Weekly Macro Report, January 11 2026

1. Economic Growth & Outlook

The S&P 500 closed at 6,966 on Jan 9, 2026, up roughly 18% over the past year, underscoring strong risk appetite and supportive wealth effects. Q3 2025 real GDP grew at a 4.3% annualized rate, while the effective fed funds rate is currently 3.64%, with futures implying a gradual decline from current levels rather than additional hikes. This configuration points to still-solid near‑term growth and employment, while the expected rate path signals market confidence that inflation will drift lower without a sharp downturn.

2. Labor Market

December 2025 labor data shows mixed signals for Federal Reserve policy. Nonfarm payrolls grew just 50,000 against expectations of 70,000, with significant downward revisions to prior months, yet the unemployment rate unexpectedly fell to 4.4% from 4.5% as the jobless count declined 278,000. This disconnect—weak hiring alongside improving unemployment—combined with 3.8% year-over-year wage growth and 4.9% productivity gains suggests the Fed can likely maintain its current rate stance rather than cutting further, as the labor market remains sufficiently resilient without inflation concerns.

3. Interest Rates

As of January 8, the 10-year Treasury yield edged up to roughly 4.2%, keeping benchmark borrowing costs elevated for households and investors. Investment-grade BBB corporate yields hovered near 5.0% on January 8, signaling still-attractive income for bond buyers but a stubbornly high financing hurdle for many issuers. For homebuyers, 30-year mortgage rates remain in the high-6% area, leaving affordability strained and limiting move-up activity even as rate volatility has moderated.

4. Yield Spreads

As of January 9, 2026, a positively sloped US yield curve, with the 10Y–2Y spread near 0.6–0.7%, points to expectations for continued, moderate growth rather than imminent recession. Ten-year TIPS real yields around 1.9% indicate a relatively high real rate environment, consistent with solid long-run growth and inflation near target. US credit spreads remain tight versus historical norms, signaling strong risk appetite and supportive financing conditions across corporate issuers.

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5. Inflation Dynamics

As of November 2025, U.S. headline CPI is running near 2.7% year-on-year, with core CPI about 2.6%; shelter and broader services, along with medical care and household furnishings, are the main positive contributors, partly offset by earlier energy declines. The Producer Price Index, which often leads CPI, is rising around the high‑2% area year-on-year into late 2025, pointing to contained but persistent upstream cost pressures. The 10-year breakeven rate, which signifies expected inflation priced into TIPS bonds, is hovering close to 2.2–2.3%, broadly in line with or slightly below many G10 peers.

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6. Money Supply

M2 rose to $22.32T in November 2025, up 0.5% over 3 months and roughly 1.2% year-on-year, lagging nominal GDP growth near 2.3% and implying mildly restrictive liquidity relative to activity. CPI inflation is running at 2.7% year-on-year as of November, slightly above the estimated pace of real M2, indicating that money growth is not currently an independent inflation driver. M2 dynamics are being shaped mainly by slower bank deposit growth, a shrinking Fed balance sheet, and positive but moderate credit expansion.

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7. Consumer Sentiment

In the preliminary January 2026 reading, University of Michigan Current Economic Conditions stands at 52.4 while Expectations is higher at 55.0, leaving a modestly positive 2.6-point spread that signals households now feel slightly better about the year ahead than about their present situation. On the macro side, the US yield curve has re-steepened: the 10Y–2Y spread is roughly 0.6% and the 10Y–3M spread about 0.6% as of January 9, both consistent with bond markets pricing a lower recession risk and a tentative turn toward future growth.

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8. Housing Market

Through November 2025, home prices grew just 1.0% annually, the slowest pace in 14 years, while existing-home sales remain near 30-year lows despite a 26-month streak of inventory gains. Mortgage rates averaging around 6.7% have improved modestly from 2025 peaks, yet affordability remains constrained with middle-income buyers able to purchase only 21% of available homes compared to 50% pre-pandemic. The combination of restricted supply still 12% below pre-2020 norms and weak demand has created a buyer's market tilted toward negotiators, though meaningful transaction recovery hinges on rate declines below 6%.

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9. Stock Market Sectors

As of the January 6, 2026 close, Materials (XLB +0.46%), Energy (XLE +0.36%), and Technology (XLK +0.35%) led the US sector tape, supported by higher commodity pricing, firmer crude, and ongoing AI and cloud capex enthusiasm centered on mega-cap platforms and semiconductor names. In contrast, Financials (XLF -0.25%) and Industrials (XLI -0.10%) lagged as investors locked in 2025 gains amid concerns about net interest margins, credit costs, and slowing order books in cyclical capital goods.

