Beijing Responds As Trump's Iran-Related Tariffs Risk Derailing US-China Trade Deal

China sharply criticized Washington's move to levy tariffs on countries trading with the Islamic Republic of Iran, issuing a statement Tuesday - less than 12 hours after President Trump announced the punitive action on Truth Social - condemning the decision.

Chinese Foreign Ministry spokesperson Mao Ning stated, "China's position on the tariff issue is very clear." She said, "We have always believed that there are no winners in a tariff war. China will resolutely safeguard its legitimate rights and interests."

The Chinse embassy in Washington also blasted the move, characterizing the US action as "exceeding legal frameworks."

The United States will impose a 25% tariff on any nation conducting business with Iran. "Effective immediately, any country doing business with the Islamic Republic of Iran will pay a Tariff of 25 percent on any and all business being done with the United States of America. This Order is final and conclusive," Trump had declared.

But this could have broader unintended consequences, and threatens to derail Washington's fragile trade deal with Beijing, which remains Tehran’s largest trading partner. According to more of the Chinese response:

The world’s top two economies had secured an interim trade deal in late October that saw a roll back of punitive U.S. tariffs on China, while Beijing paused its sweeping rare earth export controls.

In response to Trump’s tariff threat China said it “firmly opposes any illicit unilateral sanctions and long-arm jurisdiction,” while warning that it would take “all necessary measures” to defend its interests, according to a post on X by a spokesperson for the Chinese Embassy in the U.S.

Deborah Elms, head of trade policy at the Hinrich Foundation, told CNBC that if Trump is serious about the 25% rate, "that is a massive escalation from current tariff levels."

"The last time we played this game, we ended up with tariff levels at 145%" - she added, warning about the potential for a tit-for-tat spiral, which would further halt any future plans of US soybean exports to China.

Trump's tariff decision comes amid violent unrest in Iran, described by Tehran as foreign-backed riots, which have left dozens dead - or possibly even hundreds according to unverified reports - including civilians and numerous members of the security forces.

China is Iran's largest trading partner, by far. So because the neocons surrounding Trump want to overthrow the Iranian government, Iranian civilians get higher prices via crippling sanctions and American consumers get higher prices via US tariffs on Chinese-made goods.

We're… https://t.co/8Ewc6Sk9vI

— Aaron Maté (@aaronjmate) January 12, 2026

Since the unrest began more than two weeks ago, the US president has repeatedly threatened military action against Iran, pledging to "rescue" anti-government protesters. 

Iran's national currency has collapsed to a record low, effectively losing all value against the US dollar. The economic downturn, driven largely by years of brutal US sanctions, has fueled widespread public discontent. But this street anger is also being 'hijacked' by external powers which want to see Iran destabilized, weakened, and it's ruling clerics and leaders overthrown.

Tyler Durden Tue, 01/13/2026 - 10:45

Mamdani Declares War On Civil Discourse

Authored by Charles Mitchell via RealClearPolitics,

Zohran Mamdani’s inauguration speech on Jan. 1 became instantly famous for his promise to prove the “warmth of collectivism.” Yet Americans should pay just as much attention to another deeply concerning comment from the socialist mayor of New York City’s first act in office. He declared that those who are “fluent in the good grammar of civility have deployed decorum to mask agendas of cruelty,” implying that his administration won’t tolerate public debate about his agenda.

These words mark the moment when higher education’s radical monoculture jumped into the real world of political power and cultural impact. Our experiment in self-government is now at unprecedented risk.

Mamdani’s words are familiar to anyone who has followed the decline of the university in recent decades. It reflects the idea that respectful discourse – a central Enlightenment and American ideal – is really a tool of oppression used by elites to prop themselves up while keeping everyone else down. This belief is widespread on campus: A December poll from the free-speech group FIRE found that 90% of undergraduates think that “words can be violence.” Even worse, a third of students are willing to use actual violence to prevent the saying of those words. This is a generation prepared to stifle debate it dislikes, casting even the most well-meaning ideological opponents as enemies of society.

But Mamdani’s inauguration is the first time this generation has seized the levers of power outside of the classroom. It makes sense: His candidacy was driven by zealot-like support from young college graduates and students – the groups most likely to be radicalized. Now Mamdani, in some of his first words, is spreading the message that discourse is dangerous. This isn’t simply another college professor preaching to the undergrad choir. It’s the mayor of America’s most powerful city proselytizing the broader public about the supposed moral importance of stifling debate.

Mamdani’s rhetoric is especially dangerous due to his track record of enabling and encouraging antisemitism. Since Oct. 7, 2023, the biggest security bills my organization has paid have been for events in which Jewish students could discuss the Hamas attacks openly and experience their heritage – and that’s in a small town in rural Pennsylvania. Two of the speakers we hosted in November and protected were attacked, bloodied, and hospitalized the next day. But it’s just not Jewish people who are threatened when civil discourse is discarded. Everyone is at risk from the resulting breakdown of basic human decency.

Given the ideological capture of academia, the day was always going to come when the inmates started running the asylum. What’s shocking is that so many serious people failed to see it. A generation of well-meaning centrists let such extremism run riot in higher education, assuming that what happened on campus would surely stay there. It didn’t, and the resulting damage will not easily or quickly be undone.

But it must be confronted as soon as possible, which requires immediate action from sane Americans of all political stripes. While some may pin their hopes on the Trump administration, the real reform of higher education must happen elsewhere. As we enter America’s 250th year, Arizona, Florida, North Carolina, Ohio, Tennessee, and Texas policymakers have created new civics programs within their state universities. This is a template for further progress. At the very least, students should learn about the Enlightenment values that undergirded the American experiment before deciding whether they will join Mamdani in denouncing them.

The most important action, however, depends on philanthropists. Many of the country’s most successful people are profoundly disappointed by their alma maters, yet continue to make large, unrestricted gifts to them. This is profoundly self-defeating, insofar as it supports the training of a generation that rejects the foundations of American success. Instead, philanthropists should stop funding irreformable schools, establish new centers at the schools where there’s still a shred of hope, and even create new schools altogether, similar to the University of Austin. Whether on the sane left or the sane right, the donor’s goal should be to make civil discourse and respectful debate the defining part of a university’s work. That’s currently the case for only a handful of schools.

Zohran Mamdani is proof that the destructive ideology that defines the modern university is poised to damage America itself. He is the first of a wave of extremists who want to reshape society for the worse. Our best hope, as a country, is to begin building an even bigger wave of college graduates who practice civil discourse and promote social cohesion. This monumental challenge will take years. Untold harm will be done in the meantime. But the survival of our experiment in self-government ultimately depends on raising the next generation to choose a better, truer, and freer path than the one chosen by Zohran Mamdani and the radicalized army that elected him.

Charles Mitchell is co-founder and CEO of the Open Discourse Coalition.

Tyler Durden Tue, 01/13/2026 - 10:25

Mamdani Declares War On Civil Discourse

Authored by Charles Mitchell via RealClearPolitics,

Zohran Mamdani’s inauguration speech on Jan. 1 became instantly famous for his promise to prove the “warmth of collectivism.” Yet Americans should pay just as much attention to another deeply concerning comment from the socialist mayor of New York City’s first act in office. He declared that those who are “fluent in the good grammar of civility have deployed decorum to mask agendas of cruelty,” implying that his administration won’t tolerate public debate about his agenda.

These words mark the moment when higher education’s radical monoculture jumped into the real world of political power and cultural impact. Our experiment in self-government is now at unprecedented risk.

Mamdani’s words are familiar to anyone who has followed the decline of the university in recent decades. It reflects the idea that respectful discourse – a central Enlightenment and American ideal – is really a tool of oppression used by elites to prop themselves up while keeping everyone else down. This belief is widespread on campus: A December poll from the free-speech group FIRE found that 90% of undergraduates think that “words can be violence.” Even worse, a third of students are willing to use actual violence to prevent the saying of those words. This is a generation prepared to stifle debate it dislikes, casting even the most well-meaning ideological opponents as enemies of society.

But Mamdani’s inauguration is the first time this generation has seized the levers of power outside of the classroom. It makes sense: His candidacy was driven by zealot-like support from young college graduates and students – the groups most likely to be radicalized. Now Mamdani, in some of his first words, is spreading the message that discourse is dangerous. This isn’t simply another college professor preaching to the undergrad choir. It’s the mayor of America’s most powerful city proselytizing the broader public about the supposed moral importance of stifling debate.

Mamdani’s rhetoric is especially dangerous due to his track record of enabling and encouraging antisemitism. Since Oct. 7, 2023, the biggest security bills my organization has paid have been for events in which Jewish students could discuss the Hamas attacks openly and experience their heritage – and that’s in a small town in rural Pennsylvania. Two of the speakers we hosted in November and protected were attacked, bloodied, and hospitalized the next day. But it’s just not Jewish people who are threatened when civil discourse is discarded. Everyone is at risk from the resulting breakdown of basic human decency.

Given the ideological capture of academia, the day was always going to come when the inmates started running the asylum. What’s shocking is that so many serious people failed to see it. A generation of well-meaning centrists let such extremism run riot in higher education, assuming that what happened on campus would surely stay there. It didn’t, and the resulting damage will not easily or quickly be undone.

But it must be confronted as soon as possible, which requires immediate action from sane Americans of all political stripes. While some may pin their hopes on the Trump administration, the real reform of higher education must happen elsewhere. As we enter America’s 250th year, Arizona, Florida, North Carolina, Ohio, Tennessee, and Texas policymakers have created new civics programs within their state universities. This is a template for further progress. At the very least, students should learn about the Enlightenment values that undergirded the American experiment before deciding whether they will join Mamdani in denouncing them.

The most important action, however, depends on philanthropists. Many of the country’s most successful people are profoundly disappointed by their alma maters, yet continue to make large, unrestricted gifts to them. This is profoundly self-defeating, insofar as it supports the training of a generation that rejects the foundations of American success. Instead, philanthropists should stop funding irreformable schools, establish new centers at the schools where there’s still a shred of hope, and even create new schools altogether, similar to the University of Austin. Whether on the sane left or the sane right, the donor’s goal should be to make civil discourse and respectful debate the defining part of a university’s work. That’s currently the case for only a handful of schools.

Zohran Mamdani is proof that the destructive ideology that defines the modern university is poised to damage America itself. He is the first of a wave of extremists who want to reshape society for the worse. Our best hope, as a country, is to begin building an even bigger wave of college graduates who practice civil discourse and promote social cohesion. This monumental challenge will take years. Untold harm will be done in the meantime. But the survival of our experiment in self-government ultimately depends on raising the next generation to choose a better, truer, and freer path than the one chosen by Zohran Mamdani and the radicalized army that elected him.

Charles Mitchell is co-founder and CEO of the Open Discourse Coalition.

Tyler Durden Tue, 01/13/2026 - 10:25

Mamdani Declares War On Civil Discourse

Authored by Charles Mitchell via RealClearPolitics,

Zohran Mamdani’s inauguration speech on Jan. 1 became instantly famous for his promise to prove the “warmth of collectivism.” Yet Americans should pay just as much attention to another deeply concerning comment from the socialist mayor of New York City’s first act in office. He declared that those who are “fluent in the good grammar of civility have deployed decorum to mask agendas of cruelty,” implying that his administration won’t tolerate public debate about his agenda.

These words mark the moment when higher education’s radical monoculture jumped into the real world of political power and cultural impact. Our experiment in self-government is now at unprecedented risk.

Mamdani’s words are familiar to anyone who has followed the decline of the university in recent decades. It reflects the idea that respectful discourse – a central Enlightenment and American ideal – is really a tool of oppression used by elites to prop themselves up while keeping everyone else down. This belief is widespread on campus: A December poll from the free-speech group FIRE found that 90% of undergraduates think that “words can be violence.” Even worse, a third of students are willing to use actual violence to prevent the saying of those words. This is a generation prepared to stifle debate it dislikes, casting even the most well-meaning ideological opponents as enemies of society.

But Mamdani’s inauguration is the first time this generation has seized the levers of power outside of the classroom. It makes sense: His candidacy was driven by zealot-like support from young college graduates and students – the groups most likely to be radicalized. Now Mamdani, in some of his first words, is spreading the message that discourse is dangerous. This isn’t simply another college professor preaching to the undergrad choir. It’s the mayor of America’s most powerful city proselytizing the broader public about the supposed moral importance of stifling debate.

Mamdani’s rhetoric is especially dangerous due to his track record of enabling and encouraging antisemitism. Since Oct. 7, 2023, the biggest security bills my organization has paid have been for events in which Jewish students could discuss the Hamas attacks openly and experience their heritage – and that’s in a small town in rural Pennsylvania. Two of the speakers we hosted in November and protected were attacked, bloodied, and hospitalized the next day. But it’s just not Jewish people who are threatened when civil discourse is discarded. Everyone is at risk from the resulting breakdown of basic human decency.

Given the ideological capture of academia, the day was always going to come when the inmates started running the asylum. What’s shocking is that so many serious people failed to see it. A generation of well-meaning centrists let such extremism run riot in higher education, assuming that what happened on campus would surely stay there. It didn’t, and the resulting damage will not easily or quickly be undone.

But it must be confronted as soon as possible, which requires immediate action from sane Americans of all political stripes. While some may pin their hopes on the Trump administration, the real reform of higher education must happen elsewhere. As we enter America’s 250th year, Arizona, Florida, North Carolina, Ohio, Tennessee, and Texas policymakers have created new civics programs within their state universities. This is a template for further progress. At the very least, students should learn about the Enlightenment values that undergirded the American experiment before deciding whether they will join Mamdani in denouncing them.

The most important action, however, depends on philanthropists. Many of the country’s most successful people are profoundly disappointed by their alma maters, yet continue to make large, unrestricted gifts to them. This is profoundly self-defeating, insofar as it supports the training of a generation that rejects the foundations of American success. Instead, philanthropists should stop funding irreformable schools, establish new centers at the schools where there’s still a shred of hope, and even create new schools altogether, similar to the University of Austin. Whether on the sane left or the sane right, the donor’s goal should be to make civil discourse and respectful debate the defining part of a university’s work. That’s currently the case for only a handful of schools.

Zohran Mamdani is proof that the destructive ideology that defines the modern university is poised to damage America itself. He is the first of a wave of extremists who want to reshape society for the worse. Our best hope, as a country, is to begin building an even bigger wave of college graduates who practice civil discourse and promote social cohesion. This monumental challenge will take years. Untold harm will be done in the meantime. But the survival of our experiment in self-government ultimately depends on raising the next generation to choose a better, truer, and freer path than the one chosen by Zohran Mamdani and the radicalized army that elected him.

Charles Mitchell is co-founder and CEO of the Open Discourse Coalition.

Tyler Durden Tue, 01/13/2026 - 10:25

As Trump Threatens Iran, Most Of The US Navy Strike Group Remains In Caribbean

Update(1420ET): President Trump just said something very revealing while in Michigan. He admitted he really doesn't know the death toll in Iran after a couple weeks of raging protests and violence. In classic Trump fashion, he started the morning by issuing direct threats of military intervention, but now seems to obfuscate, keeping Iranian leaders and the world guessing...

Reporter: You said to Iran that help is on the way. What kind of help?

President Trump: You are going to have to figure that out. I'm sorry.n pic.twitter.com/qjfXOkbpZM

— Open Source Intel (@Osint613) January 13, 2026

But there's reason to believe that even if Trump wanted to order some kind of 'kinetic strikes' on the Islamic Republic, it may not be imminent. Regional analyst Levent Kemal has observed:

I don't think help is on the way. And no matter how much Trump threatens, most of the US Navy strike group is still in the Caribbean. The matter of F15 or F22 aircraft accompanying the plan to strike Khamenei with B52s remains unclear. Maybe Israeli F35 can escort and support them. Even if he did something limited, there doesn't seem to be any capacity ready to defend against the response that would follow. He needs, I think, at least 5 days.

Kemal concludes by pointing out that anything within this window would have to involve Israel doing a lot of heavy lifting. Meanwhile, the following won't happen anytime soon (driving oil down) if Trump keeps threatening Iran with military intervention:

• TRUMP: WE'LL GET OIL PRICES DOWN EVEN FURTHER
• TRUMP'S ENVOY SECRETLY MET IRAN'S EXILED CROWN PRINCE -AXIOS
• WITKOFF MET IRAN'S EXILED CROWN PRINCE OVER THE WEEKEND: AXIOS

AFP/Getty Images

There's reason to believe that the White House is not close to ordering fresh attacks on Iran.

"What you’re hearing publicly from the Iranian regime is quite different from the messages the administration is receiving privately, and I think the president has an interest in exploring those messages," White House press secretary Karoline Leavitt told reporters Monday. "However, with that said, the president has shown he’s unafraid to use military options if and when he deems necessary, and nobody knows that better than Iran." But that seemed to reveal the administration's real thinking on the issue.

Reporter: How many protesters have been killed in Iran?

Trump: Nobody has been able to give me an accurate number. Everything is a lot. One is a lot. We will probably find out in the next 24 hours. I think it is a lot. pic.twitter.com/fvVVVbZWrK

— Clash Report (@clashreport) January 13, 2026

On this question of casualty numbers in Iran...

This shouldn't need to be said, but for the predictable whiners, pointing out a giant journalistic flaw in how casualty counts are currently being transmitted to US news consumers is in no way any sort of slight against the actual Iranian protesters.

It's a slight against the… https://t.co/HuZOAiXhgl

— Michael Tracey (@mtracey) January 12, 2026

* * *

Update(0953ET): President Trump on Tuesday morning has called on Iranians to keep protesting in the streets, where clashes with security services have spiraled and turned violent - but in some locations have waned. He's told Iranians to "take over your institutions" - which is essentially a call for coup or armed insurrection.

Trump further said he has canceled all meetings with Iranian officials, after yesterday's reports that the two sides were looking to jump-start diplomacy of official contacts if Tehran leaders cooperate, and don't kill any protesters. But now Trump is doing his typical thing of quickly ratcheting pressure to the max. He's reiterated that HELP IS ON THE WAY - suggesting military intervention could be imminent, in the following Truth Social statement.

This resulted in an immediate spike in oil prices, already amid war rumors, as the Commander-in-Chief has been briefed on military "options" - despite the Islamic Republic not having attacked the United States or any of its regional bases.

We detailed below that Iran's government has begun to face a potential deadly insurgency, and even anti-Tehran NGOs have admitted that dozens of police and security personnel have been killed - and even knifed and shot.

