Control Panel: Trend changes in 2026

Investment Analysis Clubs Macro Economic Trends and Risks
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Before describing the purely economic trend changes in 2026 I have to focus on the single greatest Macroeconomic Trend change: the ongoing transformation of the U.S. from a liberal democracy dedicated to the rule of law into a corrupt, murderous, lawless autocracy enabled by a supine Congress and a Supreme Court that apparently never read the Constitution and has given the president a get-out-of-jail-free card (Trump vs. United States which established that presidents have absolute immunity for actions within their core constitutional powers and presumptive immunity for all official acts, making them immune from criminal prosecution for such actions).

My heart is broken over the murders of Renee Good and Alex Jeffrey Pretti by federal agents who are beginning more and more to resemble National Socialist Party brown shirts. I am deeply frightened over the internal ICE memo that authorized agents to enter homes without a judicial warrant, a clear violation of the 4th Amendment.

Is it 1933 or 1936? The Trump administration is following the Authoritarian Playbook.

History shows that totalitarians can turn on a dime, restricting economic actions such as the transfer of assets (and their own persons) between countries. In pre-WW2 Germany, only those who acted early escaped. Will that happen here? Jews who fled early to France were captured and killed when Germany conquered France in 1940. Will the same thing happen to Americans who flee to Canada?

The financial markets are ignoring any of these fears but there are still plenty of economic trend changes in 2026.

https://www.wsj.com/world/asia/the-first-three-weeks-of-the-year-will-reshape-the-world-e9487b2d?mod=hp_lead_pos9

The First Three Weeks of the Year Will Reshape the World

From Davos to Minneapolis, the events of this month have the potential to profoundly change the political and economic landscape for years to come

By Greg Ip, The Wall Street Journal, Jan. 24, 2026

“There are decades where nothing happens; and there are weeks where decades happen.” The quote, often attributed to Lenin, aptly describes the first weeks of 2026. …

The U.S. uncouples from Europe…

For now, NATO remains intact and trade peace is holding. But the turmoil in markets last Tuesday, when stocks fell and bond yields and gold rose, hint at the anxiety that awaits as the political and economic institutions that bind the West slowly unravel.

A new Monroe Doctrine built on resources [I would call this a return to imperialism. – W]

China comes in from the cold

…
Though small in the scheme of things, the Canada-China deal showed how third countries must swallow their misgivings about China if they want to hedge their dependence on the U.S. As Prime Minister Mark Carney noted in Davos, “not every partner will share all of our values.”…

American technological autonomy advances…

The Commerce Department said Taiwan Semiconductor Manufacturing, as part of $250 billion in new Taiwanese investment, will add to several chip factories in Arizona… They will make the advanced chips essential to the artificial intelligence, communications and mobile applications designed by Nvidia, Qualcomm and Apple…

War between the president and the Fed

…
The outcome of this battle matters immensely to investors around the world who have long assumed the Fed would act in the long-term interests of the U.S. economy and global stability. Trump wants a Fed chair who puts his agenda first—i.e., lower rates, faster growth, and a higher stock market…

Japan and the end of easy money

…
Japan’s already massive debt may become unsustainable. The world has a stake in this because Japan is one of the world’s largest, if not the largest, creditors. Its government and investors hold $1.2 trillion worth of U.S. Treasury debt. Japan increasingly needs those investors to buy its own debt. …As Japanese rates rise, debtor nations will feel pressure to offer higher rates to keep Japanese investors buying their bonds. The U.S., whose government is the world’s largest borrower, is especially vulnerable… [end quote]

Last week, Trump’s aggressive talk about taking over Greenland caused the stock and bond markets to react negatively and he TACO’d. These markets rebounded right away.

The USD fell. Gold and silver rose. These moves did not rebound. The “mungofitch ratio” of copper:gold suddenly plunged which showed (according to mungofitch) that traders were putting their money more into safety than building the economy.

Oil is climbing. Natgas suddenly spiked, probably due to the huge winter storm.