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10. Stock Market Valuation

US equity valuations remain elevated versus history and global peers as of early January 2026. The S&P 500 PE is about 31 (Jan 8, 2026) while the Shiller PE is roughly 37 (Jan 4, 2026), with the Buffett Indicator near 200% of GDP in late 2025. The premium to Europe and Japan is driven by the high weight of AI‑levered US mega-cap tech, superior margin structures, and structurally higher reinvestment and buyback intensity, which offset lower multiples in more value‑ and financials‑heavy international markets.

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11. Stock Market Internals

As of January 9, the VIX closed near 14.5, down about 6% from 15.45 on January 8, underscoring a quick reset lower in implied equity volatility. Growth, Momentum, and Quality factors continued to outperform, while Value, High Dividend Yield, Minimum Volatility, Equal Weight, Small Cap, and Risk Weighted lagged on a relative basis over the past week. Compressed volatility alongside leadership in higher-beta, growth-oriented factors points to a constructive risk backdrop, with investors still rewarding earnings visibility and secular growth over defensiveness.

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12. Global Equity Performance

Global equity markets delivered divergent performance in 2025, with emerging markets and developed Asia significantly outpacing the United States. The S&P 500 gained 17.9% for the year, but lagged emerging markets which surged 34.4%, while South Korea's KOSPI emerged as the standout performer with a 100.7% return driven by AI-related enthusiasm and tech supply chain positioning. Meanwhile, Chinese equities returned 31.4%, benefiting from homegrown AI advances and resilient exports despite tariff headwinds, marking a notable shift from the prior decade's US-centric market dominance.

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13. Commodities

Silver surged 146% year-over-year in 2025, reaching above $80 per ounce before retreating to $74 by January 8, 2026, driven by a fifth consecutive year of market deficit and China's newly imposed export restrictions on the world's second-largest producer. Gold advanced 65.81% year-over-year to $4,427 per ounce as of January 8, supported by sustained central bank accumulation and geopolitical uncertainty offsetting recent profit-taking that pulled prices down from the $4,500 threshold earlier in the week.

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14. Crypto Market

Bitcoin is trading near $90,500 as of January 10, 2026, consolidating after a strong multi-month advance that has left it just below recent highs. Ethereum continues to lag Bitcoin on a relative basis, reinforcing a market structure where large-cap assets capture the bulk of new inflows and set the tone for risk appetite. Fundamentals remain defined by growing institutional participation, the expansion of real-world asset tokenization, and sustained on-chain usage in DeFi and stablecoins, even as speculative activity rotates toward higher-liquidity majors.

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15. Currencies

The US dollar firmed broadly into January 9, 2026, with EUR near 1.16, GBP 1.34, CAD 1.39, AUD 0.67, NZD 0.62, and USD/JPY around 158, while USD/CHF hovered near 0.80 and USD/CNY near 6.98. These levels favor US importers, pressure EM exporters linked to the dollar, and sustain disinflation in dollar-priced commodities, while keeping capital flowing toward higher‑yielding US assets. Central banks in Europe, Japan, and commodity producers face tighter financial conditions and reduced scope for near‑term rate cuts.

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16. Debt Levels

As of Q2 2025, U.S. federal debt stands near 119% of GDP, versus roughly 87% in the euro area and about 260% in Japan, while U.S. nonfinancial corporate and household leverage remain moderate relative to peers such as Canada and the UK. The central risk is surging U.S. interest costs at elevated debt levels, which compress fiscal space and raise the term premium. Policymakers face mounting pressure to anchor medium‑term fiscal plans, and investors should price in higher rate volatility and a fatter tail of fiscal stress.

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17. Economic Calendar

In the month ahead, the January 9 employment situation report will reveal December job creation and the unemployment rate, critical inputs for Fed policy decisions. The January 13 Consumer Price Index and January 14 Producer Price Index will gauge inflation trajectory, with readings above 3% potentially delaying rate cuts. The January 27-28 FOMC meeting will assess these labor and inflation data to determine whether conditions support the anticipated 2026 rate reduction.

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An error appeared while loading the data. Maybe there is a technical problem with the data source. Please let me know if this happens regularly @silvan_frank.