* * *

Facing global condemnation and threats of US intervention over casualties associated with anti-government protests, the Iranian government summoned French, German, Italian and British ambassadors in Tehran and screened a collection of videos purportedly showing "armed violence carried out by protesters." Saying the images belie the notion that protests have been uniformly peaceful, Iran demanded that the envoys share the videos with their respective governments and stop voicing support of the "rioters."  

In a screenshot of the video presented to a roomful of European diplomats, a masked individual fires a pump-action shotgun

The ambassadors' Monday matinee coincided with massive pro-government demonstrations in Iran. The presentation included imagery of individuals firing pump-action shotguns and pistols. Other clips showed makeshift barricades on city streets, and groups of people vandalizing cars and flipping them over. There were also multiple apparent examples of arson, including burnt-out buildings, cars and buses. There's also testimony given by a bloodied man, identified as a law enforcement officer, on a hospital gurney. Asked what he was hit by, he replies: 

"I don't know. Knives and things. I was holding my helmet to guard my head...then they pulled off my pants, dragged me," reads the on-screen transcription. "I was told to get up and go. I couldn't. Told them to help me. Then they dragged me toward the square so I got run over by cars." 

Attempting to portray the US government as hypocritical, the video presentation included a clip of anti-ICE activist Renee Good being shot in the head by ICE agents in Minneapolis last week, along with President Trump's reaction. "The woman screaming was, obviously, a professional agitator, and the woman driving the car was very disorderly, obstructing and resisting," Trump said, adding that the ICE officer "seems to have shot her in self-defense." The presentation closed with another quote from Trump, when he warned that, "If Iran shots [sic] and violently kills peaceful protesters, the United States of America will come to their rescue." 

VIDEO | Iran has invited the ambassadors of the UK, Germany, Italy, France, and several other nations to view videos showing armed rioters killing people, urging them to report the footage to their respective foreign ministers. pic.twitter.com/AI70rqUvJq

— The Cradle (@TheCradleMedia) January 12, 2026

Iran's foreign ministry directed the assembled diplomats to "hand over these videos to their governments and stop supporting the protesters," saying that foreign governments giving "any form of political or information support for rioters" represents wrongful interference with Iran's internal affairs.

According to Iranian state news outlet Press TV, President Masoud Pezeshkian accused US and Israeli intelligence agencies of training armed units, with that training happening both inside and outside the country. If outside governments are directly aiding the agitators, it wouldn't be the first time that technique was used in an attempt to impose regime change on Iran. In 1953, US and British intelligence engineered a coup d'etat that ousted Iran's democratically-elected prime minister, Mohammad Mosaddegh. "Operation Ajax" involved the use of CIA-funded Iranian agents and "rented" crowds of anti-government demonstrators.

Soon after the presentation in Tehran, the European Parliament announced a "ban [of] all diplomatic staff and any other representatives of the Islamic Republic of Iran from all European Parliament premises," to avoid support the "brave people of Iran" and to avoid "aid[ing] in legitimising this regime that has sustained itself through torture, repression and murder." 

Fueling diplomatic disputes, the American son of the deposed Shah of Iran urged members of the Iranian diaspora to replace the "disgraceful" flag of the Islamic Republic of Iran at the country's diplomatic facilities. That exhortation came after a video went viral over the weekend, showing a protester scaling a balcony of Iran's London embassy and replacing the flag with the version used during the Shah's rule. Iran separately summoned the UK ambassador and formally protested "the desecration of the Iranian flag." The former shah's son, Reza Pahlavi, is aggressively pushing for US intervention and promoting himself as the best "transitional figure" after regime change.   

WOW.

Someone tore down the islamic flag at the Iranian embassy in London and raised the old flag of Iran before the islamic regime took over the country.pic.twitter.com/aByZt0YblC

— PeterSweden (@PeterSweden7) January 10, 2026

On Sunday, Vice President Mohammad‑Reza Aref portrayed the discord as a new phase of Israel's confrontation with Iran, after June's 12-day war. "The enemies made a mistake by starting the riots through their key agents who were arrested by Iran’s security forces," following which "they had no option but to accelerate their plots, which led to violent incidents in the last few nights," Aref said. He added that Iran's enemies have sought to thwart each of the country's attempts to overcome foreign sanctions.

The Iranian protests began on Dec 29, with merchants railing against the plunging value of Iran's currency -- the rial now trades at 1.4 million to the dollar. More than two weeks later, the death toll is widely reported to be several hundred. Many US outlets are relying on numbers from the US-based Human Rights Activists News Agency (HRANA). The group, which is a subsidiary of Human Rights Activists in Iran (HRA), says 646 people have been killed through Monday, including 505 protesters, 133 security personnel, a prosecutor and seven civilian bystanders.    

Tyler Durden Tue, 01/13/2026 - 09:53

As Trump Threatens Iran, Most Of The US Navy Strike Group Remains In Caribbean

Update(1420ET): President Trump just said something very revealing while in Michigan. He admitted he really doesn't know the death toll in Iran after a couple weeks of raging protests and violence. In classic Trump fashion, he started the morning by issuing direct threats of military intervention, but now seems to obfuscate, keeping Iranian leaders and the world guessing...

Reporter: You said to Iran that help is on the way. What kind of help?

President Trump: You are going to have to figure that out. I'm sorry.n pic.twitter.com/qjfXOkbpZM

— Open Source Intel (@Osint613) January 13, 2026

But there's reason to believe that even if Trump wanted to order some kind of 'kinetic strikes' on the Islamic Republic, it may not be imminent. Regional analyst Levent Kemal has observed:

I don't think help is on the way. And no matter how much Trump threatens, most of the US Navy strike group is still in the Caribbean. The matter of F15 or F22 aircraft accompanying the plan to strike Khamenei with B52s remains unclear. Maybe Israeli F35 can escort and support them. Even if he did something limited, there doesn't seem to be any capacity ready to defend against the response that would follow. He needs, I think, at least 5 days.

Kemal concludes by pointing out that anything within this window would have to involve Israel doing a lot of heavy lifting. Meanwhile, the following won't happen anytime soon (driving oil down) if Trump keeps threatening Iran with military intervention:

• TRUMP: WE'LL GET OIL PRICES DOWN EVEN FURTHER
• TRUMP'S ENVOY SECRETLY MET IRAN'S EXILED CROWN PRINCE -AXIOS
• WITKOFF MET IRAN'S EXILED CROWN PRINCE OVER THE WEEKEND: AXIOS

AFP/Getty Images

There's reason to believe that the White House is not close to ordering fresh attacks on Iran.

"What you’re hearing publicly from the Iranian regime is quite different from the messages the administration is receiving privately, and I think the president has an interest in exploring those messages," White House press secretary Karoline Leavitt told reporters Monday. "However, with that said, the president has shown he’s unafraid to use military options if and when he deems necessary, and nobody knows that better than Iran." But that seemed to reveal the administration's real thinking on the issue.

Reporter: How many protesters have been killed in Iran?

Trump: Nobody has been able to give me an accurate number. Everything is a lot. One is a lot. We will probably find out in the next 24 hours. I think it is a lot. pic.twitter.com/fvVVVbZWrK

— Clash Report (@clashreport) January 13, 2026

On this question of casualty numbers in Iran...

This shouldn't need to be said, but for the predictable whiners, pointing out a giant journalistic flaw in how casualty counts are currently being transmitted to US news consumers is in no way any sort of slight against the actual Iranian protesters.

It's a slight against the… https://t.co/HuZOAiXhgl

— Michael Tracey (@mtracey) January 12, 2026

* * *

Update(0953ET): President Trump on Tuesday morning has called on Iranians to keep protesting in the streets, where clashes with security services have spiraled and turned violent - but in some locations have waned. He's told Iranians to "take over your institutions" - which is essentially a call for coup or armed insurrection.

Trump further said he has canceled all meetings with Iranian officials, after yesterday's reports that the two sides were looking to jump-start diplomacy of official contacts if Tehran leaders cooperate, and don't kill any protesters. But now Trump is doing his typical thing of quickly ratcheting pressure to the max. He's reiterated that HELP IS ON THE WAY - suggesting military intervention could be imminent, in the following Truth Social statement.

This resulted in an immediate spike in oil prices, already amid war rumors, as the Commander-in-Chief has been briefed on military "options" - despite the Islamic Republic not having attacked the United States or any of its regional bases.

We detailed below that Iran's government has begun to face a potential deadly insurgency, and even anti-Tehran NGOs have admitted that dozens of police and security personnel have been killed - and even knifed and shot.

* * *

Facing global condemnation and threats of US intervention over casualties associated with anti-government protests, the Iranian government summoned French, German, Italian and British ambassadors in Tehran and screened a collection of videos purportedly showing "armed violence carried out by protesters." Saying the images belie the notion that protests have been uniformly peaceful, Iran demanded that the envoys share the videos with their respective governments and stop voicing support of the "rioters."  

In a screenshot of the video presented to a roomful of European diplomats, a masked individual fires a pump-action shotgun

The ambassadors' Monday matinee coincided with massive pro-government demonstrations in Iran. The presentation included imagery of individuals firing pump-action shotguns and pistols. Other clips showed makeshift barricades on city streets, and groups of people vandalizing cars and flipping them over. There were also multiple apparent examples of arson, including burnt-out buildings, cars and buses. There's also testimony given by a bloodied man, identified as a law enforcement officer, on a hospital gurney. Asked what he was hit by, he replies: 

"I don't know. Knives and things. I was holding my helmet to guard my head...then they pulled off my pants, dragged me," reads the on-screen transcription. "I was told to get up and go. I couldn't. Told them to help me. Then they dragged me toward the square so I got run over by cars." 

Attempting to portray the US government as hypocritical, the video presentation included a clip of anti-ICE activist Renee Good being shot in the head by ICE agents in Minneapolis last week, along with President Trump's reaction. "The woman screaming was, obviously, a professional agitator, and the woman driving the car was very disorderly, obstructing and resisting," Trump said, adding that the ICE officer "seems to have shot her in self-defense." The presentation closed with another quote from Trump, when he warned that, "If Iran shots [sic] and violently kills peaceful protesters, the United States of America will come to their rescue." 

VIDEO | Iran has invited the ambassadors of the UK, Germany, Italy, France, and several other nations to view videos showing armed rioters killing people, urging them to report the footage to their respective foreign ministers. pic.twitter.com/AI70rqUvJq

— The Cradle (@TheCradleMedia) January 12, 2026

Iran's foreign ministry directed the assembled diplomats to "hand over these videos to their governments and stop supporting the protesters," saying that foreign governments giving "any form of political or information support for rioters" represents wrongful interference with Iran's internal affairs.

According to Iranian state news outlet Press TV, President Masoud Pezeshkian accused US and Israeli intelligence agencies of training armed units, with that training happening both inside and outside the country. If outside governments are directly aiding the agitators, it wouldn't be the first time that technique was used in an attempt to impose regime change on Iran. In 1953, US and British intelligence engineered a coup d'etat that ousted Iran's democratically-elected prime minister, Mohammad Mosaddegh. "Operation Ajax" involved the use of CIA-funded Iranian agents and "rented" crowds of anti-government demonstrators.

Soon after the presentation in Tehran, the European Parliament announced a "ban [of] all diplomatic staff and any other representatives of the Islamic Republic of Iran from all European Parliament premises," to avoid support the "brave people of Iran" and to avoid "aid[ing] in legitimising this regime that has sustained itself through torture, repression and murder." 

Fueling diplomatic disputes, the American son of the deposed Shah of Iran urged members of the Iranian diaspora to replace the "disgraceful" flag of the Islamic Republic of Iran at the country's diplomatic facilities. That exhortation came after a video went viral over the weekend, showing a protester scaling a balcony of Iran's London embassy and replacing the flag with the version used during the Shah's rule. Iran separately summoned the UK ambassador and formally protested "the desecration of the Iranian flag." The former shah's son, Reza Pahlavi, is aggressively pushing for US intervention and promoting himself as the best "transitional figure" after regime change.   

WOW.

Someone tore down the islamic flag at the Iranian embassy in London and raised the old flag of Iran before the islamic regime took over the country.pic.twitter.com/aByZt0YblC

— PeterSweden (@PeterSweden7) January 10, 2026

On Sunday, Vice President Mohammad‑Reza Aref portrayed the discord as a new phase of Israel's confrontation with Iran, after June's 12-day war. "The enemies made a mistake by starting the riots through their key agents who were arrested by Iran’s security forces," following which "they had no option but to accelerate their plots, which led to violent incidents in the last few nights," Aref said. He added that Iran's enemies have sought to thwart each of the country's attempts to overcome foreign sanctions.

The Iranian protests began on Dec 29, with merchants railing against the plunging value of Iran's currency -- the rial now trades at 1.4 million to the dollar. More than two weeks later, the death toll is widely reported to be several hundred. Many US outlets are relying on numbers from the US-based Human Rights Activists News Agency (HRANA). The group, which is a subsidiary of Human Rights Activists in Iran (HRA), says 646 people have been killed through Monday, including 505 protesters, 133 security personnel, a prosecutor and seven civilian bystanders.    

Tyler Durden Tue, 01/13/2026 - 09:53

As Trump Threatens Iran, Most Of The US Navy Strike Group Remains In Caribbean

Update(1420ET): President Trump just said something very revealing while in Michigan. He admitted he really doesn't know the death toll in Iran after a couple weeks of raging protests and violence. In classic Trump fashion, he started the morning by issuing direct threats of military intervention, but now seems to obfuscate, keeping Iranian leaders and the world guessing...

Reporter: You said to Iran that help is on the way. What kind of help?

President Trump: You are going to have to figure that out. I'm sorry.n pic.twitter.com/qjfXOkbpZM

— Open Source Intel (@Osint613) January 13, 2026

But there's reason to believe that even if Trump wanted to order some kind of 'kinetic strikes' on the Islamic Republic, it may not be imminent. Regional analyst Levent Kemal has observed:

I don't think help is on the way. And no matter how much Trump threatens, most of the US Navy strike group is still in the Caribbean. The matter of F15 or F22 aircraft accompanying the plan to strike Khamenei with B52s remains unclear. Maybe Israeli F35 can escort and support them. Even if he did something limited, there doesn't seem to be any capacity ready to defend against the response that would follow. He needs, I think, at least 5 days.

Kemal concludes by pointing out that anything within this window would have to involve Israel doing a lot of heavy lifting. Meanwhile, the following won't happen anytime soon (driving oil down) if Trump keeps threatening Iran with military intervention:

• TRUMP: WE'LL GET OIL PRICES DOWN EVEN FURTHER
• TRUMP'S ENVOY SECRETLY MET IRAN'S EXILED CROWN PRINCE -AXIOS
• WITKOFF MET IRAN'S EXILED CROWN PRINCE OVER THE WEEKEND: AXIOS

AFP/Getty Images

There's reason to believe that the White House is not close to ordering fresh attacks on Iran.

"What you’re hearing publicly from the Iranian regime is quite different from the messages the administration is receiving privately, and I think the president has an interest in exploring those messages," White House press secretary Karoline Leavitt told reporters Monday. "However, with that said, the president has shown he’s unafraid to use military options if and when he deems necessary, and nobody knows that better than Iran." But that seemed to reveal the administration's real thinking on the issue.

Reporter: How many protesters have been killed in Iran?

Trump: Nobody has been able to give me an accurate number. Everything is a lot. One is a lot. We will probably find out in the next 24 hours. I think it is a lot. pic.twitter.com/fvVVVbZWrK

— Clash Report (@clashreport) January 13, 2026

On this question of casualty numbers in Iran...

This shouldn't need to be said, but for the predictable whiners, pointing out a giant journalistic flaw in how casualty counts are currently being transmitted to US news consumers is in no way any sort of slight against the actual Iranian protesters.

It's a slight against the… https://t.co/HuZOAiXhgl

— Michael Tracey (@mtracey) January 12, 2026

* * *

Update(0953ET): President Trump on Tuesday morning has called on Iranians to keep protesting in the streets, where clashes with security services have spiraled and turned violent - but in some locations have waned. He's told Iranians to "take over your institutions" - which is essentially a call for coup or armed insurrection.

Trump further said he has canceled all meetings with Iranian officials, after yesterday's reports that the two sides were looking to jump-start diplomacy of official contacts if Tehran leaders cooperate, and don't kill any protesters. But now Trump is doing his typical thing of quickly ratcheting pressure to the max. He's reiterated that HELP IS ON THE WAY - suggesting military intervention could be imminent, in the following Truth Social statement.

This resulted in an immediate spike in oil prices, already amid war rumors, as the Commander-in-Chief has been briefed on military "options" - despite the Islamic Republic not having attacked the United States or any of its regional bases.

We detailed below that Iran's government has begun to face a potential deadly insurgency, and even anti-Tehran NGOs have admitted that dozens of police and security personnel have been killed - and even knifed and shot.

* * *

Facing global condemnation and threats of US intervention over casualties associated with anti-government protests, the Iranian government summoned French, German, Italian and British ambassadors in Tehran and screened a collection of videos purportedly showing "armed violence carried out by protesters." Saying the images belie the notion that protests have been uniformly peaceful, Iran demanded that the envoys share the videos with their respective governments and stop voicing support of the "rioters."  

In a screenshot of the video presented to a roomful of European diplomats, a masked individual fires a pump-action shotgun

The ambassadors' Monday matinee coincided with massive pro-government demonstrations in Iran. The presentation included imagery of individuals firing pump-action shotguns and pistols. Other clips showed makeshift barricades on city streets, and groups of people vandalizing cars and flipping them over. There were also multiple apparent examples of arson, including burnt-out buildings, cars and buses. There's also testimony given by a bloodied man, identified as a law enforcement officer, on a hospital gurney. Asked what he was hit by, he replies: 

"I don't know. Knives and things. I was holding my helmet to guard my head...then they pulled off my pants, dragged me," reads the on-screen transcription. "I was told to get up and go. I couldn't. Told them to help me. Then they dragged me toward the square so I got run over by cars." 

Attempting to portray the US government as hypocritical, the video presentation included a clip of anti-ICE activist Renee Good being shot in the head by ICE agents in Minneapolis last week, along with President Trump's reaction. "The woman screaming was, obviously, a professional agitator, and the woman driving the car was very disorderly, obstructing and resisting," Trump said, adding that the ICE officer "seems to have shot her in self-defense." The presentation closed with another quote from Trump, when he warned that, "If Iran shots [sic] and violently kills peaceful protesters, the United States of America will come to their rescue." 

