For decades, the US has long benefited from being the world's stock market. Our legal system creates a "safe harbor." If you buy a share of Apple, you own a piece of the company, and that ownership is protected in courts. The SEC, while not perfect, enforces standardized financials and requires companies to disclose risks so investors can be educated before they commit funds.
US technology companies provide unmatched innovation. If you are an investor and you want exposure to AI or cloud computing, you have to invest in US stocks. There is no other alternative. The world trades in dollars and it is considered a standard and normal process for investors to park excess cash in US stocks and Treasuries. We benefit from a constant, structural demand for US securities, which in turn provides liquidity.
Even though the US is only about 25% of the global economy (GDP), it is over 60% of the global stock market. For all of the great benefits our stock market has going for it, the recent tariff announcements over the weekend provide a cause for concern for investors.
Protectionism vs Coercion
Unlike the tariffs that were put in place in 2025, the January 2026 version is about geopolitics. In Round 1, (2025) the administration cited trade deficits, currency manipulation and unfair labor practices as the reasons for implementation. In Round 2, (2026) the administration is demanding a sovereign land sale. There is no economic lever Europe can offer to fix this. It is a political problem requiring a territorial solution. This raises a whole list of macro risks that we were not even considering just a couple of days ago.
While all of the points above about our market still hold up today, the tariff announcements over the weekend are a new risk to consider. The Round 1 tariffs were across the board and universal. Now, according to the administration, a tariff of 10% will apply to the "Greenland 8" effective Feb. 1 (Denmark, Norway, Sweden, Finland, Germany, France, UK, Netherlands).
By exempting other EU nations, it splits the EU single market and benefits non-tariff countries. The tariffs are likely based on "Country of Origin" rules. A German car part sent to Italy to be assembled might still get hit, while an all-Italian part doesn't.
The Mechanism
Tariffs implemented in 2025 were immediate or with standard review periods. They became an inflationary drag, but were predictable. This new round of tariffs is structured as an ultimatum. The Feb. 1 effective date serves as a warning shot with a June 1 escalation to 25% if a deal is not made.
This puts the next four months into a countdown. Corporate planning cycles now have to account for multiple "what-if" scenarios, adding complexity and cost to budgeting cycles. If you are holding inventory, you now have to decide whether to stockpile before February or liquidate.
Photo by Johannes Plenio / Unsplash
Erosion of Trust
Usually, tariffs are used as economic leverage, for example, to protect US steel. However, threatening tariffs on NATO allies is merging security policy with trade policy. From a global perspective, it's a signal that US capital markets are no longer just economics, it's a tool of diplomatic coercion. Investors can model a tariff increase; they cannot price in a sudden diplomatic rupture between allies.
Global reactions to the new tariff announcements have been unified and immediate. The eight targeted nations warned in a joint statement that these tariffs, "undermine transatlantic relations and risk a dangerous downward spiral." The Dutch Minister of Justice and Security David van Weel called the President's demand "blackmail." Reports from Europe suggest the often cited "trade bazooka" as a potential counter. The risk here is moving from a "threat" phase to a "trade war" phase very quickly.
Compromise
We've all seen these spontaneous threats from the administration in the past and the market has taken that into effect. By now, we know the President usually pivots but has to accept some sort of "face-saving" compromise for a deal. Some geopolitical analysts believe expanded US base rights or leasing deals may be potential "off-ramps."
To be sure, the US, in the near term still remains the world's investment haven. The US market is so deep and liquid, that even in turmoil, it is still the safest place to hide. There also is currently no other alternative, China is facing a slowdown, Europe is fragmented and Japan doesn't have the liquidity.
Long term, here are two trends that may create future erosion in the US markets.
- The Alternative Currency Argument: China's argument for an alternative to the US dollar gains traction if these tariffs are enacted. China can say, "The US weaponizes the dollar, you need an alternative."
- The Risk Premium: If global investors feel the US legal system is becoming unpredictable, they will want a higher return to invest here. This makes borrowing more expensive for US companies and the US government over the long term.
The market is currently trading on the belief that a compromise will appear. If February 1st comes and there is no deal, the narrative shifts from negotiation to trade war.
Latest News
Credit Cap
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The Proposal: The administration is pushing for a temporary 10% interest rate cap on credit cards effective tomorrow, threatening executive action if banks do not adopt the measure voluntarily.
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Bank Pushback: Major lenders warn that this policy would compel them to tighten lending standards and slash credit limits for millions of consumers to protect their profit margins.
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Market Impact: Investors are bracing for volatility in card-heavy stocks like Capital One and Synchrony when markets reopen Tuesday as the sector weighs the potential hit to net interest income.
Photo by Alicja Ziajowska / Unsplash
Regional Banks Earnings
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We are focused on Regional Banks this week and will be watching closely for data on the potential impact of the proposed 10% Credit Cap.
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Tuesday’s Industrial & Energy Pulse: A busy Tuesday slate features Hancock Whitney and 1st Source Corp, regional lenders whose loan books offer a direct window into Gulf Coast energy activity and the specialized financing of Midwest industrial equipment.
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Mid-Week Geographic Check: On Wednesday, Fulton Financial and Banner Corporation report results that cover the Mid-Atlantic and West Coast, providing data on credit quality and borrower health across two distinct economic hubs.
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Thursday’s Efficiency Watch: The week concludes with Home BancShares and Independent Bank Corp, highly efficient operators that investors track to gauge the stability of profit margins in the South and the New England economy.
Movers & Shakers
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ImmunityBio (IBRX) The biotech rose 40 percent on Friday as Management raised guidance. The company is now projecting 700 percent revenue growth for its bladder cancer drug, Anktiva.
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Kopin Corp (KOPN) Up 15% - A new development order confirms defense spending is trickling down to small component makers.
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GE Vernova (GEV) Up 6% - Continues to rise as the premier play on the power gride upgrade cylce.
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Energy Talen Energy Down 11%, Constellation Energy down 10% - The market is reacting to Talen's acquisition news from last week, debt-funded growth is being penalized.
The Briefing
The Economy
- Strong Growth, New Risks: Last Friday, we noted strong momentum entering the new year. However, analysts are now rushing to model the inflationary drag of the "Greenland 8" tariffs.
The Markets
- Futures Red: S&P 500 futures are down ~0.8% and Dow futures are down ~1.1%. Algorithms are reacting to the geopolitical shock and the regulatory threat to bank margins.
- Sector Split: Nasdaq 100 futures are down only 0.5%, as investors bet that software and AI are safer havens than hardware or banking.
The Policy
- Credit Cap Shock: The proposed 10% cap on credit card interest rates is shaking the financial sector.
- Bank Reaction: Lenders are expected to lobby hard against the measure, warning of a credit contraction for low-income borrowers.
The Flows
- Flight to Quality: We are seeing early signs of rotation out of financials and into "fortress balance sheet" tech stocks.
- Small Cap Pain: Russell 2000 futures are down ~2.2%, hammered by the double threat of regional bank weakness and reduced credit availability.
Today's Fact
The Father of "Horsepower"
Today, January 19, marks the 290th birthday of James Watt (born 1736), the godfather of the Industrial Revolution. While famous for the steam engine, his true genius was marketing.
To convince skeptical clients to ditch their draft animals for his machines, Watt invented a unit of measurement that non-engineers could easily understand: "Horsepower."
The Lesson: Technology wins when Engineers can quantify the economics for the people writing the checks.
Thank you for spending part of your morning with me. See you tomorrow. -Marques
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