In this solo morning briefing, Kenny Polcari walks through the week’s market turbulence, labeling the rapid back‑and‑forth moves in equities as “ping‑pong” noise that distracts from long‑term investing. He reviews labor‑market indicators – Challenger job‑cut data, weekly unemployment claims, and the non‑farm payroll report – showing a normalizing but still solid job market that eases pressure on the Fed to cut rates. Polcari highlights how political headlines, especially President Trump’s swing on defense spending and tariffs, create short‑term volatility in aerospace and defense stocks without changing fundamentals. He then shifts to the evolving Venezuela energy‑rebuild narrative, noting potential $100 billion private‑sector investment and its downstream impact on oil‑service and infrastructure firms. The analyst discusses a Trump‑driven, GSE‑backed $200 billion purchase of mortgage‑backed securities as a QE‑adjacent move that could lower mortgage rates but risk inflating housing prices. Commodity markets are described as range‑bound: oil around $55‑$58, gold near $4,470, and bonds showing modest yield moves. Finally, Polcari previews an upcoming Supreme Court decision on Trump’s tariffs, outlining how a ruling could trigger sector rotation between industrials/materials and consumer‑discretionary/technology. He ends with a reminder to stay disciplined, offers a free portfolio review, and shares personal notes about upcoming media appearances and a Tito’s martini.
Chapters
Well, good morning. Yes, it's me. It is Friday, January 9th, 2026. It's been an interesting week, and here are the things you need to know to get your day started. Well, this ping pong back and forth, it just equals a lot of noise, right? The labor market is normalizing, doesn't appear to be cracking. The question is, will that cut, uh, the pressure on the Fed to cut rates, right? Oil's up a bit, gold was steady, and what are we having tonight? We're going to have the Tito's Martini because I am just exhausted. Okay, so like I started out, ping pong, because that's what the action is, right? Back and forth and back and forth. Yesterday's tape was— it perfectly captures that current mindset. On Wednesday, traders sold the broad market and they chased the beaten-down tech names. And then yesterday they sold the tech names and rode right back into the broader market that they had just abandoned the day before. That's not conviction, that's ping pong, right? That is an algo-driven, trader-led, short-term churning. That's all that It is not long-term capital-making, thoughtful allocation decisions. And all it really does is create lots of noise designed to shake you, confuse you, and really knock you off your long-term plan that actually works. Now, besides the ongoing geopolitical noise that is sucking the air out of the room, we did get some more conflicting economic data. Challenger Job Cuts showed layoffs down 8.3%, and that helped reinforce the idea that the labor market is cooling, not cracking. Employers announced just over 35,000 job cuts, the lowest monthly total in more than a year, while planned hiring actually picked up. Markets initially shrugged off the data because challenge is inherently noisy, but it ended up celebrating the news by the end of the day. 4 PM, this is how it looked. The Dow added 270 points. The S&P was up 1 point, it was essentially flat. NASDAQ was down 104. The Russell gained 26. The Transports up 197. The Equal Weight S&P up 70 points, or nearly 1%, while the Mag 7 added just 9 points. In the end, the message is clear: companies are no longer in aggressive cost-cutting mode. This report did not signal economic stress at all. It suggests normalization after a year of restructuring. Importantly, it didn't— it did nothing to change expectations around Friday's official jobs report or the broader narrative that the labor market is slowing gradually. Exactly what the Fed needs to see. So in addition, weekly jobless claims fell again, another sign that the labor market is normalizing, not deteriorating. The New York Fed's 1-Year Inflation Expectations Survey also sent a reminder that inflation psychology hasn't fully reset, with respondents expecting inflation to really run better than 3%, 3.4% actually, well above the current 2.8%. So yes, the data is mixed. But there is nothing that suggests crisis. Now today brings the non-farm payroll, right, number, and expectations did call for 70,000. In fact, we got 50,000. So a little bit weaker on the number, but employment— unemployment fell from 4.6 to 4.4, uh, better than the expected 4.5%, and average hourly earnings rising at 3.6% year over year. And if that's what we get, then I think the market's okay. But remember, strong labor data also means pressure to cut rates starts to fade. You can't credibly argue that we need to cut rates