VIDEO | Iran has invited the ambassadors of the UK, Germany, Italy, France, and several other nations to view videos showing armed rioters killing people, urging them to report the footage to their respective foreign ministers. pic.twitter.com/AI70rqUvJq

— The Cradle (@TheCradleMedia) January 12, 2026

Iran's foreign ministry directed the assembled diplomats to "hand over these videos to their governments and stop supporting the protesters," saying that foreign governments giving "any form of political or information support for rioters" represents wrongful interference with Iran's internal affairs.

According to Iranian state news outlet Press TV, President Masoud Pezeshkian accused US and Israeli intelligence agencies of training armed units, with that training happening both inside and outside the country. If outside governments are directly aiding the agitators, it wouldn't be the first time that technique was used in an attempt to impose regime change on Iran. In 1953, US and British intelligence engineered a coup d'etat that ousted Iran's democratically-elected prime minister, Mohammad Mosaddegh. "Operation Ajax" involved the use of CIA-funded Iranian agents and "rented" crowds of anti-government demonstrators.

Soon after the presentation in Tehran, the European Parliament announced a "ban [of] all diplomatic staff and any other representatives of the Islamic Republic of Iran from all European Parliament premises," to avoid support the "brave people of Iran" and to avoid "aid[ing] in legitimising this regime that has sustained itself through torture, repression and murder." 

Fueling diplomatic disputes, the American son of the deposed Shah of Iran urged members of the Iranian diaspora to replace the "disgraceful" flag of the Islamic Republic of Iran at the country's diplomatic facilities. That exhortation came after a video went viral over the weekend, showing a protester scaling a balcony of Iran's London embassy and replacing the flag with the version used during the Shah's rule. Iran separately summoned the UK ambassador and formally protested "the desecration of the Iranian flag." The former shah's son, Reza Pahlavi, is aggressively pushing for US intervention and promoting himself as the best "transitional figure" after regime change.   

WOW.

Someone tore down the islamic flag at the Iranian embassy in London and raised the old flag of Iran before the islamic regime took over the country.pic.twitter.com/aByZt0YblC

— PeterSweden (@PeterSweden7) January 10, 2026

On Sunday, Vice President Mohammad‑Reza Aref portrayed the discord as a new phase of Israel's confrontation with Iran, after June's 12-day war. "The enemies made a mistake by starting the riots through their key agents who were arrested by Iran’s security forces," following which "they had no option but to accelerate their plots, which led to violent incidents in the last few nights," Aref said. He added that Iran's enemies have sought to thwart each of the country's attempts to overcome foreign sanctions.

The Iranian protests began on Dec 29, with merchants railing against the plunging value of Iran's currency -- the rial now trades at 1.4 million to the dollar. More than two weeks later, the death toll is widely reported to be several hundred. Many US outlets are relying on numbers from the US-based Human Rights Activists News Agency (HRANA). The group, which is a subsidiary of Human Rights Activists in Iran (HRA), says 646 people have been killed through Monday, including 505 protesters, 133 security personnel, a prosecutor and seven civilian bystanders.    

Tyler Durden Tue, 01/13/2026 - 09:53

"Entered New Era": SK Hynix To Build $13 Billion Memory Plant As Nvidia CEO Says AI Demand Soaring

One week after Nvidia CEO Jensen Huang told the auidence at CES Las Vegas that AI data centers are creating a "market that never existed" for memory, the global leader in high-bandwidth memory, SK Hynix, announced that construction of a new $13 billion advanced memory manufacturing plant will begin this spring, with first production targeted for the second half of 2027, as it races furiously to keep up with surging AI-driven demand.

As Nvidia's main HBM supplier, SK Hynix sits at the center of the memory supply chain and has become a headwind for AI data center growth. With HBM prices soaring, we have been documenting the key developments across the space:

• "Market That Never Existed": Nvidia CEO Sparks Frenzy In Memory Stocks

• Soaring Memory Costs Sink Nintendo Shares; Goldman Says Selloff Is Buy-The-Dip Opportunity

• UBS Says Soaring Memory Chip Prices To "Turbo-Charge" Samsung Earnings

SK Hynix's HBM is the stacked DRAM Nvidia uses on H100, H200, Blackwell, and every AI accelerator shipping through 2030. It's easily half or more of the world's HBM supplies, ahead of both Samsung and Micron.

Last week, Huang told the audience at CES, "For storage, that is a completely unserved market today. This is a market that never existed, and this market will likely be the largest storage market in the world, basically holding the working memory of the world's AIs."

Update: two months later https://t.co/Q4TPIrpzxV pic.twitter.com/O3KTKxZOVE

— zerohedge (@zerohedge) December 22, 2025

The SK Hynix forecast shows the HBM market is expected to grow at an average annual rate of 33% from 2025 to 2030.

"The importance of proactively responding to rising HBM demand is becoming increasingly critical," SK Hynix wrote in a statement.

Chey Tae-won, chairman of SK Hynix parent SK Group, warned of tight supplies late last year. "We have entered an era in which supply is facing a bottleneck. We are receiving memory chip supply requests from many companies, and we are thinking hard about how to address all demands."

Ty Tue, 01/13/2026 - 09:30

"Entered New Era": SK Hynix To Build $13 Billion Memory Plant As Nvidia CEO Says AI Demand Soaring

One week after Nvidia CEO Jensen Huang told the auidence at CES Las Vegas that AI data centers are creating a "market that never existed" for memory, the global leader in high-bandwidth memory, SK Hynix, announced that construction of a new $13 billion advanced memory manufacturing plant will begin this spring, with first production targeted for the second half of 2027, as it races furiously to keep up with surging AI-driven demand.

As Nvidia's main HBM supplier, SK Hynix sits at the center of the memory supply chain and has become a headwind for AI data center growth. With HBM prices soaring, we have been documenting the key developments across the space:

• "Market That Never Existed": Nvidia CEO Sparks Frenzy In Memory Stocks

• Soaring Memory Costs Sink Nintendo Shares; Goldman Says Selloff Is Buy-The-Dip Opportunity

• UBS Says Soaring Memory Chip Prices To "Turbo-Charge" Samsung Earnings

SK Hynix's HBM is the stacked DRAM Nvidia uses on H100, H200, Blackwell, and every AI accelerator shipping through 2030. It's easily half or more of the world's HBM supplies, ahead of both Samsung and Micron.

Last week, Huang told the audience at CES, "For storage, that is a completely unserved market today. This is a market that never existed, and this market will likely be the largest storage market in the world, basically holding the working memory of the world's AIs."

Update: two months later https://t.co/Q4TPIrpzxV pic.twitter.com/O3KTKxZOVE

— zerohedge (@zerohedge) December 22, 2025

The SK Hynix forecast shows the HBM market is expected to grow at an average annual rate of 33% from 2025 to 2030.

"The importance of proactively responding to rising HBM demand is becoming increasingly critical," SK Hynix wrote in a statement.

Chey Tae-won, chairman of SK Hynix parent SK Group, warned of tight supplies late last year. "We have entered an era in which supply is facing a bottleneck. We are receiving memory chip supply requests from many companies, and we are thinking hard about how to address all demands."

Ty Tue, 01/13/2026 - 09:30

Here's Proof That UK's X Ban Threat Has Nothing To Do With Protecting Children

Authored by Steve Watson via Modernity.news,

As UK authorities ramp up their assault on free speech, a viral post shared by Elon Musk exposes the glaring hypocrisy in the government’s “protect the children” narrative. Data from the The National Society for the Prevention of Cruelty to Children (NSPCC) and police forces reveals Snapchat as the epicenter of online child sexual grooming, dwarfing X’s minimal involvement.

This comes amid Keir Starmer’s escalating war on X, where community notes routinely dismantle government spin, and unfiltered truth is delivered to the masses. If safeguarding kids was the real goal, it would be the likes of Snapchat in the crosshairs, given that thousands of real world child sexual offences have originated from its use.

Instead they’re going after X because, they claim, it provides the ability to make fake images of anyone in a bikini using the inbuilt Grok Ai image generator.

If the UK government really wanted to 'protect children' They'd go after Snapchat, which is according to the NSPCC the platform on which more than half of all online sexual offences against children are recorded. X, meanwhile, is at 1-2% in those stats. https://t.co/76Azm2N3PG

— m o d e r n i t y (@ModernityNews) January 13, 2026

Based on 2025 NSPCC and UK police data, Snapchat is linked to 40-48% of identified child grooming cases, Instagram around 9-11%, Facebook 7-9%, WhatsApp 9%, and X under 2%.

These numbers align with NSPCC’s alarming report on the surge in online grooming. The charity recorded over 7,000 Sexual Communication with a Child offences in 2023/24—an 89% spike since 2017/18.

Yeah, but what about fake bikini pics on X? pic.twitter.com/T4ui2DRpPc

— m o d e r n i t y (@ModernityNews) January 13, 2026

Where platforms were identified, Snapchat dominated at 48%, followed by WhatsApp at 12%, Facebook and Messenger at 10%, Instagram at 6%, and Kik at 5%.

NSPCC Chief Executive Sir Peter Wanless stated “One year since the Online Safety Act became law and we are still waiting for tech companies to make their platforms safe for children. We need ambitious regulation by Ofcom who must significantly strengthen their current approach to make companies address how their products are being exploited by offenders. It is clear that much of this abuse is taking place in private messaging which is why we also need the Government strengthen the Online Safety Act to give Ofcom more legal certainty to tackle child sexual abuse on the likes of Snapchat and WhatsApp.”

Victim testimonies underscore the horror. Thomas, groomed at 14, recalled: “Our first conversation was quite simple. I was just chatting. The only way I can describe it is like having the most supportive person that you could ever meet. After about a month, the pressure started to build of him trying to prove that I was gay. That’s when he started sending explicit pictures and pressuring me to send images to him. I did send him pictures, but I didn’t like it and I didn’t want to do it anymore. He said he had saved the images and would send them to everyone if I stopped sending more pictures. There was a constant fear in the back of my mind. It wasn’t easy but I managed to block him on all sites and carry on with my life.”

Liidia, a 13-year-old from Glasgow, highlighted Snapchat’s risks: “Snapchat has disappearing messages, and that makes it easier for people to hide things they shouldn’t be doing. Another problem is that Snapchat has this feature where you can show your location to everyone. If you’re not careful, you might end up showing where you are to people you don’t know, which is super risky. And honestly, not all the rules in Snapchat are strict, so some people take advantage of that to do bad things. Apps should have better ways for us to report bad things, and they should always get updated to protect us better with the latest security tech.”

NSPCC’s policy manager Rani Govender added: “The scale and significance of these crimes cannot be underestimated. No justification for tech company inaction.”

Becky Riggs, National Police Chief’s Council lead for child protection, urged: “It is imperative that the responsibility of safeguarding children online is placed with the companies who create spaces for them, and the regulator strengthens rules that social media platforms must follow.”

A Snapchat spokesperson claimed: “If we identify such activity, or it is reported to us, we remove the content, disable the account, take steps to prevent the offender from creating additional accounts, and report them to the authorities.”

The NSPCC on grooming tactics noted: “Perpetrators typically used mainstream and open web platforms as the first point of contact with children. This can include social media chat apps, video games and messaging apps on consoles, dating sites, and chatrooms. Perpetrators then encourage children to continue communication on private and encrypted messaging platforms where abuse can proceed undetected.”

Sextortion adds another layer of terror, with the Guardian reporting a “shocking” rise alarming the FBI and NSPCC. The National Center for Missing and Exploited Children (NCMEC) logged 546,000 global reports in 2024—a 192% jump from 2023—with 9,600 from the UK in the first half alone.

QUICK… Protect the children… Ban X. https://t.co/M9MKV56fTn pic.twitter.com/BunwoS1B5G

— m o d e r n i t y (@ModernityNews) January 13, 2026

Snapchat reported 20,000 cases of adults grooming children last year, more than all other platforms combined.

The NCA warned: “Sextortion is a heartless crime, which can have devastating consequences for victims. Sadly, teenagers in the UK and around the world have taken their own lives because of it.”

Labour’s child protection claims ring completely hollow against the backdrop of stalled progress on Britain’s grooming gangs scandal. Despite scandals in Rotherham, Rochdale, and beyond exposing organized abuse—often dismissed to avoid racism accusations—little has advanced.

A government audit last month admitted the “concept of ‘grooming gangs’… is not captured clearly in any official data set.” Parliamentary debates urge stepping up the grooming gangs taskforce, but as UnHerd notes, these “rape gangs started in the 1990’s and accelerated as the Blair government shoved woke down our throats and made everyone afraid of being called racist.”

Raising the issue now risks “hate speech” labels, silencing victims and enabling perpetrators. Vague accusations of bigotry are increasingly garnering more attention than the actual crimes. This cultural relativism has fueled hate, per experts, while survivors’ stories get rewritten to downplay institutional failures.

Starmer’s regime isn’t prioritising kids—it’s weaponising safety pretexts in an effort to crush X’s influence. The platform’s free speech ethos and community notes expose leftist deceptions daily, threatening their narrative control.

They want any excuse for censorship https://t.co/JrJcz8rsEt

— Elon Musk (@elonmusk) January 9, 2026

As we highlighted earlier, US Under-Secretary Sarah B Rogers has warned “With respect to a potential ban of X, Keir Starmer has said that nothing is off the table. I would say from America’s perspective, nothing is off the table when it comes to free speech.”

She added: “America has a full range of tools that we can use” to bypass bans, like in Iran via Starlink. Rogers mocked Labour’s hypocrisy: if the government “cared about women’s safety, it would have acted differently on grooming gangs.”

As Starmer’s approval rating craters, threatening to fall into SINGLE digits, his desperation grows. But X endures as a beacon for truth, proving authoritarians can’t snuff out freedom without a fight.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Tyler Durden Tue, 01/13/2026 - 09:10

Here's Proof That UK's X Ban Threat Has Nothing To Do With Protecting Children

Authored by Steve Watson via Modernity.news,

As UK authorities ramp up their assault on free speech, a viral post shared by Elon Musk exposes the glaring hypocrisy in the government’s “protect the children” narrative. Data from the The National Society for the Prevention of Cruelty to Children (NSPCC) and police forces reveals Snapchat as the epicenter of online child sexual grooming, dwarfing X’s minimal involvement.

This comes amid Keir Starmer’s escalating war on X, where community notes routinely dismantle government spin, and unfiltered truth is delivered to the masses. If safeguarding kids was the real goal, it would be the likes of Snapchat in the crosshairs, given that thousands of real world child sexual offences have originated from its use.

Instead they’re going after X because, they claim, it provides the ability to make fake images of anyone in a bikini using the inbuilt Grok Ai image generator.

If the UK government really wanted to 'protect children' They'd go after Snapchat, which is according to the NSPCC the platform on which more than half of all online sexual offences against children are recorded. X, meanwhile, is at 1-2% in those stats. https://t.co/76Azm2N3PG

— m o d e r n i t y (@ModernityNews) January 13, 2026

Based on 2025 NSPCC and UK police data, Snapchat is linked to 40-48% of identified child grooming cases, Instagram around 9-11%, Facebook 7-9%, WhatsApp 9%, and X under 2%.

These numbers align with NSPCC’s alarming report on the surge in online grooming. The charity recorded over 7,000 Sexual Communication with a Child offences in 2023/24—an 89% spike since 2017/18.

Yeah, but what about fake bikini pics on X? pic.twitter.com/T4ui2DRpPc

— m o d e r n i t y (@ModernityNews) January 13, 2026

Where platforms were identified, Snapchat dominated at 48%, followed by WhatsApp at 12%, Facebook and Messenger at 10%, Instagram at 6%, and Kik at 5%.

NSPCC Chief Executive Sir Peter Wanless stated “One year since the Online Safety Act became law and we are still waiting for tech companies to make their platforms safe for children. We need ambitious regulation by Ofcom who must significantly strengthen their current approach to make companies address how their products are being exploited by offenders. It is clear that much of this abuse is taking place in private messaging which is why we also need the Government strengthen the Online Safety Act to give Ofcom more legal certainty to tackle child sexual abuse on the likes of Snapchat and WhatsApp.”

Victim testimonies underscore the horror. Thomas, groomed at 14, recalled: “Our first conversation was quite simple. I was just chatting. The only way I can describe it is like having the most supportive person that you could ever meet. After about a month, the pressure started to build of him trying to prove that I was gay. That’s when he started sending explicit pictures and pressuring me to send images to him. I did send him pictures, but I didn’t like it and I didn’t want to do it anymore. He said he had saved the images and would send them to everyone if I stopped sending more pictures. There was a constant fear in the back of my mind. It wasn’t easy but I managed to block him on all sites and carry on with my life.”

Liidia, a 13-year-old from Glasgow, highlighted Snapchat’s risks: “Snapchat has disappearing messages, and that makes it easier for people to hide things they shouldn’t be doing. Another problem is that Snapchat has this feature where you can show your location to everyone. If you’re not careful, you might end up showing where you are to people you don’t know, which is super risky. And honestly, not all the rules in Snapchat are strict, so some people take advantage of that to do bad things. Apps should have better ways for us to report bad things, and they should always get updated to protect us better with the latest security tech.”

NSPCC’s policy manager Rani Govender added: “The scale and significance of these crimes cannot be underestimated. No justification for tech company inaction.”

Becky Riggs, National Police Chief’s Council lead for child protection, urged: “It is imperative that the responsibility of safeguarding children online is placed with the companies who create spaces for them, and the regulator strengthens rules that social media platforms must follow.”

A Snapchat spokesperson claimed: “If we identify such activity, or it is reported to us, we remove the content, disable the account, take steps to prevent the offender from creating additional accounts, and report them to the authorities.”

The NSPCC on grooming tactics noted: “Perpetrators typically used mainstream and open web platforms as the first point of contact with children. This can include social media chat apps, video games and messaging apps on consoles, dating sites, and chatrooms. Perpetrators then encourage children to continue communication on private and encrypted messaging platforms where abuse can proceed undetected.”

Sextortion adds another layer of terror, with the Guardian reporting a “shocking” rise alarming the FBI and NSPCC. The National Center for Missing and Exploited Children (NCMEC) logged 546,000 global reports in 2024—a 192% jump from 2023—with 9,600 from the UK in the first half alone.

QUICK… Protect the children… Ban X. https://t.co/M9MKV56fTn pic.twitter.com/BunwoS1B5G

— m o d e r n i t y (@ModernityNews) January 13, 2026

Snapchat reported 20,000 cases of adults grooming children last year, more than all other platforms combined.

