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“Nothing changes on New Year’s Day.” This famous line from a 1983 U2 song captures a truth often overlooked in financial markets – while the calendar may flip, the underlying macro and market trends rarely undergo dramatic shifts overnight. 2026 has begun much like 2025 ended: Broadening of markets continued, as global stock markets continued their upward trajectory,1 supported by expected strong earnings growth,2 anchored inflation expectations,3 and optimism around potential central bank policy easing.4
Yet, as was the case last year, investors face a proverbial “wall of worry,” none of which we believe is likely to derail the market advance. These include, but aren’t limited to: Persistent geopolitical tensions and new flashpoints such as the developments in Venezuela, Greenland, and Iran; questions surrounding the independence of the Federal Reserve (Fed); and the legality of the Trump administration’s tariffs.
Meanwhile, the U.S. economy enters the year on a sound footing, resilient, and with important signs that productivity has improved.5
The Trump administration’s Department of Justice is opening an investigation into the U.S. Fed and raised the possibility of a criminal indictment connected to Fed Chair Jerome Powell’s testimony regarding cost overruns associated with the Fed’s building renovation. Powell pushed back publicly and strongly, releasing a video in which he argued that the building costs are merely a pretext.
The independence of the central bank is critical. That should not be a bold or controversial statement. It is a foundational principle of modern macroeconomic management and a cornerstone of financial market confidence. The market reaction to this news has been muted. Stocks were generally stable,6 and the U.S. dollar surprisingly advanced in the week.7
We believe that the muted reaction is justified for now as the market appears to have grown accustomed to the jawboning from the administration. It also raises the probability that Chair Powell will remain on the Federal Open Market Committee (FOMC) even after his term as Chair ends. He would be the third Chairman to break convention and do that. Ironically, the upshot could be a Fed that is more hawkish than was previously expected. This is an important and changing story. We’ll be watching inflation expectations closely. They remain within the Fed’s perceived “comfort zone,” despite a sizeable increase early in the week.8
Recent events in Venezuela and Iran have made big headlines. Questions about potential global impacts are being raised. Typically, geopolitical developments have only disrupted markets when they either damage global economic activity – via a growth or supply shock – or provoke a shift in policy by the world’s major central banks. In Venezuela’s case, neither outcome seems likely. The same is true in the Middle East, provided the Strait of Hormuz remains open.
Venezuela’s diminished oil production capacity9 and the overall robustness of world oil supply10 have kept energy markets stable. While Venezuela reportedly has more oil reserves than Saudi Arabia, there’s little likelihood that Venezuelan production rises meaningfully for years at best. Thus, the muted reaction in oil makes sense to us.
Unsurprisingly, precious metals, including gold and silver, have advanced11 as investors sought potential safe havens. We think both have the potential to move higher if geopolitical concerns, including those in Iran and Greenland, persist.
The U.S. Supreme Court delayed its ruling on the legality of the tariffs that President Trump issued last year under the International Emergency Economic Powers Act (IEEPA). A ruling is expected in the coming weeks. Regardless, overall U.S. tariff levels are unlikely to decline substantially even if the IEEPA tariffs are struck down. Other statutes grant the president broad authority to impose tariffs, meaning those previously enacted under the IEEPA could be reimposed under different legal frameworks.
Over the weekend, President Trump announced that several European countries would face additional tariffs if they didn’t support the full sale of Greenland to the U.S. President Trump’s rhetoric around a sale then grew with a letter sent to the Norwegian Prime Minister on Monday. He threatened to apply a 10% tariffs on all goods exported from Denmark, Norway, Sweden, France, Germany, the U.K., the Netherlands, and Finland to the U.S. starting February 1 until a deal is reached for the “Complete and Total Purchase of Greenland.” Also, the tariff will be increased to 25% on June 1, 2026, if a deal hasn’t been reached. This is on top of existing tariffs. European Union (EU) leaders are debating their response, but one option could include invoking the Anti-Coercion Instrument (ACI), which would allow the EU to close off U.S. access to the European single market.
Markets have reacted in a relatively sanguine fashion, and for now, we think that’s probably the right and expected reaction. We knew the U.S. administration wanted to acquire Greenland, and President Trump has a clear history of threatening high tariffs and then walking them back. These moves support our core views: A weaker U.S. dollar; higher precious metals prices; and potential outperformance by non-US stocks.
U.S. banks were the worst-performing group in the U.S. last week despite delivering strong earnings results that painted a picture of a resilient U.S. consumer and strong trading revenue.12 Downward pressure came as a result of President Trump calling for a 10% cap on credit card rates – average credit card rates have never been at 10%.13
It remains to be seen whether the U.S. administration could deliver this change and how bank credit would respond. But the idea sends a message. The U.S. administration wants a very strong economy this year and will try unconventional measures to get it.