to save the labor market at the same time you're reporting solid job creation, falling unemployment, and rising wages. That's a disconnect for investors, and you need to keep that in mind. Now, so back to the noise, because this is a perfect example of it. On Wednesday, President Trump said he was effectively gonna punch the aerospace and defense sector right in the gut, and the group sold off hard. Then yesterday he turned around and announced plans to increase defense spending by $1.5 trillion by 2027. And guess what? The very same names that got beaten up the day before surged right back on Thursday. So on Wednesday, the XAR fell 1.3%, the ITA dropped 1.6%. Yesterday, the XAR jumped 2.3% and the ITA rose by half a percent. The individual names did the same thing. Lockheed Martin really had taken— had really lost 4.4%, uh, on third— on Wednesday, and it rose 4.3% on Thursday. Northrop Grumman gained back 2.5%. Raytheon added 0.8%. That's really not fundamental investing. All that is is headline-driven, trader-led volatility clear at work. Meanwhile, the Venezuelan narrative continues to evolve and modestly improve. Delcy appears to be choosing a more cooperative path and engaging with the U.S. And President Trump is signaling that American oil companies are going to be central to rebuilding Venezuela's battered oil and gas infrastructure. Now we're talking north of $100 billion in potential investment. And yes, you can already imagine the infrastructure and service names that are going to stand to benefit from a commitment like that: oilfield services, energy infrastructure, engineering, pipeline storage, main— uh, midstream names, power and grid, industrial equipment, materials, commodities. Just reach out to me because I have a list of interesting names. Trump is meeting today at the White House with major US upstream and oil service players, names like Chevron, ExxonMobil, ConocoPhillips, Schlumberger, Halliburton, and likely some others. He has also floated the idea that the US could subsidize or reimburse parts of the rebuild to help modernize those facilities. The key point here is important. This is not the US government going in to take over. This is about enabling private sector capital and expertise to do the work, which means they have real skin in the game. Now PDVSA, which is the Venezuelan state-owned oil company, will almost certainly be involved. But let's be realistic. Decades of underinvestment, decay, and past expropriations mean that foreign firms remain cautious about their ability to lead construction on its own. It's a long-term capital-intensive story. This is not a quick fix, but the tone is getting better and markets are paying tension. Why this matters? Over time, a credible rebuild of Venezuela's energy infrastructure increases global supply, improves reliability, and lowers the geopolitical risk embedded in oil prices. Now, more stable energy supply is disinflationary at the margin, helping cap fuel costs, transportation and input costs, right? It's not an overnight fix, but directionally it matters for energy prices, inflation expectations, and ultimately Fed policy. That's why markets are paying attention to global supply and not so much the politics. Now, bonds fell yesterday— on Thursday. The TLT was down 0.5% while the TLH was down 0.4%. The 10-year is yielding 4.18%, while the 30-year is yielding 4.85%. Nothing really to see here, but let's look over here, because, uh, Trump asked Fannie Mae and Freddie Mac to step up and purchase roughly $200 billion in mortgage-backed securities. The objective is very straightforward: reduce the supply of MBS in the market. That'll support prices and push long-term mortgage rates lower. Perhaps call it QE adjacent. It's not the Fed expanding its balance sheet, but the effect is similar. More demand for longer duration means tighter mortgage spreads and lower borrowing costs. Bond investors are gonna love this. But here's the bigger point: this is a policy end around Jay Powell. If the Fed won't cut rates quickly enough, Trump is effectively trying to engineer housing affordability through the back door by leaning on the GSEs to do what monetary policy will not. The risk— and there's always a risk— that this kind of intervention can and probably will distort price discovery. It's going to inflate housing demand without fixing supply and keep financial conditions looser than inflation data may justified. Now, while it may help mortgage rates in the short run, it risks reigniting housing inflation and reinforcing a perception that policymakers will always step in when the markets get uncomfortable. It's short-term effective, but it is long-term problematic, the same way we kept rates at zero for 15 years. Again, we need housing prices to just come down, and all that's gonna— all this is gonna do is cause