The trade was neutral as the moves in stocks and bonds were correlated. The Fear & Greed Index was Neutral.

The Price to earnings ratio based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted P/E Ratio (CAPE Ratio), was over 40, compared with a historic median of 16. The bubble continues to inflate, driven by loose money and debt. Margin debt continues to rise rapidly at record levels.

The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, showed that financial conditions were loose and getting even looser. The Fed’s “not QE” action reversed some incipient financial stress.

The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 was 5.4 percent on January 22. That is smokin’ hot growth, far higher than the Blue Chip economists’ consensus.

The Cleveland Fed’s inflation watch shows a divergence between CPI and PCE inflation.

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The options market doesn’t see a significant chance of a fed funds rate cut until April.

The METAR for next week is sunny. None of the craziness is impacting the markets…yet.

Wendy

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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I vaguely remember something about no politics on METAR…

DB2

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Dear Bob,

Gosh, I vaguely remember a time when investors in the USA did not need to begin their investment analyses by pondering the chances that rapacious persons would use government to seize goods belonging to others, socializing (to “we the people”) serious risks while privatizing (to those within their small very powerful clique) immense near risk free profits. I remember (not long ago) when USA politics remained “limited” to the political sphere of peaceful discussion and policymaking, and was conducted with at least a pretense of NOT appearing to aspire to total control of almost every aspect of public life, an aspiration that is the essence of totalitarianism. Now we see that very aspiration invading every place and aspect of life in the USA, with dangerous spillover into the rest of the world.

And Bob, I agree with you and quite a few others on this board, starring Wendy, who have worked and worked to maintain strong enough limits and dissuasion from political bomb throwing on METAR so as to allow ourselves on this board the privilege of an open, civil, friendly yet robust discussion about investments and related topics.

Let’s not give up. Let’s be careful and care for each other, as wrong as most of those other people are….. I (unfortunately) believe we now MUST include political risks in our discussions because they are now increasingly very potent and relevant. Your AND Wendy’s calm posts are on the mark.

Here is a superb pair of (gifted) columns from the NYT that I see as weirdly but extremely relevant to we on this board at this moment in time.

https://www.nytimes.com/2026/01/25/opinion/ice-rage-identity.html?unlocked_article_code=1.HFA.tf7g.njO2bxQZWokb&smid=nytcore-ios-share

https://www.nytimes.com/2026/01/25/opinion/trump-greenland-venezuela-democracy.html?unlocked_article_code=1.HFA.UMM_.hNQALszWYOWo&smid=nytcore-ios-share

I have two dear old friends in their 70’s who at this very moment are braving the dangers on Minneapolis streets, striving to keep sanity and civility and people alive and safe. I am terrified for them, and for the nation, and, incidentally, for my investments. Quite unfortunately, all that is now horribly intertangled.

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But your quote from Wendy included the important bit about “focus on the single greatest Macroeconomic Trend change.” Politics for pure politics is one thing, but when there is a direct impact on METAR from what’s going on with the rule of law (and its absence), it’s not about pure politics anymore.

Pete

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@DrBob2 please refer to @flyerboys reply to you.

When politics did not directly impact economics and political actors did not physically threaten innocent citizens’ well-being it was possible to keep politics out of METAR.

I have a very old friend (in fact, my first love in college) who is an ICU specialist surgeon, marching in sub-zero temperatures in Minneapolis with his wife. They worked with Mr. Pretti who was murdered. Their lives are also in danger.

Let’s keep METAR civil. But it is impossible to ignore the Macroeconomic impact of politics when it literally is breaking down doors and killing people.

Wendy

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Two points.

  • I understand Wendy’s feelings but there are other, more appropriate venues.

  • So far, the most “macro impact” is a current GDP forecast of over 5%.

DB2

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You make a good point. The German economy boomed under Hitler. Unemployment dropped from 30% to zero, and corporate profits soared. But at what long term cost?