The NCA warned: “Sextortion is a heartless crime, which can have devastating consequences for victims. Sadly, teenagers in the UK and around the world have taken their own lives because of it.”

Labour’s child protection claims ring completely hollow against the backdrop of stalled progress on Britain’s grooming gangs scandal. Despite scandals in Rotherham, Rochdale, and beyond exposing organized abuse—often dismissed to avoid racism accusations—little has advanced.

A government audit last month admitted the “concept of ‘grooming gangs’… is not captured clearly in any official data set.” Parliamentary debates urge stepping up the grooming gangs taskforce, but as UnHerd notes, these “rape gangs started in the 1990’s and accelerated as the Blair government shoved woke down our throats and made everyone afraid of being called racist.”

Raising the issue now risks “hate speech” labels, silencing victims and enabling perpetrators. Vague accusations of bigotry are increasingly garnering more attention than the actual crimes. This cultural relativism has fueled hate, per experts, while survivors’ stories get rewritten to downplay institutional failures.

Starmer’s regime isn’t prioritising kids—it’s weaponising safety pretexts in an effort to crush X’s influence. The platform’s free speech ethos and community notes expose leftist deceptions daily, threatening their narrative control.

They want any excuse for censorship https://t.co/JrJcz8rsEt

— Elon Musk (@elonmusk) January 9, 2026

As we highlighted earlier, US Under-Secretary Sarah B Rogers has warned “With respect to a potential ban of X, Keir Starmer has said that nothing is off the table. I would say from America’s perspective, nothing is off the table when it comes to free speech.”

She added: “America has a full range of tools that we can use” to bypass bans, like in Iran via Starlink. Rogers mocked Labour’s hypocrisy: if the government “cared about women’s safety, it would have acted differently on grooming gangs.”

As Starmer’s approval rating craters, threatening to fall into SINGLE digits, his desperation grows. But X endures as a beacon for truth, proving authoritarians can’t snuff out freedom without a fight.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Tyler Durden Tue, 01/13/2026 - 09:10

US Equity Futures Jump To Record High After Core CPI Comes In Cool

US equity futures were initially weaker as the market weighs geopolitics, inflation data, and the start to earnings season, where JPM reported results that were mixed at best (unexpected weakness in bank underwriting kept the stock flat in premarket trading). However, just after core CPI printed below estimates, futures spiked as high as 7030, rising to a new record high, up 0.2%, with Nasdaq futures also rising 0.2%, with Mag7 names mixed premarket with AMD/INTC leading Semis. Fins/Energy are leading Cyclicals which are roughly flat vs. Defensives, where Utils are the standout group.Sentiment was impaired after Trump said that any country doing business with Iran will receive a 25% tariff; the potential for conflict is pushing oil prices higher with WTI back above $60 for first time since Nov. Japanese stocks jumped while the yen slumped on speculation that PM Sanae Takaichi may call a snap election, reigniting the so-called Takaichi trade.Bond yields are +1-2bp across the curve and USD is rallying driven by a surge in the USDJPY which jumped as high as 159, the highest since July 2024. CPI print this afternoon with the scenario analysis is below. The ADP weekly print, NFIB Small Biz Survey, and New Home Sales the other macro data today. 

In premarket trading, Mag 7 stocks were mixed (Alphabet +0.7%, Nvidia +0.02%, Tesla +0.1%, Meta little changed, Amazon -0.2%, Microsoft -0.4%, Apple -0.4%)

• Delta Air Lines (DAL) falls 5% after the carrier gave an underwhelming profit forecast for the full year.
• L3Harris Technologies Inc. (LHX) gains 13% as the US Department of Defense is set to invest in the company’s Missile Solutions business via a $1 billion convertible preferred security, tightening the direct links between the US government and a major defense contractor.
• Ormat Technologies (ORA) rises 5% after the renewable energy company signed a 20-year power purchase agreement with data center operator Switch for energy from its Salt Wells geothermal power plant in Nevada.
• Synopsys (SNPS) falls 2% as Piper Sandler downgrades the chip design software firm to neutral from overweight, saying the company could see prolonged headwinds to growth.
• Travere Therapeutics (TVTX) slumps 28% after the biotech firm said it received a request from the FDA to clarify the clinical benefit of its therapy that treats a rare kidney disease, a move that analysts said could delay the approval by the agency.

In corporate news, Amgen said its experimental drug MariTide helped patients maintain weight loss for two years. Diageo is said to be considering options for its Chinese assets, including possible divestments. Wall Street firms continue to reduce headcount, with Citi set to cut about 1,000 jobs this week and BlackRock said to be trimming about 1% of staff.

After initially trading lower, spooked by Trump’s threat to tariff countries doing business with Iran which has the potential to disrupt US trading relationships across the globe, futures jumped after core CPI came in below estimates. 

Speaking of CPI, JPMorgan’s trading desk predicted a rally of up to 1.75% for the S&P 500 if CPI is in line with, or cooler, than estimated - which is now the case; let's see if stocks surge as much as JPM predicted.

Fed’s Williams said interest rates are “well positioned” to stabilize the labor market and bring inflation back to the 2% goal. 

With earnings season kicking off, Bloomberg notes how small caps have been in favor recently, with the Russell 2000 outperforming the S&P 500 for the past seven sessions. The last time it had a longer winning streak was 2019. Yet tech remains the dominant contributor to 4Q profit growth among S&P 500 members, estimated to show year-over-year EPS growth of 20%, while non-tech earnings expansion is slated to decelerate from 9% to just 1%, according to data from Bank of America.

Meanwhile, the Fed drama continues, with global central bankers pledging “full solidarity” with Powell and saying that the independence of central banks is a cornerstone of financial and economic stability. Today’s Big Take looks at the Washington backlash that could derail Trump’s campaign to tighten White House control over the Fed.

In other assets, the dollar has clawed back some ground after Monday’s drop, but downside risks remain. Oil is higher while gold slipped from its record. CME said it will change the way it sets margins for gold, silver, platinum and palladium futures after a surge in prices and volatile trading.

European stocks dip, reversing an earlier rise which pushed them near record highs as investors look ahead to US inflation data. Energy stocks outperform while the construction and materials sector lags. Stoxx 600 is little changed at 610.90 with 336 members down, 250 up, and 14 unchanged. Here are some of the biggest movers on Tuesday: 

• Symrise shares rally as much as 7.3% after the company announced a €400 million ($467 million) share buyback and said it’s in advanced talks to sell its terpene business, a kind of chemical used in fragrances and flavors.
• Orsted shares surge as much as 6.6% after a US judge ruled work can resume on a wind farm off the coast of Rhode Island while it challenges the government’s latest attempt to stop offshore projects from being built.
• Whitbread shares jump as much as 6.9%, the most since May, after the Premier Inn owner reported solid trading and increased cost efficiencies in its third-quarter update.
• Synektik shares gain as much as 4.6% after the Polish distributor of medical devices including surgery robots reported new orders rising 30% last quarter as well as new contract with Czech hospital.
• THG shares jump as much as 9.7%, the most since October, as analysts highlighted strong momentum in the company’s beauty and nutrition businesses.
• Gamma Communications shares jump as much as 9.3%, the most since September, after reporting FY25 trading is in line with consensus expectations.
• Persimmon shares rise as much as 2.8% to the highest level since November 2024 as the homebuilder reassures that full-year 2025 results are likely to be at the upper end of market expectations and it is on track to meet this year’s forecasts.
• Raspberry PI shares slump as much as 10% to a record low after the computing company’s strong results were overshadowed by its warning over the rapid increase in the cost of DRAM memory chips, as more supplies are funneled into AI data centers.
• Games Workshop shares drop as much as 3.7%, the most since November, after the Warhammer owner reported first-half results that showed sales growth declining toward the end of the period in some stores.
• Vinci shares fall as much as 3.7% as French infrastructure stocks drop on ratings downgrades by Bank of America, concerned by the risk of rising French taxes.
• Thales shares fall as much as 2.4% as Deutsche Bank downgrades several defense names, citing uncertainties surrounding the French defense budget and lagging cyber sales.

Asian stocks briefly jumped to a fresh record, driven by gains in Japanese shares as traders returned from holiday amid growing speculation that Prime Minister Sanae Takaichi may soon call a snap election.  The MSCI Asia Pacific Index rose as much as 1.4%, the most in a week, with Alibaba, TSMC and Toyota Motor among the biggest boosts to the gauge. Most subsectors were in the green, with financials being a major contributor. Benchmarks in Hong Kong, South Korea and Australia also rose.  Concerns around Federal Reserve’s independence after the Trump administration escalated its attack on the central bank again prompted flows away from US market into regions like Asia. Traders are also brushing off the latest tariff threats from President Donald Trump, who said to impose a 25% tariff on goods from countries “doing business” with Iran. 

“The market does not care about Trump’s capricious tariff threats,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “Trump’s previous backdown from China has shown that bigger levers such as the supply of rare earths matter more in tariff negotiations. It is unlikely that he can afford to upset the trade truce with China just to pressure Iran.”

In FX, the yen sinks, following a jolt in Japanese bond and stock markets, on speculation that an early election is on the cards. Dollar-yen briefly hits 159, highest since July 2024. The Bloomberg Dollar Spot Index edges marginally higher.

In rates, treasuries, European and UK bond yields rise by two or three basis points, with US CPI data ahead.

In commodities, oil prices rally on geopolitical risk and Trump’s threat of tariffs on Iranian crude buyers, with Brent hitting the highest since November and briefly moving above $65/barrel before paring. Gold edging lower from another record high, down about $12 to $4,585/oz.

Today's US economic calendar includes ADP weekly employment change (8:15am), December CPI (8:30am), October new home sales (10am) and December Federal budget balance (2pm). Scheduled Fed speakers include Musalem (10am) and Barkin (4pm)

Market Snapshot

• S&P 500 mini +0.2%
• Nasdaq 100 mini +0.3%
• Russell 2000 mini +0.3%
• Stoxx Europe 600 -0.2%
• DAX -0.2%
• CAC 40 -0.5%
• 10-year Treasury yield +2 basis points at 4.19%
• VIX +0.3 points at 15.43
• Bloomberg Dollar Index little changed at 1210.29
• euro little changed at $1.1669
• WTI crude +1.8% at $60.57/barrel

Top Overnight News

• Donald Trump vowed to impose a 25% tariff on goods from any country “doing business with” Iran, a move that risks derailing his trade truce with China, the world’s top buyer of Iranian oil. Germany’s Friedrich Merz said the world is seeing the “final days” of Iran’s regime. BBG
• The criminal probe into Jay Powel by US prosecutors has galvanized the Federal Reserve’s top leaders to resist Trump’s attacks and could push he chair to remain a governor until 2028. Trump’s   DoJ probe was seen by people close to the US central bank as a sign that the president would go to extraordinary lengths to force policymakers to bow to his demands. FT
• California Gov. Gavin Newsom said he was working behind the scenes to block a proposed tax on billionaires’ wealth and was committed to defeating the measure if it reached the ballot. NYT
• President Trump reportedly unhappy about AG Pam Bondi's performance and has repeatedly complained to aides: WSJ 
• Microsoft has warned that US AI groups are being outpaced by Chinese rivals in the battle for users outside the west, as China combines low-cost “open” models with hefty state subsidies to gain an edge. FT
• Iranian protests appeared to persist in localized pockets overnight as activist group Iran Human Rights warned of imminent executions by the state and said the civilian death toll may be in the thousands. BBG
• The BOJ may raise rates as early as April as heightened market concerns over PM Takaichi’s approach to fiscal policy keep the yen weak, former board member Makoto Sakurai said. “The BOJ must raise rates at least by June or July,” he added. BBG
• Japanese investors dumped UK government bonds at the fastest pace in 14 years in November, citing worries over Britain’s fiscal outlook and more attractive yields at home. BBG
• Japanese stocks surged to an all time high and the yen tumbled to a 19 month low as markets bet that a possible snap election net month would reignite the “Takaichi trade.” FT

Trade/Tariffs

• China's Commerce Ministry outlines the final ruling on the imports of solar polysilicon from the US and South Korea, effective 14th January with tariffs of up to 113.8%. To continue to collect anti-dumping tariffs for another five years.
• China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
• Taiwan officials said 'some' consensus has been reached with the US on a trade deal.
• Japanese Finance Minister Katayama said there were some detailed proposals on rare earth supply chains during the meeting with the US. A potential price floor on rare earths were discussed.
• US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks followed on from Monday’s gains, with equities mostly in the green. ASX 200 started the session on the front foot, +0.4%, before extending gains and currently trading just shy of session highs at 8835. With spot XAU trading near ATHs, this has aided sectors such as metals and mining (2.0%) to continue Monday’s gains. Nikkei 225 returned from its long weekend with a gap higher, resulting in the index opening with gains as much as 3.7% and forming new ATHs. This comes amid a weaker JPY and growing speculation of PM Takaichi dissolving parliament. Japanese media noted that the LDP was looking to capitalise on Takaichi's high approval ratings. KOSPI opened Tuesday’s trade at ATHs and oscillated at highs before peaking at 4681 and slightly paring back, but remains comfortably in the green. Hang Seng and Shanghai Comp. opened in line with the broader sentiment, with the former surging higher, aided by gains in Gigadevice (3986 HK). The latter is the laggard across Asia-Pacific equities, trading with slight gains of 0.2%.

Top Asian News

• China examines foreign ETF trades after Jane Street India probe, Bloomberg reported.
• Japanese Finance Minister Katayama said she shared concerns with US Treasury Secretary Bessent over weak JPY.

European equities (STOXX 600 -0.2%) have traded tentatively throughout the morning, as markets await CPI. T he AEX (+0.4%) is the key outperformer in the region amid gains in ASML (+1.2%) after Jefferies raised the Co.'s price target, thereby lifting the index. European sectors are trading mixed, with Energy (+0.9%), Technology (+0.6%) and Banks (+0.6%) leading. The former has gained amid stronger crude prices given the heightened geopolitical tension between US and Iran, whilst ASML helps boost Tech. On the downside, Autos (-0.7%), Utilities (-0.7%) and Construction & Materials (-2.6%) lag. The latter faced steep losses due to Sika (-7.0%) after the Co.'s FY25 sales fell by 4.8%, with the Chinese market a continued weakness for them.

Top European News

• French Budget Balance (Nov) -155.4B vs. Exp. -165.0B (Prev. -136.2B, Rev. -136.2B).
• UK BRC Retail Sales YY (Dec) 1.0% (Prev. 1.2%).

Central Banks

• Fed's Williams (Voter, Neutral) said monetary policy well positioned amid a favourable outlook and that policy is now closer to neutral, well-positioned ahead of January rate decision; expect that we’ll see [the labor market] stabilize this year". MONETARY POLICY. “In considering the extent and timing of additional adjustments… the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”. “Monetary policy is now well positioned to support the stabilization of the labor market and the return of inflation to the FOMC’s longer-run goal of 2 percent.”. “The actions taken by the FOMC… have moved the modestly restrictive stance of monetary policy closer to neutral.”. INFLATION. “Underlying inflation trends have been pretty favorable.”. “Tariffs have been overwhelmingly borne by domestic businesses and consumers.”. “I expect inflation will be just under 2-1/2 percent for this year as a whole, before reaching… 2 percent in 2027.”. “I anticipate inflation will peak at around 2-3/4 to 3 percent sometime during the first half of this year.”. “Inflation appears likely to peak sometime in the first half of this year as the full effects of tariffs are felt.”. “Medium- and longer-term expectations remain well within their pre-Covid ranges.”. “Inflation expectations remain well anchored.”. GROWTH. “The economic outlook is favorable.”. “I expect the economy to grow above trend this year, with real GDP growth between 2-1/2 and 2-3/4 percent.”. “GDP growth looks to have been somewhat above 2 percent last year, and it will likely pick up some this year.”. LABOR MARKET. “This has been a gradual process, without signs of a sharp rise in layoffs.”. “Downside risks to employment have increased as the labor market cooled.”. “The unemployment rate moved up… and ended the year at 4.4 percent.”. “I expect that we’ll see [the labor market] stabilize this year and then strengthen somewhat thereafter.”
• Fed's Williams (Voter, Neutral) said the Fed is not under strong influence to change rates. Expects the next Fed chair to understand the gravity of the role. Strong productivity growth echoes past booms. Adds that the best way to instill confidence in the Fed is to do the job well. He expects improved labour market demand. Confident the Fed will return inflation to 2%. Jobs market is unusual with low hiring, low firing.
• Japan's government is reportedly likely to delay the nomination of a BoJ board member if PM Takaichi called an election, via Reuters citing sources.
• Global central banks are reportedly drafting a statement in support for Fed Chair Powell.

FX

• DXY is flat and trades within a narrow 98.89 to 99.03 range; the high for the day is a couple of pips short of its 50 DMA, while a bout of pressure in the index could see a test of its 200 DMA at 98.80. Focus for the index today will be on US CPI; in brief, the consensus looks for headline CPI to rise by 0.3% M/M in December (prev. 0.3%), and the annual rate to remain unchanged at 2.7% Y/Y. GS expect the figures to exceed consensus, citing firmer food and energy prices.
• Away from the US, G10s are mixed with mild strength in the GBP whilst the JPY is the clear underperformer – other peers are near-enough flat vs the USD. Nothing really driving the strength in the GBP this morning, whilst the JPY has a lot to digest.
• A full JPY analysis piece can be found on the Newsquawk headline feed at 08:55 GMT, but in brief, USD/JPY eclipsed 159.00 for the first time since 11 July 2024. As a reminder, Japan intervened twice on July 11 and 12 to bring the USD/JPY below the 160.00 mark. The latest depreciation in the JPY has been spurred by continued reports of PM Takaichi's plans to call an election, where her aim is to secure a single-party government. This would, in theory, allow her to enact more expansionary fiscal policy.

