It was a wild week of sharp dips and rallies. The meeting of nations in Davos, Switzerland kicked off this week with fireworks to be had by all. Next week, we have a slew of earnings announcements from many of the mega-cap names which will undoubtedly set the tone for the rest of earnings season and perhaps even the first quarter. Stay buckled in as it is likely going to be another volatile week.
Let’s begin with the elephant in the room. The fight over Greenland escalated early this week before ending the week at a slow simmer. President Trump reiterated his plan to acquire Greenland and announced a 10% tariff on eight European countries set to begin February 1st. Aside from rare earth minerals, Greenland is key to the president’s “Golden Dome” defense system that he intends on implementing. Greenland has been reluctant to sign on believing such a system would put it at ground zero if another world war were to occur. However, as quickly as the rhetoric heated up, on Thursday the president seemingly called off both the tariffs and the taking of Greenland by force. Apparently, behind closed doors there was some progress made with President Trump announcing he had reached “a framework of a future deal” with NATO. Let’s hope this “framework” has more substance than his “concept of a plan” regarding the Affordable Care Act (ACA).
In other news, the Supreme Court has again kicked the can down the road regarding the legality of President Trump’s tariffs. It was expected to release a ruling several weeks ago, but with its month-long recess now, the earliest we could hear something is February 20th. At this point, regardless of how it rules, it appears tariffs are here to stay in one fashion or another. I’m sure one of the hurdles for the Supreme Court is the fact that if it rules on the tariffs being illegal, it will mean more than 1,000 companies could be owed billions of dollars in refunds. You can be assured consumers will not likely see a dime.
In economic news, we learned this week that the PCE deflator, the Fed’s chosen measure of inflation, rose to 2.8% in November from a prior 2.7%. Complicating matters is that this report is “messy” due to data collection issues during the government shutdown. However, the current data certainly calls into question another rate cut next week when the FOMC meets. On the flip side, it appears consumer sentiment is improving. Today we learned that the University of Michigan’s consumer sentiment index closed out January at a reading of 56.4, higher than expected and well above December’s reading of 52.9. Yes, the readings are still below where they were a year ago, but whether due to fatigue or optimism, the numbers are rising. I’ll take that as a win.
In closing, I came across a story that seems right out of a Charles Dickens novel. It seems chimney sweeps in London are on the rise. As energy prices rise, some Londoners are turning back to wood-burning stoves and fireplaces. This trend is creating a resurgence of the once-common profession. Membership in the UK’s chimney sweep association has grown almost 30% in the last five years. One company, H. Firkins & Sons, claims it fields 70 to 80 calls a day during the winter. Fortunately, gone are the days of Dickensian young orphans putting their lives at risk. New methods and techniques, such as CCTV and advanced equipment, make it a safe profession unlike days of yore. Now you know.