housing prices to rise. Lower rates equals higher prices. Higher rates equal lower prices. It's not rocket science. Leave rates where they are and force natural buyer, natural seller to clear the market on their own. Now, oil continues to trade within the range that we've been talking about, roughly $55 to the downside, $58.60 on the upside. Uh, on Friday morning it was trading around $58.23, and the move higher being driven really by headline risk than any fundamental shortage. The story is the same. Uh, is the same. Some supply may be coming off the market due to disruptions in Venezuela and Iran, which is forcing parts of Asia to pay up for barrels rather than rely on discounted Venezuelan crude like they have. That dynamic is lifting the risk premium, supporting prices, but for now it's still range-bound, uh, and not the start— I think not the start of a sustained breakout by any stretch. Now gold continues to churn. This morning it's down $4 at $4474. Nothing really to see we remain firmly in the range that we've been discussing for weeks now. Trendline supports down 4,200 with upside resistance at 4,550. The VIX, well, that remains very much in the complacent zone. Nothing to see there. European markets on Friday were all higher. Euro Stoxx was up, France was higher, uh, the United Kingdom was up. Defense stocks, uh, once again remain in focus. They're out 5 days in a row, fueled by all the rhetoric around Denmark and Greenland, right? Okay, it's exhausting. Look, Greenland, guess what? It's not for sale. Put that outta your head. So stop the ridiculousness. Denmark is a member of NATO and the conversation needs to be about working with allies, not posturing. From a market perspective, the takeaway is simple. Heightened geopolitical noise continues to support defense spending expectations and that's why the sector remains bid. Regardless of the headlines driving the discussion. US futures were essentially flat as they anticipated the NFP report. The day has now started. We are well into the trading day and markets are all higher on the back of that report. Now, we're also due to get the Supreme Court decision on Donald Trump's tariffs either today or early next week. The court could rule as soon as today whether the president had any authority to impose those sweeping tariffs under the International Emergency Economic Powers Act. Lower courts said he had overreached, and the justices appeared skeptical that an emergency statute was meant to grant broad tariff powers traditionally reserved for Congress. Why this matters? It's straightforward. If the court strikes the tariffs down, which, which the, the betting markets say they will, it could open the door to refund claims north of $150 billion and spark near-term volatility in trade-exposed sectors. If the court upholds them, uh, it cements expensive executive authority in trade policy. Either way, this isn't about tariffs disappearing. Oh no, no, no. It's about how they're imposed going forward and whether future trade actions require more congressional involvement. Importantly, this is not a sell the whole market type of a moment. It's sector rotation, not a systemic shock. Industrials and materials will most likely feel pressure as tariff protection fades and pricing power erodes. On the flip side, Consumer discretionary technology quietly will benefit from lower input costs, less supply chain friction, and reduced inflation pressures. Financial, healthcare, and utilities largely shrug it. Uh, bottom line is this does not derail the bull market, it just simply reshuffles the leadership. The S&P 500 closed on Thursday at 6,921, up less than a point. Trendline support still sits at 6,815 and resistance at 6,945. If all goes well, the economic data and Supreme Court decision, then we could explode up and through resistance. If not, I expect more churn. In the end, you know, stay disciplined, stay focused, stick to the plan, and don't get drawn into the fray. You can call me at 561-931-0190. I'll give you a free, no-obligation portfolio review. Let me help assess the risk in your current portfolio versus the risk you're willing to take. Okay. So, what about everything, then, tonight? 'Cause I need a drink after this week. So try the Tito's Martini. The way I like it, shaken, not stirred, a little bit dirty with 3 blue cheese stuffed olives, on the rocks. Yes, I drink my martinis on the rocks. Trust me, that's just the way I drink 'em and that's just the way I like 'em. In any event, it is a gorgeous day here in South Florida. It's gonna be a beautiful weekend. I'll be in New York City next week. I'll be on, joining Maria on Monday. The Big Money Show on Tuesday, Charles Payne on Wednesday, and Barney on Thursday. In addition, I'll be, uh, recording my Yahoo podcast that will drop on Wednesday. Until then, take good care.