Fixed Income

• JGBs led the downside overnight as the "Takaichi trade" resumed. For more details, see the 08:55GMT Market Update.
• Amidst this, USTs and Bunds also found themselves lower. USTs by just a handful of ticks and holding above the 112-00 mark and by extension yesterday's trough, which was half a tick below that. Focus turns to US CPI later, where consensus looks for the headline M/M, and Y/Y prints to remain at 0.3% and 2.7% while both core figures are seen higher by a tenth at 0.3% and 2.7% respectively. Goldman Sachs looks for a hotter print driven by technical factors.
• Bunds in-fitting with the above, at a 127.84 low with downside of 28 ticks at most. Bunds made fresh lows following a soft Bobl outing, which had a weak b/c and lower than exp. amount sold. More generally, action for today will likely be dictated by US CPI. If the bearish bias extends, we look to support at 127.89, 127.82 and 127.70 from the last three sessions.
• Gilts gapped lower by 14 ticks at the open, acknowledging the bearish bias from APAC trade, before dipping further to a 92.30 base. Since, the benchmark has recovered to opening levels. No reaction to the passing of I/L supply while the interview with BoE's Bailey took place this morning, but the text won't be published until January 16th.
• Greece begins the sale of a new 10yr bond; guidance seen at +60-65bps to mid swaps.
• Italy sells EUR 4bln vs exp. EUR 3.5-4bln 2.40% 2029 BTP: avg. yield 2.48%, b/c 1.45x
• Germany sells EUR 4.597bln vs exp. EUR 6bln 2.50% 2031 Bobl: Avg yield: 2.47%, b/c 1.41x, retention 23.38%

Commodities

• Crude firmer with geopolitics in focus. Overnight action was somewhat rangebound, as there was no significant escalation or development. However, we did get reports via CBS that President Trump was briefed on military and covert operations against Iran, but no decision has been made.
• Since, as participants digest this risk and reports via BBG that two tankers were attacked in proximity to the Black Sea loading terminal for the CPC, crude has climbed and posts upside in excess of USD 1.00/bbl. At highs of USD 60.82/bbl and USD 65.20/bbl for WTI and Brent, respectively.
• Spot gold is a little lower this morning, taking a breather following the strength seen in the prior session, where the yellow metal made fresh ATHs beyond the USD 4.6k/oz mark. Slight pressure today without a clear driver; potentially profit-taking ahead of US CPI. Price action in Europe has been sideways, and within a USD 4,573.87-4,608.13/oz range.
• A bit of divergence between gold and silver this morning, with the latter posting modest gains and currently holding at the upper end of the day's range, last at USD 85.76/oz.
• Base metals are mixed after choppy trade overnight. 3M LME Copper currently trades within a USD 13,034-13,232/t range. Desks have highlighted that there have been growing fears amongst traders that copper may sharply pull back if demand for the metal slows in 2026, particularly if China curbs spending.
• Citi said its 3-month price target for gold and silver is now USD 5000/oz and USD 100/oz respectively.
• Two oil tankers were attacked in proximity to the Black Sea loading terminal for the CPC, Bloomberg reports citing sources.-Two additional oil tankers have been hit near the Black Sea CPC terminal by drones, according to sources; taking the total on Tuesday to four tankers.

Geopolitics: Ukraine

• A push by French President Macron and Italian PM Meloni to begin discussions with the Russian Kremlin is gaining traction in EU capitals and in Brussels itself, Politico reported citing sources. Primary goal to ensure EU red lines are not crossed. and to signal to the US that the EU has leverage. Elsewhere, creation of the role of EU special envoy to Ukraine hs support of the Council and leaders. Mario Draghi and Alexander Stubb have been touted. However, EU diplomat Kallas opposes the role.
• Kyiv Mayor said the Russians are attacking the capital with ballistic missiles and that explosions are being heard.

Geopolitics Middle East 

• US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
• Iran's Foreign Minister said Tehran is ready for any action by the US, including military action.
• China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
• US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
• "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
• "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
• US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.
• US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
• Iranian authorities claim that the situation is 'under control'.
• "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
• US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
• "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
• At least two unsanctioned supertankers are departing Venezuelan waters carrying crude oil, according to reported citing TankerTrackers.
• US Treasury Secretary Bessent posted that he was pleased to hear a strong, shared desire to quickly address key vulnerabilities in critical minerals supply chains; "I am optimistic that nations will pursue prudent derisking over decoupling".

US Event Calendar

• 8:30 am: Dec CPI MoM, est. 0.3%
• 8:30 am: Dec Core CPI MoM, est. 0.3%
• 8:30 am: Dec CPI YoY, est. 2.7%, prior 2.7%
• 8:30 am: Dec Core CPI YoY, est. 2.71%, prior 2.6%
• 8:30 am: Dec CPI Index NSA, est. 324.17, prior 324.12
• 8:30 am: Dec Core CPI Index SA, est. 332.06, prior 331.07
• 10:00 am: Oct New Home Sales, est. 715k
• 10:00 am: Oct New Home Sales MoM, est. -10.63%
• 2:00 pm: Dec Federal Budget Balance, est. -152.5b, prior -173.3b

DB's Jim Reid concludes the overnight wrap

Morning from Helsinki where it's a reasonably mild -8 degrees. I've spent 2026 so far chasing the cold with -15 in Alps at the start of the year, a rare -7 degrees in Surrey last week and now 4 Nordic cities in 2 days. Most of the time I've been trying not to fall over to break the screws in my back or to further damage knees that will soon need replacing. If I were a racehorse, I suspect a few emotional goodbyes would be coming soon.   

There have been lots of icy patches to avoid in markets over the last 24 hours as 2026 continues to be the year of the headline even if most markets have enjoyed the ride so far. The main story this week, and there is competition, are the continued developments and market reaction around the Federal Reserve, after US prosecutors launched a criminal investigation that’s revived fears around central bank independence. That helped push gold (+1.95%) and silver (+6.57%) to new records yesterday, and the move out of US assets also meant the dollar and US Treasuries lost ground as well. Ironically, if the ultimate aim is to reduce yields, it could have the opposite impact as the Fed may be keen not to be seen as reacting to political pressure at the front end, and the long-end may show some concern about the motives. In addition, if Powell was looking for a reason to stay on as a Governor after his term as Chair ends in May, this could be one. It's very unusual to stay on but Eccles did so in 1948 for 3.5 years to help protect and secure Fed independence after the Treasury were trying to fund large post war time debts. So there might be some parallels in 2026. Ironically one of the buildings being renovated, that is causing the DoJ investigation, is the Marrine S. Eccles Building. You can also see our US economists quick take on the developments here.

Meanwhile, investors have also faced an array of geopolitical headlines from Venezuela to Iran, which has pushed Brent crude (+0.84%) to a 7-week high of $63.87/bbl. Remember Rubio is meeting Danish and Greenland officials some time this week as well. We could also hear on IEEPA tariffs tomorrow at the next "opinions day". And there’s no immediate sign of any letup on the calendar either, as today will bring the US CPI print as well as the start of US Q4 earnings season. Yet despite all the noise, risk assets have been remarkably unfazed by everything, with the S&P 500 (+0.16%) and Europe’s STOXX 600 (+0.21%) both at new records.   

The prospect of Fed independence being eroded immediately induced a negative reaction for US assets, reminiscent of previous episodes where it looked like Powell might be removed. But even as the reaction followed a clear pattern, it was still fairly subdued relative to previous episodes last year, and the initial losses were pared back significantly. So while the Treasury yield curve saw a bear steepening with 10yr yields trading +4bps higher just before the US open, by the close the 2yr yield (+0.2bps) was virtually unchanged at 3.53%, while 10yr (+1.1bps to 4.18%) and the 30yr (+1.5bps to 4.83%) saw modest increases. Despite higher yields, the US Dollar lost ground, weakening -0.27% against the Euro. The reversal of the initial move was particularly clear for equities, as S&P 500 futures were initially down -0.79% shortly after the European open, before the index rose +0.16% to a new record.  

A few arguments were put forward as to why there wasn’t a bigger reaction, but an important one was the resistance from a couple of Senate Republicans to Trump’s move, raising questions as to how successful any attempts to erode the Fed’s independence would be. In particular, Republican Senator Thom Tillis, who sits on the Senate Banking Committee, said that he would oppose confirming any nominee for the Fed until this was resolved. That’s significant, because the Senate Banking Committee is split 13-11 to the Republicans, so Tillis’ opposition would lead to a split if the others voted along party lines. And there were other Republican Senators who voiced concern, with Lisa Murkowski saying that “the administration’s investigation is nothing more than an attempt at coercion.” On top of that, another argument for the limited reaction was that Powell’s term as Chair was already ending in May, so a change in leadership was expected anyway in the next few months. Moreover, previous episodes last year have also led to the sense that the administration don’t want a negative bond market reaction, given long-end yields flow through to mortgage rates, which they’d prefer to keep contained. Clearly it’s a moving situation though, and these are a huge couple of weeks for the Fed, as the Supreme Court are hearing arguments in the Lisa Cook case on Jan 21, ahead of the FOMC meeting on Jan 27-28.

One asset class that did hold on to almost all of its move were precious metals, which surged to fresh records with gold (+1.97%) up to $4,598/oz, and silver (+6.57%) up to $85.10/oz. In addition to investors becoming more concerned about potential currency debasement and future inflation, these were supported by the ongoing geopolitical uncertainty. This related in particular to possible US steps towards Iran and late in the day Trump posted that “effective immediately” any country “doing business” with Iran will pay a tariff 25% on trade with the US. In theory, this would most impact countries across Asia, with China being Iran’s biggest trading partner.

However, we’ve not yet heard any further details or an executive order implementing this tariff threat, and markets have taken Trump’s post in their stride overnight. The Shanghai Comp is flat and the Hang Seng up +0.94%. Elsewhere Japanese stocks are flying, but in line with where futures were this time yesterday during their holiday, with the Nikkei (+3.21%) responding to the media speculation since Friday that Takaichi is considering a snap lower house election as early as February. Elsewhere the KOSPI (+1.13%) and the S&P/ASX 200 (+0.59%) are also performing well. S&P 500 (-0.14%) and NASDAQ 100 (-0.31%) futures are trading slightly lower though.  

Coming back to Japan, the election fever has seen the yen (-0.39%) fall to its lowest level since July 2024, trading at 158.76 against the dollar, and 10-year (+5.7bps), 20-year (+5.8bps), and 30-year (+6.1bps) JGBs trading at 2.15%, 3.13%, and 3.46%, respectively this morning.  

Looking forward, the next big test will be the US CPI print, which is out at 13:30 London time today. As a reminder, the last print came on the softer side, but there were various methodological issues from the shutdown which meant it was treated with caution. For instance, the shelter numbers saw a huge drop-off that’s more usually consistent with recessions, hence we saw some scepticism around the numbers. For this time round, our US economists expect the print to come in on the stronger side, unwinding some of the distortions from the government shutdown. So they expect headline CPI to come in at a monthly +0.36%, with core pretty similar at +0.35%.

Ahead of all that, equities put in a steady performance on both sides of the Atlantic yesterday, with the S&P 500 (+0.16%) inching up to a new record. However, financials were an underperformer, and the KBW Bank Index (-0.95%) lost ground after Trump’s post that he was calling for a one-year cap on credit card interest rates of 10%. How realistic that is to implement is a moot point and it may actually reduce credit to the poorer population. So an interesting set up for JP Morgan (-1.43%) to kick off earnings season before the bell today.

Elsewhere there were stronger performances, with consumer staples (+1.42%) the top-performing sector in the S&P 500 as Walmart rose +3.00% after NASDAQ’s announcement that they’d join the NASDAQ 100 on Jan 20. The Mag-7 (-0.03%) had a mixed session, but Alphabet (+1.00%) became the latest tech giant to cross the $4trn valuation mark as Google confirmed a “multi-year deal” to power the AI technology for Apple’s iPhones. While Microsoft and Apple also crossed the $4trn level last year, Nvidia is currently the only company with a higher valuation than Alphabet, which has surged by over 100% from post-Liberation Day lows last spring.

Over in Europe yesterday, markets had put in a stronger performance, as they weren’t affected as much by the Federal Reserve news. So sovereign bonds rallied across the continent, with yields on 10yr bunds (-1.2bps), OATs (-1.0bps) and BTPs (-1.4bps) all coming down. In addition, equities also outperformed, with the STOXX 600 (+0.21%) at a new record, whilst the DAX (+0.57%) advanced for a 10th consecutive session for the first time since summer 2024. In fact, if we get an 11th advance today, it would be the longest run of gains for the DAX since 2014.

Looking at the day ahead, and data releases include the US CPI print for December, along with the NFIB’s small business optimism index for December. Central bank speakers include BoE Governor Bailey, the ECB’s Kocher, and the Fed’s Musalem and Barkin. Earnings releases include JPMorgan Chase and BNY Mellon.

Tyler Durden Tue, 01/13/2026 - 08:40

US Equity Futures Jump To Record High After Core CPI Comes In Cool

US equity futures were initially weaker as the market weighs geopolitics, inflation data, and the start to earnings season, where JPM reported results that were mixed at best (unexpected weakness in bank underwriting kept the stock flat in premarket trading). However, just after core CPI printed below estimates, futures spiked as high as 7030, rising to a new record high, up 0.2%, with Nasdaq futures also rising 0.2%, with Mag7 names mixed premarket with AMD/INTC leading Semis. Fins/Energy are leading Cyclicals which are roughly flat vs. Defensives, where Utils are the standout group.Sentiment was impaired after Trump said that any country doing business with Iran will receive a 25% tariff; the potential for conflict is pushing oil prices higher with WTI back above $60 for first time since Nov. Japanese stocks jumped while the yen slumped on speculation that PM Sanae Takaichi may call a snap election, reigniting the so-called Takaichi trade.Bond yields are +1-2bp across the curve and USD is rallying driven by a surge in the USDJPY which jumped as high as 159, the highest since July 2024. CPI print this afternoon with the scenario analysis is below. The ADP weekly print, NFIB Small Biz Survey, and New Home Sales the other macro data today. 

In premarket trading, Mag 7 stocks were mixed (Alphabet +0.7%, Nvidia +0.02%, Tesla +0.1%, Meta little changed, Amazon -0.2%, Microsoft -0.4%, Apple -0.4%)

• Delta Air Lines (DAL) falls 5% after the carrier gave an underwhelming profit forecast for the full year.
• L3Harris Technologies Inc. (LHX) gains 13% as the US Department of Defense is set to invest in the company’s Missile Solutions business via a $1 billion convertible preferred security, tightening the direct links between the US government and a major defense contractor.
• Ormat Technologies (ORA) rises 5% after the renewable energy company signed a 20-year power purchase agreement with data center operator Switch for energy from its Salt Wells geothermal power plant in Nevada.
• Synopsys (SNPS) falls 2% as Piper Sandler downgrades the chip design software firm to neutral from overweight, saying the company could see prolonged headwinds to growth.
• Travere Therapeutics (TVTX) slumps 28% after the biotech firm said it received a request from the FDA to clarify the clinical benefit of its therapy that treats a rare kidney disease, a move that analysts said could delay the approval by the agency.

In corporate news, Amgen said its experimental drug MariTide helped patients maintain weight loss for two years. Diageo is said to be considering options for its Chinese assets, including possible divestments. Wall Street firms continue to reduce headcount, with Citi set to cut about 1,000 jobs this week and BlackRock said to be trimming about 1% of staff.

After initially trading lower, spooked by Trump’s threat to tariff countries doing business with Iran which has the potential to disrupt US trading relationships across the globe, futures jumped after core CPI came in below estimates. 

Speaking of CPI, JPMorgan’s trading desk predicted a rally of up to 1.75% for the S&P 500 if CPI is in line with, or cooler, than estimated - which is now the case; let's see if stocks surge as much as JPM predicted.

Fed’s Williams said interest rates are “well positioned” to stabilize the labor market and bring inflation back to the 2% goal. 

With earnings season kicking off, Bloomberg notes how small caps have been in favor recently, with the Russell 2000 outperforming the S&P 500 for the past seven sessions. The last time it had a longer winning streak was 2019. Yet tech remains the dominant contributor to 4Q profit growth among S&P 500 members, estimated to show year-over-year EPS growth of 20%, while non-tech earnings expansion is slated to decelerate from 9% to just 1%, according to data from Bank of America.

Meanwhile, the Fed drama continues, with global central bankers pledging “full solidarity” with Powell and saying that the independence of central banks is a cornerstone of financial and economic stability. Today’s Big Take looks at the Washington backlash that could derail Trump’s campaign to tighten White House control over the Fed.

In other assets, the dollar has clawed back some ground after Monday’s drop, but downside risks remain. Oil is higher while gold slipped from its record. CME said it will change the way it sets margins for gold, silver, platinum and palladium futures after a surge in prices and volatile trading.

European stocks dip, reversing an earlier rise which pushed them near record highs as investors look ahead to US inflation data. Energy stocks outperform while the construction and materials sector lags. Stoxx 600 is little changed at 610.90 with 336 members down, 250 up, and 14 unchanged. Here are some of the biggest movers on Tuesday: 

• Symrise shares rally as much as 7.3% after the company announced a €400 million ($467 million) share buyback and said it’s in advanced talks to sell its terpene business, a kind of chemical used in fragrances and flavors.
• Orsted shares surge as much as 6.6% after a US judge ruled work can resume on a wind farm off the coast of Rhode Island while it challenges the government’s latest attempt to stop offshore projects from being built.
• Whitbread shares jump as much as 6.9%, the most since May, after the Premier Inn owner reported solid trading and increased cost efficiencies in its third-quarter update.
• Synektik shares gain as much as 4.6% after the Polish distributor of medical devices including surgery robots reported new orders rising 30% last quarter as well as new contract with Czech hospital.
• THG shares jump as much as 9.7%, the most since October, as analysts highlighted strong momentum in the company’s beauty and nutrition businesses.
• Gamma Communications shares jump as much as 9.3%, the most since September, after reporting FY25 trading is in line with consensus expectations.
• Persimmon shares rise as much as 2.8% to the highest level since November 2024 as the homebuilder reassures that full-year 2025 results are likely to be at the upper end of market expectations and it is on track to meet this year’s forecasts.
• Raspberry PI shares slump as much as 10% to a record low after the computing company’s strong results were overshadowed by its warning over the rapid increase in the cost of DRAM memory chips, as more supplies are funneled into AI data centers.
• Games Workshop shares drop as much as 3.7%, the most since November, after the Warhammer owner reported first-half results that showed sales growth declining toward the end of the period in some stores.
• Vinci shares fall as much as 3.7% as French infrastructure stocks drop on ratings downgrades by Bank of America, concerned by the risk of rising French taxes.
• Thales shares fall as much as 2.4% as Deutsche Bank downgrades several defense names, citing uncertainties surrounding the French defense budget and lagging cyber sales.