Should we not make ourselves aware of those costs this time around? Should we turn a blind eye to the long term costs to the disenfranchised immigrants, women, brown skinned people of all stripes, the climate, the deteriorating bonds with our long term allies around the world?

Do you think this will end with the murder of Alex Pretti?

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Of course we should be aware this time around. We should learn from history. And some things are not worth the cost. We should be doing better than this. But we aren’t. And no, it doesn’t end here.

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I vaguely remember a time when masked armed federal agents couldn’t go into our cities and murder citizens with impunity. We’re not in Kansas anymore.

Social unrest is building and it absolutely has macroeconomic effects. To be fair, those effects may not be readily apparent just yet.

This is a METAR board, we’re supposed to be discussing risks. Wendy’s post did just that.

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True. So what is the economic effect of the Minnesota Mess?

Back in 2020 the George Floyd riots caused about $2 billion in damages. However, the next year the Minnesota GDP grew from $379 billion to $416 billion (+10%) below the national rate of 13%.

DB2

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I think you missed the point of Wendy’s post.

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Yeah, social unrest affects economic activity. However, I’m less concerned about GDP because I think it’s a bunk measuring stick. On top of that, focusing solely on GDP actually hurts us in the long term.

“It does not even measure crucial aspects of the economy such as its sustainability: whether or not it is headed for a crash.”

“In fact, the American economy is more like an ordinary car whose owner saved on gas by removing the spare tire, which was fine until he got a flat. And what I call “GDP thinking”—seeking to boost GDP in the misplaced expectation that that alone would enhance well-being—led us to this predicament. An economy that uses its resources more efficiently in the short term has higher GDP in that quarter or year. Seeking to maximize that macroeconomic measure translates, at a microeconomic level, to each business cutting costs to achieve the highest possible short-term profits. But such a myopic focus necessarily compromises the performance of the economy and society in the long term.”

So, what impacts will all this lawlessness have on our economy? I dunno. I suppose it depends on whether we’re talking about today, next week, next month, next year…

One thing is certain, the longer we allow these shenanigans to persist, the greater the risk to our economy and country.

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The problems with metrics of well-being and sustainability are one of measurement and weightings. It’s like those articles on the ten best countries/states/cities to live in. What is included? How much does it contribute?

County A spends a million on bike trails. County B spends a million on fixing potholes. Which one improved the well-being of its residents more (and by how much)?

How do you measure programs for the special needs population? Do you put more weight on education programs or on those for adults? What are the best sizes for residential facilities to maximize well being metrics for that population?

DB2

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I dunno. Which one improved their economy?

I guess we could say that County A improved their economy because they paid contractors to do the work on the trails. But then again, with safer trails, maybe fewer people will buy cars and will instead ride their bikes to work.

Maybe we could say that County B improved their economy because safer roadways increases productivity. Dang, but then we’re missing out on all the money that tow companies and car repair shops make. Not to mention all that healthcare gravy we’d get with more serious injuries.

Good economic policies can only be measured if we have defined goals in mind. Focusing on GDP growth alone is super stupid…and leads to recklessness.

“Addictive opioids led to an epidemic of drug deaths, but the profits of Purdue Pharma and the other villains in that drama added to GDP. Indeed, the medical expenditures resulting from these health crises also boosted GDP.”

Even when it’s medium accurate (which it’s not), GDP is a shat measure of economic stability. By focusing solely on GDP, we’re encouraging extreme inefficiency, as long as our inefficiencies make more money. Super dumb.

“By the early 2000s two fifths of corporate profits came from the financial sector. That fraction should have signaled that something was wrong: an efficient financial sector should entail low costs for engaging in financial transactions and therefore should be small. Ours was huge. Untethering the market had inflated profits, driving up GDP—and, as it turned out, instability.”

And now we’re back at it again. Second verse, same as the first.

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What is the economic effect of a country killing citizens for exercising their 1st and 2nd amendment rights over the government throwing out the 4th amendment? Does that help you any?

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Answering questions with questions doesn’t provide answers.

If you want to talk politics here then talk about the economic effects of said politics.

DB2

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