A Sweet Delight

Outlook for Jan 20-23

Jan 19, 2026

∙ Paid

What’s up everyone,

Happy Monday. Markets are closed for MLK Day, so we get a quick breather before jumping back into what’s shaping up to be a pivotal week. Let’s break it all down.

The S&P 500 closed Friday at 6,940 - essentially flat on the day but down slightly for the week. The Dow settled at 49,359 and Nasdaq at 23,515. But here’s the thing: if you’re only watching the big indices, you’re missing the real story.

The Great Rotation Is Here (well, it’s been occurring)

The Russell 2000 is absolutely ripping. We’re talking +8% YTD while the S&P sits at just +1.5%. Small caps have now outperformed the S&P 500 for 11 consecutive sessions - the longest streak since 2008. This isn’t noise. This is the rotation we’ve been waiting for.

Why? A few things converging:

The valuation gap between small and large caps hit a 25-year extreme at year-end
Russell 2000 trades at ~18x P/E vs. S&P at ~26x
Lower rates are finally flowing through to small-cap balance sheets
GDP is running hot, Atlanta Fed’s GDPNow pegs Q4 at 5.3%

If you’ve been sitting in mega-cap tech waiting for breadth to improve - congratulations, it’s happening.

Current Levels

Index Close (Jan 16) YTD: S&P 500 6,940 +1.5% Nasdaq 23,515 +2.0% Dow 49,359 +1.2% Russell 2000 2,678 +8.0% VIX 19.23

Gold: $4,600+ (record high)
Silver: $90+ (record high, +26% YTD)
10Y Treasury: 4.20% (breaking out of multi-month base)

- SPY Weekly

- QQQ Weekly

- IWM Weekly

- DJI Weekly

Overall, things are pretty constructive in the grand scheme of things with a longer time frame horizon outlook. While we do sit at/near overbought levels, the channel remains pretty mid-line controlled if you will. When looking at futures at the time of writing, we are still trading above the 10wk SMA on Spooz yet people are running around like chickens with their heads cut off on X. We’ve seen this exact song and dance before just under a year ago. The famously coined TACO trade is back? Per chance, per maybe. Certainly will see a good bit of blood in the week ahead especially with the higher beta names & growth stories likely taking a big hit. This provides necessary downside to consolidation & entry for traders who were ‘locked out’ of the trade.

The Headlines

Powell vs. DOJ

Fed Chair Jerome Powell dropped a bombshell last Sunday: the DOJ served the Fed with grand jury subpoenas threatening criminal indictment over his testimony about the Fed’s building renovation project.

But Powell isn’t backing down. In a rare video statement, he straight up said this is about one thing: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”

Trump denied involvement but continues hammering Powell on rates, posting “Jerome ‘Too Late’ Powell should cut interest rates, MEANINGFULLY!!!”

The market implication? JPMorgan now expects the Fed to hold rates steady all of 2026. That’s a big shift from the 1-2 cuts everyone was pricing in. Fed independence concerns are real, and the bond market is paying attention.

Personally still believe we remain on track for 1-2 cuts this year.

Credit Card Cap Drama

Trump floated a 10% cap on credit card interest rates for one year. Bank stocks got hammered - Citi down 7% for the week, Bank of America off 6%, Wells Fargo down 7%. Even JPMorgan sold off despite beating on earnings. Goldman Sachs remained resilient in the grand scheme of things and continues to surge at highs.

Geopolitics Getting Spicy

Iran, Greenland, Venezuela - choose your fighter (lol). Trump announced tariffs on any country doing business with Iran, “effective immediately.” The Greenland situation is escalating. Meanwhile, safe haven flows are going straight into gold and silver.