Asian stocks briefly jumped to a fresh record, driven by gains in Japanese shares as traders returned from holiday amid growing speculation that Prime Minister Sanae Takaichi may soon call a snap election.  The MSCI Asia Pacific Index rose as much as 1.4%, the most in a week, with Alibaba, TSMC and Toyota Motor among the biggest boosts to the gauge. Most subsectors were in the green, with financials being a major contributor. Benchmarks in Hong Kong, South Korea and Australia also rose.  Concerns around Federal Reserve’s independence after the Trump administration escalated its attack on the central bank again prompted flows away from US market into regions like Asia. Traders are also brushing off the latest tariff threats from President Donald Trump, who said to impose a 25% tariff on goods from countries “doing business” with Iran. 

“The market does not care about Trump’s capricious tariff threats,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “Trump’s previous backdown from China has shown that bigger levers such as the supply of rare earths matter more in tariff negotiations. It is unlikely that he can afford to upset the trade truce with China just to pressure Iran.”

In FX, the yen sinks, following a jolt in Japanese bond and stock markets, on speculation that an early election is on the cards. Dollar-yen briefly hits 159, highest since July 2024. The Bloomberg Dollar Spot Index edges marginally higher.

In rates, treasuries, European and UK bond yields rise by two or three basis points, with US CPI data ahead.

In commodities, oil prices rally on geopolitical risk and Trump’s threat of tariffs on Iranian crude buyers, with Brent hitting the highest since November and briefly moving above $65/barrel before paring. Gold edging lower from another record high, down about $12 to $4,585/oz.

Today's US economic calendar includes ADP weekly employment change (8:15am), December CPI (8:30am), October new home sales (10am) and December Federal budget balance (2pm). Scheduled Fed speakers include Musalem (10am) and Barkin (4pm)

Market Snapshot

• S&P 500 mini +0.2%
• Nasdaq 100 mini +0.3%
• Russell 2000 mini +0.3%
• Stoxx Europe 600 -0.2%
• DAX -0.2%
• CAC 40 -0.5%
• 10-year Treasury yield +2 basis points at 4.19%
• VIX +0.3 points at 15.43
• Bloomberg Dollar Index little changed at 1210.29
• euro little changed at $1.1669
• WTI crude +1.8% at $60.57/barrel

Top Overnight News

• Donald Trump vowed to impose a 25% tariff on goods from any country “doing business with” Iran, a move that risks derailing his trade truce with China, the world’s top buyer of Iranian oil. Germany’s Friedrich Merz said the world is seeing the “final days” of Iran’s regime. BBG
• The criminal probe into Jay Powel by US prosecutors has galvanized the Federal Reserve’s top leaders to resist Trump’s attacks and could push he chair to remain a governor until 2028. Trump’s   DoJ probe was seen by people close to the US central bank as a sign that the president would go to extraordinary lengths to force policymakers to bow to his demands. FT
• California Gov. Gavin Newsom said he was working behind the scenes to block a proposed tax on billionaires’ wealth and was committed to defeating the measure if it reached the ballot. NYT
• President Trump reportedly unhappy about AG Pam Bondi's performance and has repeatedly complained to aides: WSJ 
• Microsoft has warned that US AI groups are being outpaced by Chinese rivals in the battle for users outside the west, as China combines low-cost “open” models with hefty state subsidies to gain an edge. FT
• Iranian protests appeared to persist in localized pockets overnight as activist group Iran Human Rights warned of imminent executions by the state and said the civilian death toll may be in the thousands. BBG
• The BOJ may raise rates as early as April as heightened market concerns over PM Takaichi’s approach to fiscal policy keep the yen weak, former board member Makoto Sakurai said. “The BOJ must raise rates at least by June or July,” he added. BBG
• Japanese investors dumped UK government bonds at the fastest pace in 14 years in November, citing worries over Britain’s fiscal outlook and more attractive yields at home. BBG
• Japanese stocks surged to an all time high and the yen tumbled to a 19 month low as markets bet that a possible snap election net month would reignite the “Takaichi trade.” FT

Trade/Tariffs

• China's Commerce Ministry outlines the final ruling on the imports of solar polysilicon from the US and South Korea, effective 14th January with tariffs of up to 113.8%. To continue to collect anti-dumping tariffs for another five years.
• China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
• Taiwan officials said 'some' consensus has been reached with the US on a trade deal.
• Japanese Finance Minister Katayama said there were some detailed proposals on rare earth supply chains during the meeting with the US. A potential price floor on rare earths were discussed.
• US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks followed on from Monday’s gains, with equities mostly in the green. ASX 200 started the session on the front foot, +0.4%, before extending gains and currently trading just shy of session highs at 8835. With spot XAU trading near ATHs, this has aided sectors such as metals and mining (2.0%) to continue Monday’s gains. Nikkei 225 returned from its long weekend with a gap higher, resulting in the index opening with gains as much as 3.7% and forming new ATHs. This comes amid a weaker JPY and growing speculation of PM Takaichi dissolving parliament. Japanese media noted that the LDP was looking to capitalise on Takaichi's high approval ratings. KOSPI opened Tuesday’s trade at ATHs and oscillated at highs before peaking at 4681 and slightly paring back, but remains comfortably in the green. Hang Seng and Shanghai Comp. opened in line with the broader sentiment, with the former surging higher, aided by gains in Gigadevice (3986 HK). The latter is the laggard across Asia-Pacific equities, trading with slight gains of 0.2%.

Top Asian News

• China examines foreign ETF trades after Jane Street India probe, Bloomberg reported.
• Japanese Finance Minister Katayama said she shared concerns with US Treasury Secretary Bessent over weak JPY.

European equities (STOXX 600 -0.2%) have traded tentatively throughout the morning, as markets await CPI. T he AEX (+0.4%) is the key outperformer in the region amid gains in ASML (+1.2%) after Jefferies raised the Co.'s price target, thereby lifting the index. European sectors are trading mixed, with Energy (+0.9%), Technology (+0.6%) and Banks (+0.6%) leading. The former has gained amid stronger crude prices given the heightened geopolitical tension between US and Iran, whilst ASML helps boost Tech. On the downside, Autos (-0.7%), Utilities (-0.7%) and Construction & Materials (-2.6%) lag. The latter faced steep losses due to Sika (-7.0%) after the Co.'s FY25 sales fell by 4.8%, with the Chinese market a continued weakness for them.

Top European News

• French Budget Balance (Nov) -155.4B vs. Exp. -165.0B (Prev. -136.2B, Rev. -136.2B).
• UK BRC Retail Sales YY (Dec) 1.0% (Prev. 1.2%).

Central Banks

• Fed's Williams (Voter, Neutral) said monetary policy well positioned amid a favourable outlook and that policy is now closer to neutral, well-positioned ahead of January rate decision; expect that we’ll see [the labor market] stabilize this year". MONETARY POLICY. “In considering the extent and timing of additional adjustments… the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”. “Monetary policy is now well positioned to support the stabilization of the labor market and the return of inflation to the FOMC’s longer-run goal of 2 percent.”. “The actions taken by the FOMC… have moved the modestly restrictive stance of monetary policy closer to neutral.”. INFLATION. “Underlying inflation trends have been pretty favorable.”. “Tariffs have been overwhelmingly borne by domestic businesses and consumers.”. “I expect inflation will be just under 2-1/2 percent for this year as a whole, before reaching… 2 percent in 2027.”. “I anticipate inflation will peak at around 2-3/4 to 3 percent sometime during the first half of this year.”. “Inflation appears likely to peak sometime in the first half of this year as the full effects of tariffs are felt.”. “Medium- and longer-term expectations remain well within their pre-Covid ranges.”. “Inflation expectations remain well anchored.”. GROWTH. “The economic outlook is favorable.”. “I expect the economy to grow above trend this year, with real GDP growth between 2-1/2 and 2-3/4 percent.”. “GDP growth looks to have been somewhat above 2 percent last year, and it will likely pick up some this year.”. LABOR MARKET. “This has been a gradual process, without signs of a sharp rise in layoffs.”. “Downside risks to employment have increased as the labor market cooled.”. “The unemployment rate moved up… and ended the year at 4.4 percent.”. “I expect that we’ll see [the labor market] stabilize this year and then strengthen somewhat thereafter.”
• Fed's Williams (Voter, Neutral) said the Fed is not under strong influence to change rates. Expects the next Fed chair to understand the gravity of the role. Strong productivity growth echoes past booms. Adds that the best way to instill confidence in the Fed is to do the job well. He expects improved labour market demand. Confident the Fed will return inflation to 2%. Jobs market is unusual with low hiring, low firing.
• Japan's government is reportedly likely to delay the nomination of a BoJ board member if PM Takaichi called an election, via Reuters citing sources.
• Global central banks are reportedly drafting a statement in support for Fed Chair Powell.

FX

• DXY is flat and trades within a narrow 98.89 to 99.03 range; the high for the day is a couple of pips short of its 50 DMA, while a bout of pressure in the index could see a test of its 200 DMA at 98.80. Focus for the index today will be on US CPI; in brief, the consensus looks for headline CPI to rise by 0.3% M/M in December (prev. 0.3%), and the annual rate to remain unchanged at 2.7% Y/Y. GS expect the figures to exceed consensus, citing firmer food and energy prices.
• Away from the US, G10s are mixed with mild strength in the GBP whilst the JPY is the clear underperformer – other peers are near-enough flat vs the USD. Nothing really driving the strength in the GBP this morning, whilst the JPY has a lot to digest.
• A full JPY analysis piece can be found on the Newsquawk headline feed at 08:55 GMT, but in brief, USD/JPY eclipsed 159.00 for the first time since 11 July 2024. As a reminder, Japan intervened twice on July 11 and 12 to bring the USD/JPY below the 160.00 mark. The latest depreciation in the JPY has been spurred by continued reports of PM Takaichi's plans to call an election, where her aim is to secure a single-party government. This would, in theory, allow her to enact more expansionary fiscal policy.

Fixed Income

• JGBs led the downside overnight as the "Takaichi trade" resumed. For more details, see the 08:55GMT Market Update.
• Amidst this, USTs and Bunds also found themselves lower. USTs by just a handful of ticks and holding above the 112-00 mark and by extension yesterday's trough, which was half a tick below that. Focus turns to US CPI later, where consensus looks for the headline M/M, and Y/Y prints to remain at 0.3% and 2.7% while both core figures are seen higher by a tenth at 0.3% and 2.7% respectively. Goldman Sachs looks for a hotter print driven by technical factors.
• Bunds in-fitting with the above, at a 127.84 low with downside of 28 ticks at most. Bunds made fresh lows following a soft Bobl outing, which had a weak b/c and lower than exp. amount sold. More generally, action for today will likely be dictated by US CPI. If the bearish bias extends, we look to support at 127.89, 127.82 and 127.70 from the last three sessions.
• Gilts gapped lower by 14 ticks at the open, acknowledging the bearish bias from APAC trade, before dipping further to a 92.30 base. Since, the benchmark has recovered to opening levels. No reaction to the passing of I/L supply while the interview with BoE's Bailey took place this morning, but the text won't be published until January 16th.
• Greece begins the sale of a new 10yr bond; guidance seen at +60-65bps to mid swaps.
• Italy sells EUR 4bln vs exp. EUR 3.5-4bln 2.40% 2029 BTP: avg. yield 2.48%, b/c 1.45x
• Germany sells EUR 4.597bln vs exp. EUR 6bln 2.50% 2031 Bobl: Avg yield: 2.47%, b/c 1.41x, retention 23.38%

Commodities

• Crude firmer with geopolitics in focus. Overnight action was somewhat rangebound, as there was no significant escalation or development. However, we did get reports via CBS that President Trump was briefed on military and covert operations against Iran, but no decision has been made.
• Since, as participants digest this risk and reports via BBG that two tankers were attacked in proximity to the Black Sea loading terminal for the CPC, crude has climbed and posts upside in excess of USD 1.00/bbl. At highs of USD 60.82/bbl and USD 65.20/bbl for WTI and Brent, respectively.
• Spot gold is a little lower this morning, taking a breather following the strength seen in the prior session, where the yellow metal made fresh ATHs beyond the USD 4.6k/oz mark. Slight pressure today without a clear driver; potentially profit-taking ahead of US CPI. Price action in Europe has been sideways, and within a USD 4,573.87-4,608.13/oz range.
• A bit of divergence between gold and silver this morning, with the latter posting modest gains and currently holding at the upper end of the day's range, last at USD 85.76/oz.
• Base metals are mixed after choppy trade overnight. 3M LME Copper currently trades within a USD 13,034-13,232/t range. Desks have highlighted that there have been growing fears amongst traders that copper may sharply pull back if demand for the metal slows in 2026, particularly if China curbs spending.
• Citi said its 3-month price target for gold and silver is now USD 5000/oz and USD 100/oz respectively.
• Two oil tankers were attacked in proximity to the Black Sea loading terminal for the CPC, Bloomberg reports citing sources.-Two additional oil tankers have been hit near the Black Sea CPC terminal by drones, according to sources; taking the total on Tuesday to four tankers.

Geopolitics: Ukraine

• A push by French President Macron and Italian PM Meloni to begin discussions with the Russian Kremlin is gaining traction in EU capitals and in Brussels itself, Politico reported citing sources. Primary goal to ensure EU red lines are not crossed. and to signal to the US that the EU has leverage. Elsewhere, creation of the role of EU special envoy to Ukraine hs support of the Council and leaders. Mario Draghi and Alexander Stubb have been touted. However, EU diplomat Kallas opposes the role.
• Kyiv Mayor said the Russians are attacking the capital with ballistic missiles and that explosions are being heard.

Geopolitics Middle East 

• US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
• Iran's Foreign Minister said Tehran is ready for any action by the US, including military action.
• China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
• US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
• "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
• "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
• US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.
• US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
• Iranian authorities claim that the situation is 'under control'.
• "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
• US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
• "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
• At least two unsanctioned supertankers are departing Venezuelan waters carrying crude oil, according to reported citing TankerTrackers.
• US Treasury Secretary Bessent posted that he was pleased to hear a strong, shared desire to quickly address key vulnerabilities in critical minerals supply chains; "I am optimistic that nations will pursue prudent derisking over decoupling".

US Event Calendar

• 8:30 am: Dec CPI MoM, est. 0.3%
• 8:30 am: Dec Core CPI MoM, est. 0.3%
• 8:30 am: Dec CPI YoY, est. 2.7%, prior 2.7%
• 8:30 am: Dec Core CPI YoY, est. 2.71%, prior 2.6%
• 8:30 am: Dec CPI Index NSA, est. 324.17, prior 324.12
• 8:30 am: Dec Core CPI Index SA, est. 332.06, prior 331.07
• 10:00 am: Oct New Home Sales, est. 715k
• 10:00 am: Oct New Home Sales MoM, est. -10.63%
• 2:00 pm: Dec Federal Budget Balance, est. -152.5b, prior -173.3b

DB's Jim Reid concludes the overnight wrap

Morning from Helsinki where it's a reasonably mild -8 degrees. I've spent 2026 so far chasing the cold with -15 in Alps at the start of the year, a rare -7 degrees in Surrey last week and now 4 Nordic cities in 2 days. Most of the time I've been trying not to fall over to break the screws in my back or to further damage knees that will soon need replacing. If I were a racehorse, I suspect a few emotional goodbyes would be coming soon.   

There have been lots of icy patches to avoid in markets over the last 24 hours as 2026 continues to be the year of the headline even if most markets have enjoyed the ride so far. The main story this week, and there is competition, are the continued developments and market reaction around the Federal Reserve, after US prosecutors launched a criminal investigation that’s revived fears around central bank independence. That helped push gold (+1.95%) and silver (+6.57%) to new records yesterday, and the move out of US assets also meant the dollar and US Treasuries lost ground as well. Ironically, if the ultimate aim is to reduce yields, it could have the opposite impact as the Fed may be keen not to be seen as reacting to political pressure at the front end, and the long-end may show some concern about the motives. In addition, if Powell was looking for a reason to stay on as a Governor after his term as Chair ends in May, this could be one. It's very unusual to stay on but Eccles did so in 1948 for 3.5 years to help protect and secure Fed independence after the Treasury were trying to fund large post war time debts. So there might be some parallels in 2026. Ironically one of the buildings being renovated, that is causing the DoJ investigation, is the Marrine S. Eccles Building. You can also see our US economists quick take on the developments here.

Meanwhile, investors have also faced an array of geopolitical headlines from Venezuela to Iran, which has pushed Brent crude (+0.84%) to a 7-week high of $63.87/bbl. Remember Rubio is meeting Danish and Greenland officials some time this week as well. We could also hear on IEEPA tariffs tomorrow at the next "opinions day". And there’s no immediate sign of any letup on the calendar either, as today will bring the US CPI print as well as the start of US Q4 earnings season. Yet despite all the noise, risk assets have been remarkably unfazed by everything, with the S&P 500 (+0.16%) and Europe’s STOXX 600 (+0.21%) both at new records.   

The prospect of Fed independence being eroded immediately induced a negative reaction for US assets, reminiscent of previous episodes where it looked like Powell might be removed. But even as the reaction followed a clear pattern, it was still fairly subdued relative to previous episodes last year, and the initial losses were pared back significantly. So while the Treasury yield curve saw a bear steepening with 10yr yields trading +4bps higher just before the US open, by the close the 2yr yield (+0.2bps) was virtually unchanged at 3.53%, while 10yr (+1.1bps to 4.18%) and the 30yr (+1.5bps to 4.83%) saw modest increases. Despite higher yields, the US Dollar lost ground, weakening -0.27% against the Euro. The reversal of the initial move was particularly clear for equities, as S&P 500 futures were initially down -0.79% shortly after the European open, before the index rose +0.16% to a new record.  

A few arguments were put forward as to why there wasn’t a bigger reaction, but an important one was the resistance from a couple of Senate Republicans to Trump’s move, raising questions as to how successful any attempts to erode the Fed’s independence would be. In particular, Republican Senator Thom Tillis, who sits on the Senate Banking Committee, said that he would oppose confirming any nominee for the Fed until this was resolved. That’s significant, because the Senate Banking Committee is split 13-11 to the Republicans, so Tillis’ opposition would lead to a split if the others voted along party lines. And there were other Republican Senators who voiced concern, with Lisa Murkowski saying that “the administration’s investigation is nothing more than an attempt at coercion.” On top of that, another argument for the limited reaction was that Powell’s term as Chair was already ending in May, so a change in leadership was expected anyway in the next few months. Moreover, previous episodes last year have also led to the sense that the administration don’t want a negative bond market reaction, given long-end yields flow through to mortgage rates, which they’d prefer to keep contained. Clearly it’s a moving situation though, and these are a huge couple of weeks for the Fed, as the Supreme Court are hearing arguments in the Lisa Cook case on Jan 21, ahead of the FOMC meeting on Jan 27-28.

