The weekender: The market that refused to blink and dispersion is the signal

Dispersion is the signal

This was supposed to be a week of judgements. Jobs. Definitions. Prices. Instead, markets bought into the uncertainty and treated it like oxygen.

December payrolls fell short of expectations but remained within the market’s perceived bullish tolerance range for stocks. 50,000 Jobs added and unemployment decreased to 4.4% It kept the data squarely in the zone of no Fed action. It is too weak to scare inflation, and too strong to push ahead with monetary easing. Hiring slowed, firing slowed even more, and demand continued. The market processed it in seconds and kept rolling.

The tariff story followed the same scenario. The Supreme Court’s failure to rule was not interpreted as hesitation, but rather as intent. Markets tend to interpret time as a source of nuance. A hasty decision would have led to a harsh outcome and increased the likelihood of the tariffs being immediately removed. The delay indicates more complex governance and, more importantly, a longer path before policy risks become political reality. From an equity risk-taking perspective, this pause was far more important than the ruling itself. As the crisis began, uncertainty was temporarily dismissed rather than resolved, and risk capital remained on the move.

So stocks went up anyway. Not in a straight line, and not where last year’s leadership lived. Big technology is late. Secular growth stopped. The market has not given up on risk; She simply changed her uniform amidst Big market turnover for January. Small company stocks rose more than… 5% week, supported by a strong short squeeze that marked one of the strongest starts in a year 10 years. The patrols associated with the nominal force quietly took it upon themselves. Dispersion widened. This was no test hunt. It was a spin with intent.

The bonds were quieter but no less useful. Longer-term bonds have outperformed, flattening the curve even as enthusiasm for near-term interest rate cuts slows. 2 years Bond yields rose, reinforcing the idea that monetary easing in January is off the table. 10 years The returns barely moved, trapped in a tight range that screamed wait and see. Fixed income volatility has collapsed even as geopolitical pressures increase, a pairing that rarely holds for long.

The dollar strengthened One month Elevations. Gold ignored that and rose anyway, hovering near record levels. This was not an attempt at geopolitical panic; It was a credibility trade. When financial gravity deepens, gold rarely waits for consensus.

Oil has added a geopolitical premium of its own. Crude oil recorded its strongest daily gains since October as tensions flared in Iran and rhetoric escalated. Global inventories point to fading, but supply concerns call for urgency. Energy was at a crossroads, carrying enough of a risk premium to make short positions uncomfortable heading into the weekend.

Bitcoin did almost nothing. After a strong start to the year, it simply held its ground 90,000 Acts as a psychological anchor. In a week defined by scattering and rotation, cryptocurrencies opted for consolidation.

The common denominator between the originals was not conviction, but selectivity. This market is not moving together. It’s fragmentation. Correlation is low, dispersion is high, and this combination punishes slow positioning. Secular narratives are pushed aside by nominal reality. Growth is hot enough to favor procyclicality, not hot enough to force monetary policy tightening, and not weak enough to justify aggressive easing. It’s an unstable equilibrium, but the market is signaling that it knows how to trade.

The real risk isn’t whether stocks can rise from here. Rather, it is whether interest rates or politics will ultimately corrupt the party. The show returns next week. The uncertainty about the tariff is due to the framework. Volatility is still cheap on the front and is bidding more quietly. This is the kind of setup that sounds boring until it’s not.

For now, the market has refused to blink. It took turns instead, priced time as optional, and carried enough unresolved tension into the weekend to keep everyone a little off balance. This is more prevalent than any headline.

Chart for the week

“Breakthrough or bull trap? Valuation arrogance means there is no room for error.”

“The US stock market now trades at roughly 3x the money supply. That’s up 100% since the 2022 low and up from the dot-com peak in 2000. Global stocks, commodities, government bonds and credit combined recorded +50% annually… for their best overall performance since 2009. There’s not much margin for error.”. (Bobby Mulavey, JS)

Productivity is the new payroll

There is something important happening beneath the surface of the US economy, and it is not clearly visible in the jobs numbers. Productivity has taken the wheel.

