The Week in Charts (1/21/26)

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The most important charts and themes in markets and investing…

1) The Reversal of Everything

The biggest secular trend of the last decade was the complete and total dominance of US large cap growth stocks, led by the magnificent seven.

But in 2025, we saw a partial reversal of that with international stocks posting their biggest outperformance since 1993.

International outperformance has continued thus far in 2026 and we’ve also seen outperformance in small caps ($IWM +4.2%), value stocks ($IWD +2.7%), and REITs ($VNQ +2.7%). Meanwhile the S&P 500 (-0.6%), growth stocks ($IWF -3.1%), and the Mag 7 ($MAGS -4.7%) are all down on the year. It’s only 20 days into the year, but so far it’s been the reversal of everything.

The relative weakness of the Magnificent Seven over the past year has been masked by strength in two of its members: Google and Nvidia. 5 out of the 7 stocks in the Magnificent Seven are actually underperforming the S&P 500 since the start of 2025, a very different picture than 2023-2024.

And Apple, which for a long time was the largest company in the world, is now down 1% since the start of 2025. Nvidia and Google have surpassed Apple as the global market cap leader.

2) The Low-Hire, Low-Fire Labor Market

This continues to be one of the most confusing labor markets in history.

There currently are many signs pointing to lower rates of hiring, including:

• The US added of an average of 20k private-sector jobs per month over the last 3 months of 2025 (ADP data), which was 90% lower than the last 3 months of 2024 (200k jobs/month).

• The US lost an average of 22k jobs per month over the last 3 months, the 3rd straight month with a negative 3-month moving average.

• The total number of jobs in the US increased by 0.4% over the past year, the slowest growth rate since March 2021.

• There are now 685k more Unemployed Persons than Job Openings in the US. Excluding the 2020 covid recession, this is the widest spread we’ve seen since 2017.

While hiring has clearly slowed, we’re not yet seeing a spike in firings:

• The US Unemployment Rate ended the year at 4.4%, down from a revised 4.5% in November 2025 (was 4.6%) and still well below the historical average of 5.7%. Year-over-year wage growth for 2025 came in at 3.8%, well above expectations for a 3.6% increase.

• US Jobless Claims have moved down to their lowest levels in 2 years, indicating fewer people filing for unemployment insurance.

3) The Big CPI Lie

The big CPI lie: inflation in the US is at 2%. Anyone living in the real world over the past five years knows it’s been much higher than that.

The US Inflation Rate (CPI) ended 2025 at 2.7%, the 58th consecutive month above the Fed’s 2% target level.

US Consumer Prices have risen by 4.5% per year over the last 5 years and over 24% in total.

US Producer Prices have risen 4.7% per year over the last 5 years and over 26% in total.

4) Powell’s Last Stand

The last time U.S. inflation was this high for this long was back in 1997 when the Fed Funds Rate was over 5%.

Today it’s at 3.50-3.75% after the Fed cut rates by 175 bps in 2024-2025.

But apparently, this is not low enough. President Trump continues to call for “much lower” interest rates, lobbing insult after insult at Jerome Powell…

And last week, U.S. prosecutors announced that they are investigating Jerome Powell over his testimony to Congress.

Jerome Powell has 3 meetings left as Fed Chair: January 28, March 18, and April 29.

The bond market is now pricing in zero rate cuts in those meetings with the first cut in 2026 occurring after Powell’s tenure as chairman ends in May.

I’m sure the attacks on Powell will only escalate, but the data doesn’t justify additional easing.

Powell should hold the line. This is his last stand to defend the independence of the Fed.

5) More Tariffs and More TACOs?

The S&P 500 fell 2.1% yesterday in its worst down day since last October.

What was the reason for the decline?

More tariff threats from President Trump, this time on 8 European nations (Denmark, Norway, Sweden, Finland, France, Germany, the UK, and the Netherlands). If enacted, there would be an additional tax of 10% on top of the tariffs already in place, set to begin on February 1. And if no deal to purchase Greenland is reached by June 1, the additional rate would rise to 25%.

Putting aside the absurdity of the situation, the question is whether this simply another bluff from President Trump as we saw countless times in 2025.

Because if that’s indeed the case, then the TACO trade (“Trump Always Chickens Out”) will ultimately play out once again with the sell-off on the news of the tariff threat and a rally after the threat is removed or walked back.

But before that happens, we may have to see deeper declines in the stock market (only a 3% drawdown in the S&P 500 currently) or a continued rise in Treasury yields (30-year has moved up to 4.9%, highest since last September).

Betters on Polymarket are pricing in only a 20% chance of a Greenland acquisition before 2027. Why are the odds so low? Because both Denmark and Greenland have stated their strong opposition to a sale and President Trump would need congressional approval for sale, which would be a tall order. In a midterm election year where the number one issue is affordability, it seems doubtful that the American people and their representatives would support spending hundreds of billions or more to acquire a foreign country with no immediate benefit to their everyday lives.

6) A Few Interesting Stats…

a) Gas prices in the US have moved down to $2.91 per gallon, their lowest level since March 2021. That’s 43% below the peak in June 2022 ($5.11/gallon).

b) The S&P 500’s Dividend Yield ended 2025 at 1.15%, its lowest level since 2000.

c) The S&P 500 has returned an average of 10% per year since 1928 despite an average intra-year drawdown of -16%. There’s no upside without occasional downside, no reward without risk.

d) The average S&P 500 total return is 10% per year but the stock market has only performed within 2% of that number in 4 of the last 98 years.

e) The End of an Era…

$1 invested in S&P 500 in 1964 = $455 today.

$1 invested in Berkshire in 1964 = $60,883 today.

And that’s it for this week. Thanks for reading!

Every week I do a video breaking down the most important charts and themes in markets and investing. Subscribe to our YouTube channel HERE for the latest content.

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