One asset class that did hold on to almost all of its move were precious metals, which surged to fresh records with gold (+1.97%) up to $4,598/oz, and silver (+6.57%) up to $85.10/oz. In addition to investors becoming more concerned about potential currency debasement and future inflation, these were supported by the ongoing geopolitical uncertainty. This related in particular to possible US steps towards Iran and late in the day Trump posted that “effective immediately” any country “doing business” with Iran will pay a tariff 25% on trade with the US. In theory, this would most impact countries across Asia, with China being Iran’s biggest trading partner.

However, we’ve not yet heard any further details or an executive order implementing this tariff threat, and markets have taken Trump’s post in their stride overnight. The Shanghai Comp is flat and the Hang Seng up +0.94%. Elsewhere Japanese stocks are flying, but in line with where futures were this time yesterday during their holiday, with the Nikkei (+3.21%) responding to the media speculation since Friday that Takaichi is considering a snap lower house election as early as February. Elsewhere the KOSPI (+1.13%) and the S&P/ASX 200 (+0.59%) are also performing well. S&P 500 (-0.14%) and NASDAQ 100 (-0.31%) futures are trading slightly lower though.  

Coming back to Japan, the election fever has seen the yen (-0.39%) fall to its lowest level since July 2024, trading at 158.76 against the dollar, and 10-year (+5.7bps), 20-year (+5.8bps), and 30-year (+6.1bps) JGBs trading at 2.15%, 3.13%, and 3.46%, respectively this morning.  

Looking forward, the next big test will be the US CPI print, which is out at 13:30 London time today. As a reminder, the last print came on the softer side, but there were various methodological issues from the shutdown which meant it was treated with caution. For instance, the shelter numbers saw a huge drop-off that’s more usually consistent with recessions, hence we saw some scepticism around the numbers. For this time round, our US economists expect the print to come in on the stronger side, unwinding some of the distortions from the government shutdown. So they expect headline CPI to come in at a monthly +0.36%, with core pretty similar at +0.35%.

Ahead of all that, equities put in a steady performance on both sides of the Atlantic yesterday, with the S&P 500 (+0.16%) inching up to a new record. However, financials were an underperformer, and the KBW Bank Index (-0.95%) lost ground after Trump’s post that he was calling for a one-year cap on credit card interest rates of 10%. How realistic that is to implement is a moot point and it may actually reduce credit to the poorer population. So an interesting set up for JP Morgan (-1.43%) to kick off earnings season before the bell today.

Elsewhere there were stronger performances, with consumer staples (+1.42%) the top-performing sector in the S&P 500 as Walmart rose +3.00% after NASDAQ’s announcement that they’d join the NASDAQ 100 on Jan 20. The Mag-7 (-0.03%) had a mixed session, but Alphabet (+1.00%) became the latest tech giant to cross the $4trn valuation mark as Google confirmed a “multi-year deal” to power the AI technology for Apple’s iPhones. While Microsoft and Apple also crossed the $4trn level last year, Nvidia is currently the only company with a higher valuation than Alphabet, which has surged by over 100% from post-Liberation Day lows last spring.

Over in Europe yesterday, markets had put in a stronger performance, as they weren’t affected as much by the Federal Reserve news. So sovereign bonds rallied across the continent, with yields on 10yr bunds (-1.2bps), OATs (-1.0bps) and BTPs (-1.4bps) all coming down. In addition, equities also outperformed, with the STOXX 600 (+0.21%) at a new record, whilst the DAX (+0.57%) advanced for a 10th consecutive session for the first time since summer 2024. In fact, if we get an 11th advance today, it would be the longest run of gains for the DAX since 2014.

Looking at the day ahead, and data releases include the US CPI print for December, along with the NFIB’s small business optimism index for December. Central bank speakers include BoE Governor Bailey, the ECB’s Kocher, and the Fed’s Musalem and Barkin. Earnings releases include JPMorgan Chase and BNY Mellon.

Tyler Durden Tue, 01/13/2026 - 08:40

US Equity Futures Jump To Record High After Core CPI Comes In Cool

US equity futures were initially weaker as the market weighs geopolitics, inflation data, and the start to earnings season, where JPM reported results that were mixed at best (unexpected weakness in bank underwriting kept the stock flat in premarket trading). However, just after core CPI printed below estimates, futures spiked as high as 7030, rising to a new record high, up 0.2%, with Nasdaq futures also rising 0.2%, with Mag7 names mixed premarket with AMD/INTC leading Semis. Fins/Energy are leading Cyclicals which are roughly flat vs. Defensives, where Utils are the standout group.Sentiment was impaired after Trump said that any country doing business with Iran will receive a 25% tariff; the potential for conflict is pushing oil prices higher with WTI back above $60 for first time since Nov. Japanese stocks jumped while the yen slumped on speculation that PM Sanae Takaichi may call a snap election, reigniting the so-called Takaichi trade.Bond yields are +1-2bp across the curve and USD is rallying driven by a surge in the USDJPY which jumped as high as 159, the highest since July 2024. CPI print this afternoon with the scenario analysis is below. The ADP weekly print, NFIB Small Biz Survey, and New Home Sales the other macro data today. 

In premarket trading, Mag 7 stocks were mixed (Alphabet +0.7%, Nvidia +0.02%, Tesla +0.1%, Meta little changed, Amazon -0.2%, Microsoft -0.4%, Apple -0.4%)

• Delta Air Lines (DAL) falls 5% after the carrier gave an underwhelming profit forecast for the full year.
• L3Harris Technologies Inc. (LHX) gains 13% as the US Department of Defense is set to invest in the company’s Missile Solutions business via a $1 billion convertible preferred security, tightening the direct links between the US government and a major defense contractor.
• Ormat Technologies (ORA) rises 5% after the renewable energy company signed a 20-year power purchase agreement with data center operator Switch for energy from its Salt Wells geothermal power plant in Nevada.
• Synopsys (SNPS) falls 2% as Piper Sandler downgrades the chip design software firm to neutral from overweight, saying the company could see prolonged headwinds to growth.
• Travere Therapeutics (TVTX) slumps 28% after the biotech firm said it received a request from the FDA to clarify the clinical benefit of its therapy that treats a rare kidney disease, a move that analysts said could delay the approval by the agency.

In corporate news, Amgen said its experimental drug MariTide helped patients maintain weight loss for two years. Diageo is said to be considering options for its Chinese assets, including possible divestments. Wall Street firms continue to reduce headcount, with Citi set to cut about 1,000 jobs this week and BlackRock said to be trimming about 1% of staff.

After initially trading lower, spooked by Trump’s threat to tariff countries doing business with Iran which has the potential to disrupt US trading relationships across the globe, futures jumped after core CPI came in below estimates. 

Speaking of CPI, JPMorgan’s trading desk predicted a rally of up to 1.75% for the S&P 500 if CPI is in line with, or cooler, than estimated - which is now the case; let's see if stocks surge as much as JPM predicted.

Fed’s Williams said interest rates are “well positioned” to stabilize the labor market and bring inflation back to the 2% goal. 

With earnings season kicking off, Bloomberg notes how small caps have been in favor recently, with the Russell 2000 outperforming the S&P 500 for the past seven sessions. The last time it had a longer winning streak was 2019. Yet tech remains the dominant contributor to 4Q profit growth among S&P 500 members, estimated to show year-over-year EPS growth of 20%, while non-tech earnings expansion is slated to decelerate from 9% to just 1%, according to data from Bank of America.

Meanwhile, the Fed drama continues, with global central bankers pledging “full solidarity” with Powell and saying that the independence of central banks is a cornerstone of financial and economic stability. Today’s Big Take looks at the Washington backlash that could derail Trump’s campaign to tighten White House control over the Fed.

In other assets, the dollar has clawed back some ground after Monday’s drop, but downside risks remain. Oil is higher while gold slipped from its record. CME said it will change the way it sets margins for gold, silver, platinum and palladium futures after a surge in prices and volatile trading.

European stocks dip, reversing an earlier rise which pushed them near record highs as investors look ahead to US inflation data. Energy stocks outperform while the construction and materials sector lags. Stoxx 600 is little changed at 610.90 with 336 members down, 250 up, and 14 unchanged. Here are some of the biggest movers on Tuesday: 

• Symrise shares rally as much as 7.3% after the company announced a €400 million ($467 million) share buyback and said it’s in advanced talks to sell its terpene business, a kind of chemical used in fragrances and flavors.
• Orsted shares surge as much as 6.6% after a US judge ruled work can resume on a wind farm off the coast of Rhode Island while it challenges the government’s latest attempt to stop offshore projects from being built.
• Whitbread shares jump as much as 6.9%, the most since May, after the Premier Inn owner reported solid trading and increased cost efficiencies in its third-quarter update.
• Synektik shares gain as much as 4.6% after the Polish distributor of medical devices including surgery robots reported new orders rising 30% last quarter as well as new contract with Czech hospital.
• THG shares jump as much as 9.7%, the most since October, as analysts highlighted strong momentum in the company’s beauty and nutrition businesses.
• Gamma Communications shares jump as much as 9.3%, the most since September, after reporting FY25 trading is in line with consensus expectations.
• Persimmon shares rise as much as 2.8% to the highest level since November 2024 as the homebuilder reassures that full-year 2025 results are likely to be at the upper end of market expectations and it is on track to meet this year’s forecasts.
• Raspberry PI shares slump as much as 10% to a record low after the computing company’s strong results were overshadowed by its warning over the rapid increase in the cost of DRAM memory chips, as more supplies are funneled into AI data centers.
• Games Workshop shares drop as much as 3.7%, the most since November, after the Warhammer owner reported first-half results that showed sales growth declining toward the end of the period in some stores.
• Vinci shares fall as much as 3.7% as French infrastructure stocks drop on ratings downgrades by Bank of America, concerned by the risk of rising French taxes.
• Thales shares fall as much as 2.4% as Deutsche Bank downgrades several defense names, citing uncertainties surrounding the French defense budget and lagging cyber sales.

Asian stocks briefly jumped to a fresh record, driven by gains in Japanese shares as traders returned from holiday amid growing speculation that Prime Minister Sanae Takaichi may soon call a snap election.  The MSCI Asia Pacific Index rose as much as 1.4%, the most in a week, with Alibaba, TSMC and Toyota Motor among the biggest boosts to the gauge. Most subsectors were in the green, with financials being a major contributor. Benchmarks in Hong Kong, South Korea and Australia also rose.  Concerns around Federal Reserve’s independence after the Trump administration escalated its attack on the central bank again prompted flows away from US market into regions like Asia. Traders are also brushing off the latest tariff threats from President Donald Trump, who said to impose a 25% tariff on goods from countries “doing business” with Iran. 

“The market does not care about Trump’s capricious tariff threats,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “Trump’s previous backdown from China has shown that bigger levers such as the supply of rare earths matter more in tariff negotiations. It is unlikely that he can afford to upset the trade truce with China just to pressure Iran.”

In FX, the yen sinks, following a jolt in Japanese bond and stock markets, on speculation that an early election is on the cards. Dollar-yen briefly hits 159, highest since July 2024. The Bloomberg Dollar Spot Index edges marginally higher.

In rates, treasuries, European and UK bond yields rise by two or three basis points, with US CPI data ahead.

In commodities, oil prices rally on geopolitical risk and Trump’s threat of tariffs on Iranian crude buyers, with Brent hitting the highest since November and briefly moving above $65/barrel before paring. Gold edging lower from another record high, down about $12 to $4,585/oz.

Today's US economic calendar includes ADP weekly employment change (8:15am), December CPI (8:30am), October new home sales (10am) and December Federal budget balance (2pm). Scheduled Fed speakers include Musalem (10am) and Barkin (4pm)

Market Snapshot

• S&P 500 mini +0.2%
• Nasdaq 100 mini +0.3%
• Russell 2000 mini +0.3%
• Stoxx Europe 600 -0.2%
• DAX -0.2%
• CAC 40 -0.5%
• 10-year Treasury yield +2 basis points at 4.19%
• VIX +0.3 points at 15.43
• Bloomberg Dollar Index little changed at 1210.29
• euro little changed at $1.1669
• WTI crude +1.8% at $60.57/barrel

Top Overnight News

• Donald Trump vowed to impose a 25% tariff on goods from any country “doing business with” Iran, a move that risks derailing his trade truce with China, the world’s top buyer of Iranian oil. Germany’s Friedrich Merz said the world is seeing the “final days” of Iran’s regime. BBG
• The criminal probe into Jay Powel by US prosecutors has galvanized the Federal Reserve’s top leaders to resist Trump’s attacks and could push he chair to remain a governor until 2028. Trump’s   DoJ probe was seen by people close to the US central bank as a sign that the president would go to extraordinary lengths to force policymakers to bow to his demands. FT
• California Gov. Gavin Newsom said he was working behind the scenes to block a proposed tax on billionaires’ wealth and was committed to defeating the measure if it reached the ballot. NYT
• President Trump reportedly unhappy about AG Pam Bondi's performance and has repeatedly complained to aides: WSJ 
• Microsoft has warned that US AI groups are being outpaced by Chinese rivals in the battle for users outside the west, as China combines low-cost “open” models with hefty state subsidies to gain an edge. FT
• Iranian protests appeared to persist in localized pockets overnight as activist group Iran Human Rights warned of imminent executions by the state and said the civilian death toll may be in the thousands. BBG
• The BOJ may raise rates as early as April as heightened market concerns over PM Takaichi’s approach to fiscal policy keep the yen weak, former board member Makoto Sakurai said. “The BOJ must raise rates at least by June or July,” he added. BBG
• Japanese investors dumped UK government bonds at the fastest pace in 14 years in November, citing worries over Britain’s fiscal outlook and more attractive yields at home. BBG
• Japanese stocks surged to an all time high and the yen tumbled to a 19 month low as markets bet that a possible snap election net month would reignite the “Takaichi trade.” FT

Trade/Tariffs

• China's Commerce Ministry outlines the final ruling on the imports of solar polysilicon from the US and South Korea, effective 14th January with tariffs of up to 113.8%. To continue to collect anti-dumping tariffs for another five years.
• China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
• Taiwan officials said 'some' consensus has been reached with the US on a trade deal.
• Japanese Finance Minister Katayama said there were some detailed proposals on rare earth supply chains during the meeting with the US. A potential price floor on rare earths were discussed.
• US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks followed on from Monday’s gains, with equities mostly in the green. ASX 200 started the session on the front foot, +0.4%, before extending gains and currently trading just shy of session highs at 8835. With spot XAU trading near ATHs, this has aided sectors such as metals and mining (2.0%) to continue Monday’s gains. Nikkei 225 returned from its long weekend with a gap higher, resulting in the index opening with gains as much as 3.7% and forming new ATHs. This comes amid a weaker JPY and growing speculation of PM Takaichi dissolving parliament. Japanese media noted that the LDP was looking to capitalise on Takaichi's high approval ratings. KOSPI opened Tuesday’s trade at ATHs and oscillated at highs before peaking at 4681 and slightly paring back, but remains comfortably in the green. Hang Seng and Shanghai Comp. opened in line with the broader sentiment, with the former surging higher, aided by gains in Gigadevice (3986 HK). The latter is the laggard across Asia-Pacific equities, trading with slight gains of 0.2%.

Top Asian News

• China examines foreign ETF trades after Jane Street India probe, Bloomberg reported.
• Japanese Finance Minister Katayama said she shared concerns with US Treasury Secretary Bessent over weak JPY.

European equities (STOXX 600 -0.2%) have traded tentatively throughout the morning, as markets await CPI. T he AEX (+0.4%) is the key outperformer in the region amid gains in ASML (+1.2%) after Jefferies raised the Co.'s price target, thereby lifting the index. European sectors are trading mixed, with Energy (+0.9%), Technology (+0.6%) and Banks (+0.6%) leading. The former has gained amid stronger crude prices given the heightened geopolitical tension between US and Iran, whilst ASML helps boost Tech. On the downside, Autos (-0.7%), Utilities (-0.7%) and Construction & Materials (-2.6%) lag. The latter faced steep losses due to Sika (-7.0%) after the Co.'s FY25 sales fell by 4.8%, with the Chinese market a continued weakness for them.

Top European News

• French Budget Balance (Nov) -155.4B vs. Exp. -165.0B (Prev. -136.2B, Rev. -136.2B).
• UK BRC Retail Sales YY (Dec) 1.0% (Prev. 1.2%).

Central Banks

• Fed's Williams (Voter, Neutral) said monetary policy well positioned amid a favourable outlook and that policy is now closer to neutral, well-positioned ahead of January rate decision; expect that we’ll see [the labor market] stabilize this year". MONETARY POLICY. “In considering the extent and timing of additional adjustments… the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”. “Monetary policy is now well positioned to support the stabilization of the labor market and the return of inflation to the FOMC’s longer-run goal of 2 percent.”. “The actions taken by the FOMC… have moved the modestly restrictive stance of monetary policy closer to neutral.”. INFLATION. “Underlying inflation trends have been pretty favorable.”. “Tariffs have been overwhelmingly borne by domestic businesses and consumers.”. “I expect inflation will be just under 2-1/2 percent for this year as a whole, before reaching… 2 percent in 2027.”. “I anticipate inflation will peak at around 2-3/4 to 3 percent sometime during the first half of this year.”. “Inflation appears likely to peak sometime in the first half of this year as the full effects of tariffs are felt.”. “Medium- and longer-term expectations remain well within their pre-Covid ranges.”. “Inflation expectations remain well anchored.”. GROWTH. “The economic outlook is favorable.”. “I expect the economy to grow above trend this year, with real GDP growth between 2-1/2 and 2-3/4 percent.”. “GDP growth looks to have been somewhat above 2 percent last year, and it will likely pick up some this year.”. LABOR MARKET. “This has been a gradual process, without signs of a sharp rise in layoffs.”. “Downside risks to employment have increased as the labor market cooled.”. “The unemployment rate moved up… and ended the year at 4.4 percent.”. “I expect that we’ll see [the labor market] stabilize this year and then strengthen somewhat thereafter.”
• Fed's Williams (Voter, Neutral) said the Fed is not under strong influence to change rates. Expects the next Fed chair to understand the gravity of the role. Strong productivity growth echoes past booms. Adds that the best way to instill confidence in the Fed is to do the job well. He expects improved labour market demand. Confident the Fed will return inflation to 2%. Jobs market is unusual with low hiring, low firing.
• Japan's government is reportedly likely to delay the nomination of a BoJ board member if PM Takaichi called an election, via Reuters citing sources.
• Global central banks are reportedly drafting a statement in support for Fed Chair Powell.

