Latest / Markets with Megan: A Quick Financial Markets Update / Geopolitics, Bond Yields, and a Market Reality Check | S3 E113 | 01-21-26

Transcript

Geopolitics, Bond Yields, and a Market Reality Check | S3 E113 | 01-21-26 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: It's been a roller coaster ride for investors this week.
• 0:02
  Megan Horneman: It is Wednesday, January the 21st, and this is Markets with Megan.
• 0:06
  Megan Horneman: If you like this podcast, subscribe.
• 0:08
  Megan Horneman: You can hit the alarm bell, share with your friends, family, or colleagues.
• 0:12
  Megan Horneman: But we're here today to talk about some of the market movements we've been seeing over the past two days.
• 0:17
  Megan Horneman: And this is in light of having very, very slow economic data calendar.
• 0:22
  Megan Horneman: We got some disappointing news from the pending home sales today, but the majority of news that's been moving the markets has all been about geopolitical reasons.
• 0:32
  Megan Horneman: Not only the rhetoric between the US and Europe concerning Greenland and the US wanting to take ownership of Greenland, but also we've got a big sell-off in Japanese bond yields.
• 0:43
  Megan Horneman: This is something where we haven't seen the 10-year Japanese bond yields rise to this type of a level since 1999.
• 0:51
  Megan Horneman: So you're looking at well over 2%.
• 0:54
  Megan Horneman: This caused a lot of fear across the global bond markets.
• 0:57
  Megan Horneman: We saw a big sell-off in yesterday's US bond market as well.
• 1:01
  Megan Horneman: Now, when you see higher yields and an increase in geopolitical tensions, what do you tend to see?
• 1:07
  Megan Horneman: You see the stock markets decline.
• 1:09
  Megan Horneman: And what we saw was those areas of the market that have seen the biggest rally last year, that have the highest price to earnings multiples, that can be impacted by highest higher interest rates, they saw the biggest declines.
• 1:30
  Megan Horneman: But it was really all led by the US.
• 1:32
  Megan Horneman: And that was specifically the NASDAQ, the SP 500, large cap growth.
• 1:38
  Megan Horneman: We actually saw small cap stocks outperform large cap stocks yesterday, still decline, but we did see an increase.
• 1:45
  Megan Horneman: I mean, them fall less.
• 1:47
  Megan Horneman: The other areas of the market that saw weakness was the dollar.
• 1:51
  Megan Horneman: When you get concerns about what the US is going to do, if we're going to get into another trade war or tariff war, um, because of what the US's interests are in Greenland, that tends to spook all investors in U.S.
• 2:04
  Megan Horneman: assets.
• 2:04
  Megan Horneman: We did not see what some people think is a hedge against um volatility around the world, Bitcoin.
• 2:10
  Megan Horneman: We did not see that rally.
• 2:12
  Megan Horneman: We actually saw that decline pretty sharply.
• 2:14
  Megan Horneman: But we did see gold again make some new record highs here.
• 2:18
  Megan Horneman: Now, today this has reversed course.
• 2:21
  Megan Horneman: Um, the market has turned around.
• 2:23
  Megan Horneman: President Trump came out today, said that he reassured he doesn't want to use force to take Greenland.
• 2:29
  Megan Horneman: We don't think that this is going to be some sort of a forceful situation when it comes to Greenland.
• 2:34
  Megan Horneman: Instead, at the end result, we think what will happen is just the U.S.
• 2:38
  Megan Horneman: having a greater military presence there.
• 2:40
  Megan Horneman: Um, we think as usual, Trump does come out with the big far-ending part of the deal to somewhere meet in the middle.
• 2:48
  Megan Horneman: We agree, though, that any additional rhetoric around trade war between the US and Europe, we the the uh Trump talked about tariffs, additional tariffs on wine in Europe.
• 2:59
  Megan Horneman: This is not good for the markets.
• 3:00
  Megan Horneman: It's not good for sentiment.
• 3:02
  Megan Horneman: Um, it's one of the many reasons that we've been concerned about the market coming into this year.
• 3:07
  Megan Horneman: Valuations were were pricing in perfection.
• 3:10
  Megan Horneman: And we're not talking about just from fundamentals with interest rates, with um the economy, but that that Trump would be completely quiet and we wouldn't see anything on the front when it comes to some of the other initiatives that he has in his that he came forward and campaigned on.
• 3:26
  Megan Horneman: So we think um today's a nice welcome relief rally, but again, this volatility is probably not behind us.
• 3:32
  Megan Horneman: It's gonna be a very interesting year.
• 3:33
  Megan Horneman: Don't forget it's a midterm election year, and in the near term, we still are waiting for the Supreme Court decision on the tariffs.
• 3:40
  Megan Horneman: And then Trump has said he would um shortly announce his recommendation for the Federal Reserve Chairman position that that come that will come up in May.
• 3:49
  Megan Horneman: That's all we have today.
• 3:50
  Megan Horneman: If you want a history of our podcast, you go to MarcusMegan.fm.
• 3:53
  Megan Horneman: Thank you.