. Tariff pressure on Europe over Greenland Over the weekend, President Trump announced that several European countries would face additional tariffs if they didn’t support the full sale of Greenland to the US. President Trump’s rhetoric around a sale then grew with a letter sent to the Norwegian Prime Minister on Monday. He threatened to apply a 10% tariffs on all goods exported from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland to the US starting February 1 until a deal is reached for the “Complete and Total Purchase of Greenland.” Also, the tariff will be increased to 25% on June 1, 2026, if a deal hasn’t been reached. This is on top of existing tariffs. European Union (EU) leaders are debating their response, but one option could include invoking the Anti-Coercion Instrument (ACI), which would allow the EU to close off US access to the European single market. Markets have reacted in a relatively sanguine fashion, and for now, we think that’s probably the right and expected reaction. We knew the US administration wanted to acquire Greenland, and President Trump has a clear history of threatening high tariffs and then walking them back. These moves support our core views: A weaker US dollar, higher precious metals prices, and potential outperformance by non-US stocks. US banks deliver, but fall on credit card risks US banks were the worst-performing group in the US last week despite delivering strong earnings results that painted a picture of a resilient US consumer and strong trading revenue.12 Downward pressure came as a result of President Trump calling for a 10% cap on credit card rates — average credit card rates have never been at 10%.13 It remains to be seen whether the US administration could deliver this change and how bank credit would respond. But the idea sends a message. The US administration wants a very strong economy this year and will try unconventional measures to get it. Data illustrate the US economy’s resilience Recent data releases served as a reminder that the US economy has entered 2026 much as it ended 2025 — on a sound footing with resilient, indeed, improving growth. Manufacturing survey data held steady but remains in contraction territory,14 while services pointed to expansion, albeit at a moderate pace.15 Businesses continued to show caution, reluctant to hire aggressively16 yet unwilling to cut staff, as jobless claims stay near historic lows.17 Credit card spending data18 underscored that consumers are still spending, supporting overall stability. Inflation is elevated but relatively stable.19 Importantly, third-quarter productivity came in at 4.9%,20 perhaps a sign that the benefits of new technologies such as artificial intelligence (AI) are beginning to accrue. We view this as bullish for stocks, as rising productivity is supportive for corporate earnings and allows the central bankers to run the economy hot without inflation. The latest Atlanta Fed GDP Nowcast figure is pointing to real US GDP growth of near 5.5%.21 Our outlook remains the same The restful holiday period seems a long time ago now, and while it might feel like a lot is changing, we are content that our core views haven’t changed. If anything, they are strengthened. We still believe growth will improve globally and stocks have the potential to rise, led by non-US markets and cyclical sectors. Important information NA5133206 Image: Karl Hendon / Getty All investing involves risk, including the risk of loss. Past performance does not guarantee future results. Investments cannot be made directly in an index. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions. In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic, and political conditions. The ADP National Employment Report measures nonfarm private payrolls. It’s published monthly in collaboration with Moody’s Analytics. The Anti-Coercion Instrument (ACI) is a European Union regulation that is a legal framework designed to protect the EU and its member states from economic coercion by third countries that attempt to pressure the EU into changing its policies or actions through trade or investment restrictions. The Consumer Price Index (CPI) measures the change in consumer prices and is a commonly cited measure of inflation. The Federal Open Market Committee (FOMC) is a committee of the Federal Reserve Board that meets regularly to set monetary policy, including the interest rates that are charged to banks. Gross domestic product (GDP) is a broad indicator of a region’s economic activity, measuring the monetary value of all the finished goods and services produced in that region over a specified time period. Fluctuations in the price of gold and precious metals may affect the profitability of companies in the gold and precious metals sector. Changes in the political or economic conditions of countries where companies in the gold and precious metals sector are located may have a direct effect on the price of gold and precious metals. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. Gross domestic product (GDP) is a broad indicator of a region’s economic activity, measuring the monetary value of all the finished goods and services produced in that region over a specified period of time. Hawkish describes a central bank or policymaker's preference for a tighter monetary policy, typically to combat inflation. Inflation is the rate at which the general price level for goods and services is increasing. Monetary easing refers to the lowering of interest rates and deposit ratios by central banks. The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services. Purchasing Managers’ Indexes (PMI) are based on monthly surveys of companies worldwide and gauge business conditions within the manufacturing and services sectors. The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues. The S&P 500® Index is an unmanaged index considered representative of the US stock market. Safe havens are investments that are expected to hold or increase their value in volatile markets. A spot price is the current market price at which an asset is bought or sold for immediate payment and delivery. Treasury Inflation-Protected Securities (TIPS) are US Treasury securities that are indexed to inflation. West Texas Intermediate (WTI) is a type of light, sweet crude oil that comes from the US. The opinions referenced above are those of the author as of Jan. 16, 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.