Global Highlights This Week: Trump's Multi-Front Pressure Tests Market Resilience; Fed Independence Back in Focus
After a week packed with geopolitical tensions and key policy shifts, investors are pinning their hopes on a strong earnings season to keep the U.S. stock market rally on track.
With banks and other financial institutions having kicked off the Q4 reporting period last week, this week brings a broader cross-section of corporate America to the earnings stage, including Netflix, Johnson & Johnson, and Intel.
U.S. equities had a stellar 2025, and major indexes have carried that momentum into the new year, despite a minor pullback last week and a slight uptick in market volatility.
"With so much geopolitical and policy noise right now, earnings are pretty much the only game in town that can dictate the market narrative," said Art Hogan, Chief Market Strategist at B Riley Wealth.
He added, "While the bar for earnings expectations has been set quite high this quarter, companies that not only beat estimates but also raise their full-year 2026 guidance will be rewarded and could provide the much-needed catalyst the market is looking for."
According to FactSet data, analysts are projecting that S&P 500 companies will see earnings grow by 8.2% year-over-year in the fourth quarter, which would mark the index's 10th consecutive quarter of growth.
Geopolitical Risks
On the geopolitical front, former President Donald Trump's more aggressive rhetoric and actions are also keeping investors on edge. The latest focus is on the situation in Iran, where Trump threatened intervention on behalf of local protesters before shifting to a "wait-and-see attitude." However, with the U.S. continuing to deploy military resources to the Middle East, the risk of a sharp conflict between the U.S. and Iran remains acute.
The Greenland issue is also under the market's microscope. Trump threatened on Friday that he might impose tariffs on countries that do not support U.S. control over Greenland.
By Saturday, Trump took to social media to announce that, due to the Greenland dispute, a 10% tariff will be imposed on all goods exported to the U.S. from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland starting February 1 of this year. The tariff rate will increase to 25% on June 1.
This uncertainty has driven buying in safe-haven assets like gold this year and exacerbated volatility in energy markets. So far, however, major stock indexes have remained largely unscathed.
"Markets have largely shown immunity to a lot of geopolitical and U.S. domestic political issues, but that doesn't mean the risks aren't there," noted James Ragan, Co-Chief Investment Officer and Director of Wealth Management Research at D.A. Davidson.
He pointed out, "There's always the possibility that Trump pushes through some more aggressive, sweeping policies, and the market will then have to judge if they are significant enough to trigger a material reaction."
U.S. stock markets will be closed on Monday for the Martin Luther King Jr. Day holiday, but the earnings season will heat up quickly thereafter, with the most anticipated report coming from Netflix on Tuesday.
The streaming giant is also in the spotlight as it competes with Paramount and Skydance for a potential acquisition of Warner Bros. Discovery, a deal that could reshape the entire streaming landscape if completed.
Market focus will remain on corporate forward guidance, particularly regarding the outlook for 2026. Currently, the market expects overall earnings growth for S&P 500 components to exceed 15% in 2026.
"I still think the most important factor right now is earnings," said Chris Fasciano, Chief Market Strategist at Commonwealth Financial Network. "If earnings continue to come in strong, that will support the stock market."
Investors are also awaiting a ruling from the U.S. Supreme Court on the legality of Trump's "global tariff policy," which could spark asset price volatility.
On the data front, China's GDP figures and U.S. PCE inflation data are the highlights. Investors are continuously assessing when the Federal Reserve might cut interest rates next, following recent signs of improvement in U.S. employment data.
This week also marks the annual World Economic Forum in Davos, where several global leaders and central bankers will speak, including former President Trump.
Fed Independence in Question
Meanwhile, the Supreme Court will hear arguments this Wednesday regarding Trump's attempt to remove Federal Reserve Governor Lisa Cook, putting the issue of Fed independence back in the spotlight. Trump has repeatedly criticized the Fed for not cutting rates quickly enough.
Concerns about Fed independence escalated last week following news of a criminal investigation into Fed Chair Jerome Powell. Powell's term as chair ends in May, and Trump is expected to nominate a successor soon.
Trump has previously hinted that he might want Kevin Hassett, the Director of the National Economic Council and a frontrunner for the Fed chair position, to stay in his current role. Another contender for the post, former Fed Governor Kevin Warsh, is viewed by some as potentially less aggressive than Hassett in pushing for rate cuts.
In a note last week, Wedbush analysts stated: "The end of Chair Powell's term represents a critical inflection point in the Fed independence narrative. If the market perceives that Fed independence is compromised, it could trigger a rise in inflation expectations and increase U.S. government borrowing costs."
Key Events for the Week Ahead:
Monday (January 19): China Full-Year 2025 GDP Growth Rate, China Full-Year 2025 GDP Total, China December Retail Sales YoY, China December Industrial Production YoY, Eurozone December CPI YoY Final, Canada December CPI MoM, U.S. Markets Closed for Martin Luther King Jr. Day
Tuesday (January 20): China 1-Year Loan Prime Rate (LPR) (Jan 20), Germany December PPI MoM, UK December Unemployment Rate, Eurozone November Current Account, Eurozone January ZEW Economic Sentiment Index, European Commission President Ursula von der Leyen speaks at the World Economic Forum
Wednesday (January 21): UK December CPI MoM, UK December RPI MoM, U.S. November Building Permits, U.S. December Pending Home Sales Index MoM, IEA Monthly Oil Market Report, Former U.S. President Donald Trump speaks at the World Economic Forum
Thursday (January 22): U.S. API Crude Oil Inventories (Week ending Jan 16), Australia December Unemployment Rate, U.S. Initial Jobless Claims (Week ending Jan 17), U.S. November Core PCE Price Index YoY, U.S. November Personal Spending MoM, U.S. November Core PCE Price Index MoM, U.S. EIA Natural Gas Inventories (Week ending Jan 16), ECB December Monetary Policy Meeting Minutes, Turkish Central Bank Interest Rate Decision
Friday (January 23): U.S. EIA Crude Oil Inventories (Week ending Jan 16), Japan December Core CPI YoY, UK December Retail Sales MoM, Eurozone January Manufacturing PMI Flash, Canada November Retail Sales MoM, U.S. January Michigan Consumer Sentiment Index Final, U.S. January 1-Year Inflation Expectations Final, Bank of Japan Interest Rate Decision and Outlook Report, Bank of Japan Governor Kazuo Ueda holds a monetary policy press conference