Post New

Before describing the purely economic trend changes in 2026 I have to focus on the single greatest Macroeconomic Trend change: the ongoing transformation of the U.S. from a liberal democracy dedicated to the rule of law into a corrupt, murderous, lawless autocracy enabled by a supine Congress and a Supreme Court that apparently never read the Constitution and has given the president a get-out-of-jail-free card (Trump vs. United States which established that presidents have absolute immunity for actions within their core constitutional powers and presumptive immunity for all official acts, making them immune from criminal prosecution for such actions).
For charts and links, see https://discussion.fool.com/t/control-panel-trend-...

My heart is broken over the murders of Renee Good and Alex Jeffrey Pretti by federal agents who are beginning more and more to resemble Nazi brown shirts. I am deeply frightened over the internal ICE memo that authorized agents to enter homes without a judicial warrant, a clear violation of the 4th Amendment.

Is it 1933 or 1936? The Trump administration is following the Authoritarian Playbook.

History shows that totalitarians can turn on a dime, restricting economic actions such as the transfer of assets (and their own persons) between countries. In Nazi Germany, only those who acted early escaped. Will that happen here? Jews who fled early to France were captured and killed when Germany conquered France in 1940. Will the same thing happen to Americans who flee to Canada?

The financial markets are ignoring any of these fears but there are still plenty of economic trend changes in 2026.

https://www.wsj.com/world/asia/the-first-three-wee...


The First Three Weeks of the Year Will Reshape the World
From Davos to Minneapolis, the events of this month have the potential to profoundly change the political and economic landscape for years to come

By Greg Ip, The Wall Street Journal, Jan. 24, 2026

“There are decades where nothing happens; and there are weeks where decades happen.” The quote, often attributed to Lenin, aptly describes the first weeks of 2026. …
The U.S. uncouples from Europe…

For now, NATO remains intact and trade peace is holding. But the turmoil in markets last Tuesday, when stocks fell and bond yields and gold rose, hint at the anxiety that awaits as the political and economic institutions that bind the West slowly unravel.
A new Monroe Doctrine built on resources [I would call this a return to imperialism. – W]


China comes in from the cold

…
Though small in the scheme of things, the Canada-China deal showed how third countries must swallow their misgivings about China if they want to hedge their dependence on the U.S. As Prime Minister Mark Carney noted in Davos, “not every partner will share all of our values.”…


American technological autonomy advances…

The Commerce Department said Taiwan Semiconductor Manufacturing, as part of $250 billion in new Taiwanese investment, will add to several chip factories in Arizona… They will make the advanced chips essential to the artificial intelligence, communications and mobile applications designed by Nvidia, Qualcomm and Apple…


War between the president and the Fed

…
The outcome of this battle matters immensely to investors around the world who have long assumed the Fed would act in the long-term interests of the U.S. economy and global stability. Trump wants a Fed chair who puts his agenda first—i.e., lower rates, faster growth, and a higher stock market…
Japan and the end of easy money

…
Japan’s already massive debt may become unsustainable. The world has a stake in this because Japan is one of the world’s largest, if not the largest, creditors. Its government and investors hold $1.2 trillion worth of U.S. Treasury debt. Japan increasingly needs those investors to buy its own debt. …As Japanese rates rise, debtor nations will feel pressure to offer higher rates to keep Japanese investors buying their bonds. The U.S., whose government is the world’s largest borrower, is especially vulnerable… [end quote]

Last week, Trump’s aggressive talk about taking over Greenland caused the stock and bond markets to react negatively and he TACO’d. These markets rebounded right away.

The USD fell. Gold and silver rose. These moves did not rebound. The “mungofitch ratio” of copper:gold suddenly plunged which showed (according to mungofitch) that traders were putting their money more into safety than building the economy.

Oil is climbing. Natgas suddenly spiked, probably due to the huge winter storm.

The trade was neutral as the moves in stocks and bonds were correlated. The Fear & Greed Index was Neutral.

The Price to earnings ratio based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted P/E Ratio (CAPE Ratio), was over 40, compared with a historic median of 16. The bubble continues to inflate, driven by loose money and debt. Margin debt continues to rise rapidly at record levels.

The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, showed that financial conditions were loose and getting even looser. The Fed’s “not QE” action reversed some incipient financial stress.

The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 was 5.4 percent on January 22. That is smokin’ hot growth, far higher than the Blue Chip economists’ consensus.

The Cleveland Fed’s inflation watch shows a divergence between CPI and PCE inflation.

The options market doesn’t see a significant chance of a fed funds rate cut until April.

The METAR for next week is sunny. None of the craziness is impacting the markets…yet.

