Things You Need to Know
- Geo-Politics are now front and center again – this time in the Western Hemisphere.
- Capital is already assessing the beneficiaries.
- Macro data to reveal that inflation remains ‘sticky’.
- Earnings to drive the next move.
- Try the Cavatappi
And of course – there is always geo-political risk.
That was the final point I made in Friday’s ‘Investment Themes for 2026’.
At approximately 2:01 a.m. EST on Saturday, January 3, U.S. forces reportedly arrived at Avenida Urdaneta, Caracas 1010 — the Venezuelan Presidential Palace — to detain Nicolás Maduro and his wife, Cilia Flores, and transport them to the United States to face trial. The charges stem from long-standing U.S. allegations that Maduro led an illegitimate regime, engaged in drug trafficking, presided over systemic corruption, and oversaw widespread human rights abuses — accusations repeatedly made by former President Joe Biden and his administration.
What is notable is not the allegations themselves — those have been on the record for years, but that it was President Trump who ultimately acted on them. Reports indicate Venezuelans around the world are celebrating, viewing this as the long-awaited end of a dictator who ruled through repression, fraud, and fear.
Now — let’s be clear about the broader context, because this will be debated loudly and emotionally. It will trigger partisan, moral, and ideological reactions — and it already has re-ignited the China–Taiwan narrative.
But remember this: markets don’t trade on chaos. They may react to chaos in the short term, but over time they trade on facts, incentives, and consequences. For investors, the question is not whether this was right or wrong. The real questions are why did this happen, what does it mean, and how should capital be positioned in response.
And that, my friends, will dominate headlines for weeks — if not months. Some will frame this as a U.S. violation of international norms or an abandonment of restraint — you’ll hear that argument from the usual voices. Others will see it for what it is: a calculated response to a failed state that crossed the line from sovereign government into criminal enterprise, operating openly with foreign adversaries — China, Iran, and Russia — in the Western Hemisphere (that is a KEY point in this discussion – the Western Hemisphere).
We can debate morality all day. Markets won’t. Stocks will trade, capital will reprice risk, and investors and portfolio managers will position strategically — and we are already seeing that process unfold in the pre-mkt action. Think Aerospace & Defense names – LMT+ 1%, RTX +0.4%, GD +1.1%, BA + 0.3%, GE +0.4%. Think Energy names – CVX +7.7%, XOM 4.5%, SLB +9.5%, HAL +9.5%, COP +5.5%. Think about Industrial and Basic Material names, think about Communications and Technology names – just think!
Just to put it in perspective – investors around the world appear to be celebrating this event as well – markets are NOT in decline. – Asian markets ended the day higher…. Japan up 3%, Australia flat, Taiwan up 2.5%, South Korea up 3.4%, Hong Kong up 0.03% while China rose 1.9%.
European markets have also opened higher and in early trade we are seeing Germany & the Euro Stoxx up 0.7%, Italy up 0.6%, Spain up 0.3%, The UK up 0.1% while France is flat. European defense names leading the charge.
And US futures are up. At 6 am – Dow futures are up 13, S&P’s up 18, Nasdaq up 160 while the Russell is up 1.
Crypto assets are higher as well…. Bitcoin up 2%, Ethereum up 0.9%, XRP up 1.8% and Solana is up 1.4%.
And precious metals? Well, they are up as well. Gold up 2.3%, Silver up 6.9%, Platinum + 4.8%, Palladium + 2.5% while Copper is + 3%.
And oil is higher as well — but nothing dramatic. Crude is up roughly 0.1% at $57.40, and for good reason. Venezuela is not a meaningful producer today. It has vast reserves, (some 300 billion barrels) but it cannot produce them at scale — at least not yet.
So, the near-term oil supply story has not changed. That said, the action in energy equities is telling. Investors and markets are already pricing in the future — optionality, normalization scenarios, infrastructure rehabilitation, and longer-term Western Hemisphere supply dynamics. In other words: oil itself isn’t the story yet — positioning is – thus the moves in the big oil names.
Now, the so-called “Fear Index” — the VIX — is up about 4.4%, but let’s be clear: that is not fear. The VIX remains well below all three key trendlines and is not signaling stress, panic, or risk-off behavior. True fear shows up when the VIX pierces the trendlines, accelerates, and stays elevated. That is not what we are seeing here. This appears to be more noise than anything.
Ok – so stocks ended the first trading day of the new year a bit higher. The Dow up 320 pts or 0.7%, the S&P up 13 pts or 0.2%, the Nasdaq lost 6 pts, the Russell gained 26 pts or 1.1%, the Transports up 179 pts or 1%, the Equal Weight S&P up 53 pts or 0.7% while the Mag 7 lost 323 pts or 1%.