Recent data releases served as a reminder that the U.S. economy has entered 2026 much as it ended 2025 – on a sound footing with resilient, indeed, improving growth.
The restful holiday period seems a long time ago now, and while it might feel like a lot is changing, we are content that our core views haven’t changed. If anything, they are strengthened. We still believe growth will improve globally and stocks have the potential to rise, led by non-U.S. markets and cyclical sectors.
Brian Levitt is Chief Global Market Strategist and Head of Strategy & Insights at Invesco.
Benjamin Jones is Global Head of Research, Strategy & Insights at Invesco
Notes
1. Source: Bloomberg, L.P. Jan. 16, 2026, based on the year-to-date return of the All Country World (ACWI) ex USA. The broadening of markets is based on the percentage of stocks on the New York Stock Exchange trading above their 200-day moving average, which is currently 64.97%, compared to an average of 53.75% dating to 1993. The MSCI All Country World (ACWI) ex USA Index is an unmanaged index considered representative of large- and mid-cap stocks across developed and emerging markets, excluding the US. The index is computed using the net return, which withholds applicable taxes for nonresident investors.
2. Source: FactSet, Jan. 9, 2026. Consensus estimates for the S&P 500 Index earnings-to-growth are between 12% and 15% in 2026.
3. Source: Bloomberg, L.P. Jan. 9, 2026, based on the 3-year US Treasury breakeven rate. A breakeven inflation rate is a market-derived estimate of future inflation, calculated by comparing the yield on a standard government bond (nominal) to the yield on a Treasury Inflation-Protected Security (TIPS) of the same maturity.
4. Source: Bloomberg, L.P. Jan. 9, 2026, based on the fed funds implied rate, which is the difference between the spot rate and the futures rate, which is an interest rate that can be calculated for any security with a futures contract.
5. Source: US Bureau of Economic Analysis, Sep. 30, 2025, based on US Labor Productivity Output Per Hour in the Nonfarm Business Sector.
6. Source: Bloomberg, L.P. Jan. 16, 2026, based on the returns of the S&P 500 Index, which declined 0.30% over the first four days of the week.
7. Source: Bloomberg, L.P. Jan. 16, 2026, based on the US Dollar Index, which measures the value of the US dollar versus a trade-weighted basket of currencies.
8. Source: Bloomberg, L.P. Jan. 16, 2026, based on the 3-year US Treasury breakeven rate.
9. Source: Organization of the Petroleum Exporting Countries, Dec. 31, 2025.
10. Source: Organization of the Petroleum Exporting Countries, Dec. 31, 2025.
11. Source: Bloomberg, L.P. Jan. 16, 2026. Gold and silver prices have advanced by 6.29% and 24.04%, respectively, year to date.
12. Source: Bloomberg, L.P. Jan. 16, 2026, based on the S&P 500 Financials Sector GICS Level 1 Index, which declined 2.41% over the first four days of the week.
13. Source: The Guardian, “Trump announces one-year 10% cap on credit card interest rates,” Jan. 10, 2026.
14. Source: Institute for Supply Management, Dec. 31, 2025, based on the ISM Manufacturing Sector Purchasing Managers’ Index.
15. Source: Institute for Supply Management, Dec. 31, 2025, based on the ISM Service Sector Purchasing Managers’ Index.
16. Source: Automated Data Processing, Dec. 31, 2025, based on the ADP National Employment Report.
17. Source: US Department of Labor, Jan. 3, 2026, based on initial jobless claims.
18. Source: Bank of America, Dec. 31, 2025, based on the aggregated spending report.
19. Source: US Bureau of Labor Statistics, Dec. 31, 2025, based on the annual percent change (2.9%) of the Producer Price Index.
20. Source: US Bureau of Economic Analysis, Sep. 30, 2025, based on US Labor Productivity Output Per Hour in the Nonfarm Business Sector.
21. Source: Bloomberg, as of Jan. 15, 2026, based on the Atlanta Fed GDP Nowcast measure.
Disclaimer
Contents copyright © 2026 by Invesco Canada. Reprinted with permission.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
The opinions referenced above are those of the author as of January 16, 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations. Diversification does not guarantee a profit or eliminate the risk of loss. All investing involves risk, including the risk of loss.
Diversification does not guarantee a profit or eliminate the risk of loss.
All figures are in U.S. dollars.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
All investing involves risk, including the risk of loss.
Past performance is not a guarantee of future results.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the simplified prospectus before investing. Copies are available from your advisor or from Invesco Canada Ltd.
Investment funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that any fund or security will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. The foregoing is for general information purposes only. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
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