Wendy

stockcharts.com
CandleGlance | Free Charts | StockCharts.com

Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
stockcharts.com
CandleGlance | Free Charts | StockCharts.com

Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
stockcharts.com
CandleGlance | Free Charts | StockCharts.com

Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
stockcharts.com
Dynamic Yield Curve | Free Charts | StockCharts.com

Visualize the relationship between interest rates and stocks over time using our draggable, interactive yield curve charting tool.
CNN
Fear and Greed Index - Investor Sentiment | CNN

CNN’s Fear & Greed Index is a way to gauge stock market movements and whether stocks are fairly priced. The index uses seven market indicators to help answer the question: What emotion is driving the market now?
chicagofed.org
National Financial Conditions Index: Current Data - Federal Reserve Bank of...
fred.stlouisfed.org
St. Louis Fed Financial Stress Index

St. Louis Fed Financial Stress Index
Multpl
Shiller PE Ratio - Multpl

Shiller PE Ratio chart, historic, and current data. Current Shiller PE Ratio is 40.65, a change of +0.02 from previous market close.
atlantafed.org
GDPNow

GDPNow forecasting model provides a
clevelandfed.org
Inflation Nowcasting

The Federal Reserve Bank of Cleveland provides daily “nowcasts” of inflation for two popular price indexes, the price index for personal consumption expenditures (PCE) and the Consumer Price Index (CPI). These nowcasts give a sense of where inflation...

https://www.cmegroup.com/markets/interest-rates/cm...
finra.org
Margin Statistics

Pursuant to FINRA Rule 4521, FINRA member firms carrying margin accounts for customers are required to submit the following customer information: the total of all debit balances in securities margin accounts; and, the total of all free credit...

Though small in the scheme of things, the Canada-China deal showed how third countries must swallow their misgivings about China if they want to hedge their dependence on the U.S. As Prime Minister Mark Carney noted in Davos, “not every partner will share all of our values.”…

I wonder if the threatened 100% tariff on Canadian goods would include oil? The tariffs announced last spring put a 10% tariff on Canadian oil, but 25% on Mexican. Mexico pivoted to selling to other customers. Most of Canada's oil is landlocked, the US is the only outlet.

The nearest substitute for Canadian is Venezuelan. I posed a piece on the Policy board about a major push on to increase Venezuelan output, in a matter of months from now.

Steve

output from the net sifter wrt oil tariffs

As of early 2025, U.S. tariffs on Canadian crude oil are generally set at
10%, part of broader, shifting trade measures. While initial 2025 orders imposed this 10% tariff on Canadian energy products, these policies are subject to ongoing negotiations, with potential exemptions under the USMCA and threats of higher rates.

Key details regarding tariffs on Canadian oil:

Initial Action: In March 2025, the U.S. implemented a 10% tariff on Canadian crude oil and natural gas, with higher 25% tariffs on Mexico.

Current Status (2026): Reports from January 2026 indicate threats of up to a 100% tariff on all Canadian goods, including energy, depending on trade negotiations between the U.S. and Canada.

Impact: The 10% tariff was estimated to add significant costs, potentially affecting U.S. refinery operations and consumer prices.

Exceptions: Some crude oil volumes may have been exempt if they qualified under United States-Mexico-Canada Agreement (USMCA) preferences

The METAR for next week is sunny. None of the craziness is impacting the markets…yet.

Yes, but seems ludicrous.

And no, we are about to have a major government shutdown like no other. The Democrats will deny funding to the Department of Homeland Security, DHS. This is going to be a horrible impass. I hope it does not turn violent.

Most of Canada's oil is landlocked, the US is the only outlet.

You are years behind the times. Canada has a pipeline to the Pacific Ocean. So the central Canadian oil is being sold at market rates to Asia and other buyers. This has driven up the price paid for oil products in the north-central US. According to the TransCanada report to the Canadian govt (filed when Keystone XL was being planned), that increased the ANNUAL cost of oil products to the central US (think farmers) by $5B (maybe more)? So, if you wonder why stuff (i.e., food products and more) cost more today, you now have a BIG CLUE.

I hope it does not turn violent.

It already has turned violent. The two prominent murders aside, hundreds have died in custody for civil offense - and no matter what anyone says, immigration violations are not criminal. This is specific to this administration and orders of magnitude higher - they are specifically not giving medical care, which makes it hard to believe it is not intended.

They literally said this is what they are going to do. What is happening is intentional and planned. They have been publicly stating this for years but 25% of Americans are racist sociopaths and far to many are provincial, selfish, and ignorant.

In 2023, Stephen Miller proposed immediately mobilizing the military at the start of second Trump administration for domestic law and immigration enforcement under the Insurrection Act of 1807.[21] Jeffrey Clark, a senior fellow at CRA and Project 2025 contributor, has investigated using the Insurrection Act for other purposes, including suppressing protests like the George Floyd protests.[22] The Heritage Foundation denied Project 2025 planned to use the Insurrection Act, but Mandate has a single line that says it is possible to use the Insurrection Act to secure the southern border.[22][156] Russell Vought said the CRA was working to keep legal and defense communities from preventing use of the Insurrection Act.[157]

from https://en.wikipedia.org/wiki/Project_2025#Expansi..., citations available at the link.

This is part of a strategy. It is a bad strategy, executed by deluded, short-sighted, and ultimately insufficiently intelligent people leading the US. It won't work out well or how they expect it to, regardless of short term tactical outcomes.

