January, 6th, 2026
Happy New Year. I hope you had a chance to rest and recharge over the holidays.
As we open the first full trading week of 2026, the headlines are dominated by the stunning news regarding the U.S. military operation in Venezuela. While these shifts are historic, the market’s reaction so far has been a masterclass in a concept I think about often: Markets love to climb a “wall of worry.”
Beyond the Headlines: The “Saturday Surprise”
I’ll leave the legal and historical debates to the experts and focus on what this means for our investments. The capture of Nicolás Maduro and the shift in control of Venezuela’s resources—namely the world’s largest oil reserves and critical rare-earth minerals—is a massive geopolitical jolt.
Usually, we are told to “sell the rumor, buy the news.” We saw the “rumor” phase play out as tensions simmered late last year, yet the S&P 500 remained resilient. Why isn’t the market panicking? Because investors generally despise uncertainty more than they despise conflict. By moving from a “will they or won’t they” stance to definitive action, a significant layer of uncertainty has been removed from the board.
The Energy Angle: Long-Term Supply vs. Short-Term Noise
I’m sure many of you are wondering how this affects the gas pump and the broader economy. Here is how I’m reading the data:
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Short-Term Muted Impact: Oil prices actually fell 20% last year due to oversupply from the U.S. and Brazil. Because Venezuela’s infrastructure has been neglected for so long, they currently produce less than 1% of the world’s oil. This means the weekend’s events were already largely “priced in” by the time the markets opened.
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Trump’s “Under $2 Gas” Goal: If Venezuelan production eventually ramps back up, it could flood the market. This aligns with the administration’s stated goal of pushing gas prices toward the $2.00 mark. Since energy is a primary cost for manufacturing and shipping, lower oil prices act as a powerful “inflation fighter” for the rest of the economy.
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The Winners: In the near term, Gulf Coast refiners (like Valero and Marathon) are best positioned to handle Venezuela’s specific type of “heavy” crude. Long term, the “pick and shovel” companies—oil field services like SLB and Baker Hughes—will be the ones called in to rebuild that crumbling infrastructure.
2026: The Year Ahead
While the headlines focus on the “what” (Venezuela and trade), I am keeping a close eye on the “how”—the underlying mechanics that actually drive prices:
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The Return of the “Fed Put”: We’ve entered an era where the Federal Reserve appears increasingly unwilling to let a bull market die. A more dovish tilt in leadership suggests that if the market stumbles, the Fed is ready to step back in with liquidity.
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From Tightening to Easing: We are seeing the end of “Quantitative Tightening” (pulling cash out of the system) and a pivot toward a more accommodative environment. History shows that when the Fed adds liquidity, equities tend to find a strong tailwind.
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The Inflationary Tail: While 3% inflation is “sticky,” stocks act as a natural hedge. As the dollar’s value shifts, the nominal price of shares in great companies—which own real assets and generate real revenue—tends to adjust higher.
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The Performance Chase: There is still a massive amount of cash sitting on the sidelines in money market funds. Bull markets don’t end when people are worried; they end when everyone is finally “all in.” That “sidelined” cash provides a built-in buyer for the next leg up.
Strategic Predictions
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Volatility is the Toll: Expect 2026 to be “choppy but up.” We may see sharp 5-10% pullbacks driven by headlines, but the underlying fundamentals remain the anchor.
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The Resource Pivot: Venezuela highlights a strategic shift back toward “tangible” assets—energy and mining—as U.S. priorities.
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Efficiency Wins: We expect Artificial Intelligence to move from “hype” into a “results” phase, where companies show real profit margin improvements.
A Final Thought
On a human level, one can only hope this leads to better conditions for the people of Venezuela, 90% of whom live in poverty. From an investment perspective, the “Wall of Worry” is never fun to climb, but it is often a path to long-term growth. That said, my role is to keep our focus on the horizon rather than the noise of the day.
If the recent news has you concerned about your specific plan, please don’t hesitate to reach out.
And now, your Monthly Market & Economic Update by the numbers.
Warmly,
Mark S Sauer
Market Update
Global Equities: December was a “tale of two halves” for the markets. While tech saw some mid-month whipsawing, the S&P 500 finished the year up 16.4%, completing a rare three-year streak of 16%+ returns. Small caps continued to show strength as investors rotated out of the “Mag 7” and into the Russell 2000, which hit new all-time highs following the Fed’s December rate cut.
Fixed Income: Treasury yields faced upward pressure late in the month despite the Fed’s dovish tilt. The real story remained international, as Japanese yields stayed at decade-level highs following the massive $135 billion stimulus package from Prime Minister Takaichi, putting continued pressure on the global “carry trade” and the yen.
Commodities: Oil prices remained soft, with WTI crude ending the year down roughly 20%—the largest annual decline since 2020—even as tensions with Venezuela escalated. Gold held firm above its new $4,000 baseline, closing near $4,260 on safe-haven demand, while Bitcoin saw a late-month recovery, trading back toward $92,500 after its brief dip below the $80k level in November.
Economic Update
Labor Market Jitters: While the Fed officially cut rates by 25 basis points in December to a range of 3.5%–3.75%, the decision was not unanimous. Two regional presidents voted to hold steady, while one governor pushed for a larger 50-bp cut. This internal friction stems from a cooling job market; the unemployment rate has gradually climbed to 4.6%, with hiring remaining concentrated almost entirely in the healthcare sector.
Consumer Sentiment: After months of decline, the vibe finally improved slightly in December. The University of Michigan Consumer Sentiment Index ticked up to 53.3 (from 51.0 in November), driven primarily by better future expectations for personal finances. However, sentiment remains nearly 30% below last year’s levels as “pocketbook issues” and cumulative price increases for essentials continue to weigh on the average household.
Inflation Outlook: There was finally some good news on the inflation front to end the year. One-year inflation expectations slid to 4.1%, the lowest reading of 2025 . While price pressures in the goods sector remain elevated due to tariffs, the services sector is finally cooling, giving the Fed just enough room to justify their year-end easing. The “K-shaped” theme persists: affluent consumers are still spending freely on the “wealth effect” of a strong 2025 stock market, while lower-income households are increasingly trading down to lower-cost brands.
Charts of the Month
The Global View: U.S. vs. International
While U.S. stocks delivered a solid 16% in 2025, they actually trailed international markets, which surged 29%. This gap is the widest we’ve seen since 2009, driven largely by massive defense spending in Europe and AI breakthroughs in China. Despite trailing, the S&P 500 still performed well above its historical average of 10.6%, proving once again that a “Wall of Worry” can be a very productive environment for those who stay invested.
Looking ahead to 2026, the consensus is surprisingly optimistic. J.P. Morgan is calling for double-digit returns globally, fueled by a mix of government stimulus and a second wave of AI-driven spending.
Closer to home, the sentiment is even more striking: out of 21 top strategists surveyed by Bloomberg, not a single one is predicting a down year for U.S. stocks. On average, they’re eyeing another 9% gain for the S&P 500.
Source: Left: LSEG via Marets.ft.com Chart by Prof G Media; Right: data by Yahoo Finance, CNN, CNBC, Chart by Prof G Media