The newest group — now dubbed the “Sexy 3” — ended the session substantially higher. Seagate Technology (STX) gained 4.4%, Micron Technology (MU) surged 10.5%, and Western Digital (WDC) jumped 9%. These are the Big Three memory manufacturers, and they are now front and center in the accelerating AI demand cycle story.
Just a year ago, these names would have been classified as value stocks — cyclical, capital-intensive, and overlooked. But the explosion in AI workloads has fundamentally changed that narrative. High-performance memory is no longer optional — it’s mission-critical infrastructure. As a result, these companies have gone from value to growth.
The move began in October, and all indications suggest it’s only beginning. In 2026, memory isn’t about being a side dish in the AI story — it’s becoming the entrée. (See how I did that?)
Now while most stocks were higher – it was still a quiet trading day, volumes were low and the algo’s drove the action.
Of the 11 sectors – only Consumer Discretionary and Communications ended lower – down 0.9% and 0.7% respectively. The other 9 ended higher – led by Energy +2.1%, Industrials +1.8%, Basic Materials + 1.7%, Utilities + 1.15%, Healthcare +0.5%, Financials + 0.3%, Tech + 0.25%, and Real Estate up 0.01%.
Further down the chain – we saw strength in Homebuilders + 1.5%, Retail +0.7%, Airlines +0.8%, Disruptive Tech + 1.8%, Semi’s +4.1%, Emerging Mkts – EEM + 2.8%, Metals & Miners + 3.8%, Aerospace & Defense + 3.5% (and going higher), Quantum Tech + 2.8%, Big Pharma + 0.5% and the list goes on.
Eco data today includes ISM Manufacturing which is expected to be 48.4 – which is in contractionary territory, Prices Paid to hold steady at 58.7. We will also get Personal Income and Spending.
We are also getting the PCE Index that was delayed in late December due to the government shutdown. This report is one of the first major inflation reads of 2026, and investors will be watching it closely to gauge inflation momentum as the year begins.
What happens next will depend on the print, consensus expectations are for headline PCE inflation at 2.8% y/y and Core PCE inflation at 2.9% y/y. These readings would be in line, suggesting inflation remains ‘sticky’ and that brings up the whole ‘What is the FED going to do’ conversation. They will do nothing in January, and my gut says nothing in March either. The next move will be put upon the next FED chair and if the economy remains robust – I just don’t see how they can convince us that rates HAVE to go lower.
Earnings season is now just eight days away. JPMorgan Chase & Co. reports on Tuesday, January 13, officially kicking off the season as the first Dow component to report — and that always sets the tone.
But don’t overlook this week. Exxon Mobil reports Wednesday, with expectations around $1.68 per share. Given recent geopolitical developments, the headline number may matter less than the commentary. Investors will be listening closely to what the C-suite says about supply, pricing, capital discipline, and geopolitical risk.
In this environment, guidance and tone will matter as much as earnings.
The S&P 500 closed at 6,858 up 13 pts and remains in the range that we have been discussing for weeks now – 6,805/6,950. While we may have an up day today – I do not think we are breaking out yet. In the end – expect all kinds of conversations around the weekend’s arrest – he and his wife will be arraigned in NYC today.
Recall – there is a wide dispersion, reflecting very different assumptions around earnings growth, valuation multiples, rates, FED, inflation and other macro conditions never mind the mid-term elections. It is a reminder that you need to have a plan and then stick to the plan.
Call me at 561-931-0190 – to give you a no obligation portfolio review. Let me help you assess the risk of the portfolio vs. the risk you are willing to take.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Cavatappi in a Crispy Pancetta Mascarpone Sauce
This is easy AND delicious…. comes together in 25 mins….and the kids will love it.
For this you need – Diced pancetta, 1 thinly sliced yellow onion, 3 cloves of garlic, s&p, butter, Olive oil, 1 lb. of Cavatappi, 1 container of mascarpone cheese and of course fresh grated parmegiana.
Begin bringing a pot of salted water to a rolling boil on the back burner.
In a large sauté pan – add ¼ stick of butter and a splash of olive oil – – heat it up and add in the thinly sliced onions and 3 cloves of garlic (whole). Sauté until soft – 5 – 8 mins…remove and set aside. Now add in the diced pancetta and cook it until it crisps up. Remove ½ and set aside.
Add the pasta to the water and cook for 8 mins or so.
Now add back the sauteed onions (without the garlic) and mix. Next add in the mascarpone cheese and allow it to melt and become all creamy. Season with s&p.
When the pasta is done – using a slotted spoon – add the pasta to the sauté pan and mix well. Now add a ladle of the pasta water and two handfuls of the parmegiana cheese. Mix to coat and serve immediately. When serving add a few of the reserved pancetta’s on top.
- If you sense that the pasta is sucking up all the sauce – you can always add another ladle of the pasta water to give it life.
Buon Appetito.