I hope it does not turn violent.

I am worried about our representatives who stand up against him.

"The nearest substitute for Canadian is Venezuelan. I posed a piece on the Policy board about a major push on to increase Venezuelan output, in a matter of months from now."

--------------------------------
this link is to a Mish post, in which a reader by the name of Dave
Smith commented. He has had a career in the petroleum industry, and
posted a very informative comment. I think the link will go right to the comment, but if not, it is near the top of the comments section.
TLDR: it will take a lot of time and money for Canadian oil to be replaced by Venezuelan oil. Trump is living in fantasy land. I smell taco's.

Another great comment in that blog post is "Trump needs to reduce oil and gas prices while raising oil prices. Good luck with that"
( paraphrased, I'm tired and sleepy, lol ).

https://mishtalk.com/economics/trump-threatens-100...

Bovino, around 5:40 calls this de-escalation.....ten shots.

https://www.cnn.com/2026/01/25/politics/video/bovi...

You are years behind the times. Canada has a pipeline to the Pacific Ocean.

With the recently completed expansion project, that pipeline has a capacity of some 890,000bpd. It is running at about 84% of capacity. Current Canadian exports to the US are running 4Mbpd.

Trans Mountain pipeline

The expansion, which runs roughly parallel to the existing pipeline, increased capacity from 300,000 to 890,000 barrels per day (48,000–141,000 m3/d), at a cost of C$53 billion.[7]

https://en.wikipedia.org/wiki/Trans_Mountain_pipel...

US imports from Canada of crude oil.

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx...

I stand by what I said. Most of Canada's oil is landlocked.

Chevron is optimistic about the feasibility of increasing production.

Chevron (CVX) is currently producing about 140,000 barrels of oil daily. Vice Chairman Mark Nelson told the White House in early January that it could boost production at its joint ventures with Venezuela’s state oil company, PDVSA, 50% over the next 18 months to two years. Before U.S. sanctions were expanded in 2025, Chevron’s production exceeded 200,000 bpd.

https://www.thestreet.com/investing/chevron-oil-ex...

And this hit the wire, shortly after the Davos conference.

US Pushes for Quickest Fixes to Boost Venezuela Oil Output

(Bloomberg) -- The US is in talks with Chevron Corp., other crude producers and the world’s biggest oilfield service providers about a plan to quickly revive output in Venezuela at a fraction of the estimated $100 billion cost for a complete rebuilding.

The idea is that with limited investment, Venezuela could boost production by several hundred thousand barrels over the short term, the people said.

https://finance.yahoo.com/news/us-pushes-quickest-...

Steve

...purely economic trend changes in 2026...

One to note...at the moment the US dollar has resumed its slide. Down 1.2% year to date.

I'm not predicting which way things will go in future, but it's interesting to note.

The trade weighted US dollar is down 10.45% since the start of last year against the typical big currency. So anybody whose portfolio made 10% since then measured in US dollars did worse than (say) a guy with some euro and sterling banknotes stuffed in a drawer. Especially if you had to pay tax on some of that 10%.

Jim

The news over the last couple of days has terrified USD traders.

The principles lacking are very problematic to doing business.

https://stockcharts.com/sc3/ui/?s=%24USD

US dollars did worse than (say) a guy with some euro and sterling banknotes stuffed in a drawer.
_________________________________________________________________________________

While a completely unscientific comparison, I was curious how my foreign-heavy equity portfolio (mostly single issue rather than fund/ETF) fared so far this year (slightly less than 1 month):

S&P: up about .5%

My random collection of stuff: up about 4.91% when converted to USD

At this stage, probably pretty meaningless, but makes me feel better than if the numbers were reversed.

Jeff

S&P: up about .5%
My random collection of stuff: up about 4.91% when converted to USD
At this stage, probably pretty meaningless, but makes me feel better than if the numbers were reversed.

I'm in a similar position. And similar conclusions - it's only "real" if it lasts.

I was mostly in non-USD cash last year, and it made a huge tail wind. Beat the S&P measured in US dollars while averaging around 70% cash. But of course the good seeming result is money illusion. Investors everywhere should occasionally measure how they're doing in (say) euros or sterling. It's not often appreciated that the US dollar is one of the currencies with the biggest moves in value, while being so common as a yardstick for prices. For example, the EUR/CAD pair varied this century maybe half what USD/CAD or EUR/USD did.

Of course every portfolio looks good in yen lately - they yen has fallen a lot in the last few years. As a European, my October trip to Tokyo was full of very attractive prices! Except hotel rooms for some reason.

Jim

This is the early times of a shake-up. The EU is shifting to supply-side economics, while the US is shifting to demand-side economics. Early times produce recessions. Tariffs? Not the time for them.

Two years from now would be a better time to determine if we are emerging from a recession/depression. First, we might be entering a recession/depression. We certainly have the mismanagement to produce either.

Post New

Macroeconomic Trends and Risks FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.