Business productivity rose at an annual pace of 4.9% in the third quarter, after an already strong gain of 4.1% in the previous quarter. This is the fastest two-quarter stretch in almost two years, and while the annual numbers look more modest at 1.9%, short-horizon data always lie. When you smooth out the noise and look at the eighth-quarter moving average, productivity is close to 2.4%, which is well above the post-pandemic norm, higher than the trend of the past decade, and even exceeds the long-term post-war average. This is not a hike. It is a regime change that is trying to establish itself.

Industrialization has historically lagged, but even there the tone is changing. After spending much of the past decade reducing rather than expanding efficiency, factory productivity accelerated 3.3% year-on-year in the third quarter and is now up 2.3% from a year ago. The sector is moving. Not roaring yet, but clearly waking up.

What makes this productivity rebound particularly notable is that it comes without an increase in labor inputs. Working hours have barely gone up. Headcount growth remained weak. Output rose anyway. This tells you everything you need to know about where the edit came from.

American companies are proceeding by design. High inflation rates over the past few years, now accompanied by uncertainty over tariffs, have put pressure on margins and restricted the purchasing power of low-income consumers. Companies are responding the only way they can without sacrificing profitability: by doing more with less. Recruitment is cautious. Selective payroll expansion. Efficiency is the lever of growth.

Meanwhile, there is a quiet arms race. Companies are not blindly chasing AI headlines, but are testing, piloting and integrating automation across workflows because the cost of downtime is rising. No CEO in two years wants to explain why competitors expanded profit margins while they waited for certainty. Productivity spending has become a form of defensive attack.

This has near-term consequences. Productivity-led expansion is not labor-friendly at first glance. Job growth remains weak. Wage demands remain restricted. Workers are reluctant to demand higher wages when companies clearly prioritize efficiency over expansion. This is the uncomfortable stage we are living in now.

But it is strong at the macroeconomic level.

Hourly compensation growth slowed to about 3.2% year over year, the weakest pace in more than two years. Add to that the rise in productivity and unit labor costs have now fallen for two straight quarters, rising just 1.2% over the past year. This is as clear a signal of lower inflation as you would find without a recession.

This is why inflation pressure continues to ease even as growth refuses to slow. This also explains why the Fed suddenly has room to maneuver again. Productivity is the Fed’s job to do. Lower unit labor costs ease price pressures, open the way for lower interest rates, and support growth without reigniting inflation. This is a rare combination.

In the long term, the repercussions will be deeper. Restrictions on immigration and an aging population are quietly limiting labor force growth. The economy cannot rely on an increasing number of employees as it did before. Productivity has become the main driver of GDP growth by necessity, not choice.

And here the parts markets are just starting to price. Productivity driven growth vehicles. The income, profits and wealth generated by increased efficiency do not disappear. They recycle. They ultimately create new demand, new industries, and new jobs, even if these jobs do not resemble those they are displacing. The schedule is uneven, but the destination is familiar.

For investors, this is the kind of backdrop that rewards patience and punishes nostalgia. Growth comes from within the machine, not from adding more workers to it. Earnings expand without margin compression. Inflation remains under control. Politics becomes easier, not tighter.

This is not a jobs boom economy. It’s something quieter and arguably more powerful.

The American economy is not moving forward. She’s making her engineering way there.

Global stocks are expected to return 11% over the next 12 months

Global stocks are expected to continue to rise in 2026 but not as strongly as last year, with diversification across styles, sectors and regions likely to give investors a boost, according to Goldman Sachs research.

The global economy is poised to continue expanding in 2026, and the US Federal Reserve is expected to provide more modest easing.

“Given this macro backdrop, it would be unusual to see a major setback/bear market for stocks without a recession, even from high valuations,” Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research, wrote in a report titled “Global Equity Strategy Outlook 2026: Tech Tonic – A Broadening Bull Market.”

• Our analysts’ 12-month global forecast indicates that share prices, weighted by regional market cap, are expected to rise 9% this year and return 11% with dividends in US dollars.
• A strong rally in global stocks in 2025 has left valuations at historically high levels in all regions – not just in the US but also in Japan, Europe and emerging markets. “Therefore, we believe returns in 2026 are likely to be driven more by underlying earnings growth rather than by rising valuations,” Oppenheimer says.
• Investors who diversified their investments across regions received bonuses last year for the first time in many years, with the United States underperforming most major markets. Our analysts expect diversification to continue as a key theme in 2026, extending to investment factors such as growth and value and across sectors.