FX

• DXY is flat and trades within a narrow 98.89 to 99.03 range; the high for the day is a couple of pips short of its 50 DMA, while a bout of pressure in the index could see a test of its 200 DMA at 98.80. Focus for the index today will be on US CPI; in brief, the consensus looks for headline CPI to rise by 0.3% M/M in December (prev. 0.3%), and the annual rate to remain unchanged at 2.7% Y/Y. GS expect the figures to exceed consensus, citing firmer food and energy prices.
• Away from the US, G10s are mixed with mild strength in the GBP whilst the JPY is the clear underperformer – other peers are near-enough flat vs the USD. Nothing really driving the strength in the GBP this morning, whilst the JPY has a lot to digest.
• A full JPY analysis piece can be found on the Newsquawk headline feed at 08:55 GMT, but in brief, USD/JPY eclipsed 159.00 for the first time since 11 July 2024. As a reminder, Japan intervened twice on July 11 and 12 to bring the USD/JPY below the 160.00 mark. The latest depreciation in the JPY has been spurred by continued reports of PM Takaichi's plans to call an election, where her aim is to secure a single-party government. This would, in theory, allow her to enact more expansionary fiscal policy.

Fixed Income

• JGBs led the downside overnight as the "Takaichi trade" resumed. For more details, see the 08:55GMT Market Update.
• Amidst this, USTs and Bunds also found themselves lower. USTs by just a handful of ticks and holding above the 112-00 mark and by extension yesterday's trough, which was half a tick below that. Focus turns to US CPI later, where consensus looks for the headline M/M, and Y/Y prints to remain at 0.3% and 2.7% while both core figures are seen higher by a tenth at 0.3% and 2.7% respectively. Goldman Sachs looks for a hotter print driven by technical factors.
• Bunds in-fitting with the above, at a 127.84 low with downside of 28 ticks at most. Bunds made fresh lows following a soft Bobl outing, which had a weak b/c and lower than exp. amount sold. More generally, action for today will likely be dictated by US CPI. If the bearish bias extends, we look to support at 127.89, 127.82 and 127.70 from the last three sessions.
• Gilts gapped lower by 14 ticks at the open, acknowledging the bearish bias from APAC trade, before dipping further to a 92.30 base. Since, the benchmark has recovered to opening levels. No reaction to the passing of I/L supply while the interview with BoE's Bailey took place this morning, but the text won't be published until January 16th.
• Greece begins the sale of a new 10yr bond; guidance seen at +60-65bps to mid swaps.
• Italy sells EUR 4bln vs exp. EUR 3.5-4bln 2.40% 2029 BTP: avg. yield 2.48%, b/c 1.45x
• Germany sells EUR 4.597bln vs exp. EUR 6bln 2.50% 2031 Bobl: Avg yield: 2.47%, b/c 1.41x, retention 23.38%

Commodities

• Crude firmer with geopolitics in focus. Overnight action was somewhat rangebound, as there was no significant escalation or development. However, we did get reports via CBS that President Trump was briefed on military and covert operations against Iran, but no decision has been made.
• Since, as participants digest this risk and reports via BBG that two tankers were attacked in proximity to the Black Sea loading terminal for the CPC, crude has climbed and posts upside in excess of USD 1.00/bbl. At highs of USD 60.82/bbl and USD 65.20/bbl for WTI and Brent, respectively.
• Spot gold is a little lower this morning, taking a breather following the strength seen in the prior session, where the yellow metal made fresh ATHs beyond the USD 4.6k/oz mark. Slight pressure today without a clear driver; potentially profit-taking ahead of US CPI. Price action in Europe has been sideways, and within a USD 4,573.87-4,608.13/oz range.
• A bit of divergence between gold and silver this morning, with the latter posting modest gains and currently holding at the upper end of the day's range, last at USD 85.76/oz.
• Base metals are mixed after choppy trade overnight. 3M LME Copper currently trades within a USD 13,034-13,232/t range. Desks have highlighted that there have been growing fears amongst traders that copper may sharply pull back if demand for the metal slows in 2026, particularly if China curbs spending.
• Citi said its 3-month price target for gold and silver is now USD 5000/oz and USD 100/oz respectively.
• Two oil tankers were attacked in proximity to the Black Sea loading terminal for the CPC, Bloomberg reports citing sources.-Two additional oil tankers have been hit near the Black Sea CPC terminal by drones, according to sources; taking the total on Tuesday to four tankers.

Geopolitics: Ukraine

• A push by French President Macron and Italian PM Meloni to begin discussions with the Russian Kremlin is gaining traction in EU capitals and in Brussels itself, Politico reported citing sources. Primary goal to ensure EU red lines are not crossed. and to signal to the US that the EU has leverage. Elsewhere, creation of the role of EU special envoy to Ukraine hs support of the Council and leaders. Mario Draghi and Alexander Stubb have been touted. However, EU diplomat Kallas opposes the role.
• Kyiv Mayor said the Russians are attacking the capital with ballistic missiles and that explosions are being heard.

Geopolitics Middle East 

• US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
• Iran's Foreign Minister said Tehran is ready for any action by the US, including military action.
• China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
• US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
• "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
• "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
• US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.
• US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
• Iranian authorities claim that the situation is 'under control'.
• "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
• US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
• "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
• At least two unsanctioned supertankers are departing Venezuelan waters carrying crude oil, according to reported citing TankerTrackers.
• US Treasury Secretary Bessent posted that he was pleased to hear a strong, shared desire to quickly address key vulnerabilities in critical minerals supply chains; "I am optimistic that nations will pursue prudent derisking over decoupling".

US Event Calendar

• 8:30 am: Dec CPI MoM, est. 0.3%
• 8:30 am: Dec Core CPI MoM, est. 0.3%
• 8:30 am: Dec CPI YoY, est. 2.7%, prior 2.7%
• 8:30 am: Dec Core CPI YoY, est. 2.71%, prior 2.6%
• 8:30 am: Dec CPI Index NSA, est. 324.17, prior 324.12
• 8:30 am: Dec Core CPI Index SA, est. 332.06, prior 331.07
• 10:00 am: Oct New Home Sales, est. 715k
• 10:00 am: Oct New Home Sales MoM, est. -10.63%
• 2:00 pm: Dec Federal Budget Balance, est. -152.5b, prior -173.3b

DB's Jim Reid concludes the overnight wrap

Morning from Helsinki where it's a reasonably mild -8 degrees. I've spent 2026 so far chasing the cold with -15 in Alps at the start of the year, a rare -7 degrees in Surrey last week and now 4 Nordic cities in 2 days. Most of the time I've been trying not to fall over to break the screws in my back or to further damage knees that will soon need replacing. If I were a racehorse, I suspect a few emotional goodbyes would be coming soon.   

There have been lots of icy patches to avoid in markets over the last 24 hours as 2026 continues to be the year of the headline even if most markets have enjoyed the ride so far. The main story this week, and there is competition, are the continued developments and market reaction around the Federal Reserve, after US prosecutors launched a criminal investigation that’s revived fears around central bank independence. That helped push gold (+1.95%) and silver (+6.57%) to new records yesterday, and the move out of US assets also meant the dollar and US Treasuries lost ground as well. Ironically, if the ultimate aim is to reduce yields, it could have the opposite impact as the Fed may be keen not to be seen as reacting to political pressure at the front end, and the long-end may show some concern about the motives. In addition, if Powell was looking for a reason to stay on as a Governor after his term as Chair ends in May, this could be one. It's very unusual to stay on but Eccles did so in 1948 for 3.5 years to help protect and secure Fed independence after the Treasury were trying to fund large post war time debts. So there might be some parallels in 2026. Ironically one of the buildings being renovated, that is causing the DoJ investigation, is the Marrine S. Eccles Building. You can also see our US economists quick take on the developments here.

Meanwhile, investors have also faced an array of geopolitical headlines from Venezuela to Iran, which has pushed Brent crude (+0.84%) to a 7-week high of $63.87/bbl. Remember Rubio is meeting Danish and Greenland officials some time this week as well. We could also hear on IEEPA tariffs tomorrow at the next "opinions day". And there’s no immediate sign of any letup on the calendar either, as today will bring the US CPI print as well as the start of US Q4 earnings season. Yet despite all the noise, risk assets have been remarkably unfazed by everything, with the S&P 500 (+0.16%) and Europe’s STOXX 600 (+0.21%) both at new records.   

The prospect of Fed independence being eroded immediately induced a negative reaction for US assets, reminiscent of previous episodes where it looked like Powell might be removed. But even as the reaction followed a clear pattern, it was still fairly subdued relative to previous episodes last year, and the initial losses were pared back significantly. So while the Treasury yield curve saw a bear steepening with 10yr yields trading +4bps higher just before the US open, by the close the 2yr yield (+0.2bps) was virtually unchanged at 3.53%, while 10yr (+1.1bps to 4.18%) and the 30yr (+1.5bps to 4.83%) saw modest increases. Despite higher yields, the US Dollar lost ground, weakening -0.27% against the Euro. The reversal of the initial move was particularly clear for equities, as S&P 500 futures were initially down -0.79% shortly after the European open, before the index rose +0.16% to a new record.  

A few arguments were put forward as to why there wasn’t a bigger reaction, but an important one was the resistance from a couple of Senate Republicans to Trump’s move, raising questions as to how successful any attempts to erode the Fed’s independence would be. In particular, Republican Senator Thom Tillis, who sits on the Senate Banking Committee, said that he would oppose confirming any nominee for the Fed until this was resolved. That’s significant, because the Senate Banking Committee is split 13-11 to the Republicans, so Tillis’ opposition would lead to a split if the others voted along party lines. And there were other Republican Senators who voiced concern, with Lisa Murkowski saying that “the administration’s investigation is nothing more than an attempt at coercion.” On top of that, another argument for the limited reaction was that Powell’s term as Chair was already ending in May, so a change in leadership was expected anyway in the next few months. Moreover, previous episodes last year have also led to the sense that the administration don’t want a negative bond market reaction, given long-end yields flow through to mortgage rates, which they’d prefer to keep contained. Clearly it’s a moving situation though, and these are a huge couple of weeks for the Fed, as the Supreme Court are hearing arguments in the Lisa Cook case on Jan 21, ahead of the FOMC meeting on Jan 27-28.

One asset class that did hold on to almost all of its move were precious metals, which surged to fresh records with gold (+1.97%) up to $4,598/oz, and silver (+6.57%) up to $85.10/oz. In addition to investors becoming more concerned about potential currency debasement and future inflation, these were supported by the ongoing geopolitical uncertainty. This related in particular to possible US steps towards Iran and late in the day Trump posted that “effective immediately” any country “doing business” with Iran will pay a tariff 25% on trade with the US. In theory, this would most impact countries across Asia, with China being Iran’s biggest trading partner.

However, we’ve not yet heard any further details or an executive order implementing this tariff threat, and markets have taken Trump’s post in their stride overnight. The Shanghai Comp is flat and the Hang Seng up +0.94%. Elsewhere Japanese stocks are flying, but in line with where futures were this time yesterday during their holiday, with the Nikkei (+3.21%) responding to the media speculation since Friday that Takaichi is considering a snap lower house election as early as February. Elsewhere the KOSPI (+1.13%) and the S&P/ASX 200 (+0.59%) are also performing well. S&P 500 (-0.14%) and NASDAQ 100 (-0.31%) futures are trading slightly lower though.  

Coming back to Japan, the election fever has seen the yen (-0.39%) fall to its lowest level since July 2024, trading at 158.76 against the dollar, and 10-year (+5.7bps), 20-year (+5.8bps), and 30-year (+6.1bps) JGBs trading at 2.15%, 3.13%, and 3.46%, respectively this morning.  

Looking forward, the next big test will be the US CPI print, which is out at 13:30 London time today. As a reminder, the last print came on the softer side, but there were various methodological issues from the shutdown which meant it was treated with caution. For instance, the shelter numbers saw a huge drop-off that’s more usually consistent with recessions, hence we saw some scepticism around the numbers. For this time round, our US economists expect the print to come in on the stronger side, unwinding some of the distortions from the government shutdown. So they expect headline CPI to come in at a monthly +0.36%, with core pretty similar at +0.35%.

Ahead of all that, equities put in a steady performance on both sides of the Atlantic yesterday, with the S&P 500 (+0.16%) inching up to a new record. However, financials were an underperformer, and the KBW Bank Index (-0.95%) lost ground after Trump’s post that he was calling for a one-year cap on credit card interest rates of 10%. How realistic that is to implement is a moot point and it may actually reduce credit to the poorer population. So an interesting set up for JP Morgan (-1.43%) to kick off earnings season before the bell today.

Elsewhere there were stronger performances, with consumer staples (+1.42%) the top-performing sector in the S&P 500 as Walmart rose +3.00% after NASDAQ’s announcement that they’d join the NASDAQ 100 on Jan 20. The Mag-7 (-0.03%) had a mixed session, but Alphabet (+1.00%) became the latest tech giant to cross the $4trn valuation mark as Google confirmed a “multi-year deal” to power the AI technology for Apple’s iPhones. While Microsoft and Apple also crossed the $4trn level last year, Nvidia is currently the only company with a higher valuation than Alphabet, which has surged by over 100% from post-Liberation Day lows last spring.

Over in Europe yesterday, markets had put in a stronger performance, as they weren’t affected as much by the Federal Reserve news. So sovereign bonds rallied across the continent, with yields on 10yr bunds (-1.2bps), OATs (-1.0bps) and BTPs (-1.4bps) all coming down. In addition, equities also outperformed, with the STOXX 600 (+0.21%) at a new record, whilst the DAX (+0.57%) advanced for a 10th consecutive session for the first time since summer 2024. In fact, if we get an 11th advance today, it would be the longest run of gains for the DAX since 2014.

Looking at the day ahead, and data releases include the US CPI print for December, along with the NFIB’s small business optimism index for December. Central bank speakers include BoE Governor Bailey, the ECB’s Kocher, and the Fed’s Musalem and Barkin. Earnings releases include JPMorgan Chase and BNY Mellon.

Tyler Durden Tue, 01/13/2026 - 08:40

Core CPI Prints Cooler Than Expected In December, Near 5 Year Lows

On the heels of 'solid' labor market data from BLS (lower unemployment), ADP (weekly employment change remaining positive), and a rebound in Small Business Optimism; this morning we get a glimpse of the other side of The Fed's mandate as the last CPI print for 2025 prints. From what we can tell, President Trump did not drop any hints this time ahead of the release which was expected to be flat from November's prints.

The headline CPI print rose 0.3% MoM (vs +0.3% MoM exp) driving prices up 2.7% on a YoY basis (vs +2.7% YoY exp)...

Source: Bloomberg

Many expected a December pickup due to the unwinding of distortions from data-collection disruptions during the government shutdown, which amplified seasonal discounting in November.

Under the hood, Goods inflation was unch while Services and Food led the price increases...

Source: Bloomberg

Overall shelter inflation continues to slide on a YoY basis:

• December Shelter inflation up 0.4% MoM, translating into 3.2% YoY, down from 3.3% YoY in Nov

• December Rent inflation up 0.3% MoM, translating into 2.9% YoY, down from 3.3% YoY in Nov

The more stable (and most watched) Core CPI was expected to rise from +2.6% YoY to +2.7% YoY but was surprisingly cooler up just 0.2% MoM and steady at +2.6% YoY - the lowest since March 2021...

Source: Bloomberg

Core Goods saw deflation on a MoM basis while Services prices accelerated a little...

Source: Bloomberg

The Fed's 'old favorite' inflation signal - SupreCore (Services Ex-Shelter) - slowed once again on a YoY basis, now at its slowest since Sept 2021...

Source: Bloomberg

Recreation Services saw a significant jump on a MoM basis while Education Services saw notable deflation MoM...

Source: Bloomberg

And if you want someone to blame for higher prices - it's your Recreational time...

Source: Bloomberg

...with a record increase in Movie & Sports Admission costs... World Cup & UFC?

Source: Bloomberg

This is clearly a more convincing sign that inflation is on a downward path after November's shutdown-distorted data.

According to JPM's Market Intel team, this is the market reaction matrix, and probability:

• Core MoM prints above 0.45%. SPX loses 1.25% - 2.5%: Probability 5.0%

• Core MoM prints between 0.40% - 0.45%. SPX gains 0.25% to loses 75bps: Probability 32.5%

• Core MoM prints between 0.35% - 0.40%. SPX gains 0.25% to 0.75%: Probability 40.0%

• Core MoM prints between 0.30% - 0.35%. SPX gains 1% - 1.5%: Probability 20.0%

• Core MoM prints below 0.30%. SPX gains 1.25% - 1.75%: Probability 2.5%

Finally, for now, we seem to be avoiding a 1970s redux in Fed policy error helping to re-ignite an inflationary rebound...

Source: Bloomberg

...but time will tell.

Tyler Durden Tue, 01/13/2026 - 08:39

Core CPI Prints Cooler Than Expected In December, Near 5 Year Lows

On the heels of 'solid' labor market data from BLS (lower unemployment), ADP (weekly employment change remaining positive), and a rebound in Small Business Optimism; this morning we get a glimpse of the other side of The Fed's mandate as the last CPI print for 2025 prints. From what we can tell, President Trump did not drop any hints this time ahead of the release which was expected to be flat from November's prints.

The headline CPI print rose 0.3% MoM (vs +0.3% MoM exp) driving prices up 2.7% on a YoY basis (vs +2.7% YoY exp)...

Source: Bloomberg

Many expected a December pickup due to the unwinding of distortions from data-collection disruptions during the government shutdown, which amplified seasonal discounting in November.

Under the hood, Goods inflation was unch while Services and Food led the price increases...

Source: Bloomberg

Overall shelter inflation continues to slide on a YoY basis:

• December Shelter inflation up 0.4% MoM, translating into 3.2% YoY, down from 3.3% YoY in Nov

• December Rent inflation up 0.3% MoM, translating into 2.9% YoY, down from 3.3% YoY in Nov

The more stable (and most watched) Core CPI was expected to rise from +2.6% YoY to +2.7% YoY but was surprisingly cooler up just 0.2% MoM and steady at +2.6% YoY - the lowest since March 2021...

Source: Bloomberg

Core Goods saw deflation on a MoM basis while Services prices accelerated a little...

Source: Bloomberg

The Fed's 'old favorite' inflation signal - SupreCore (Services Ex-Shelter) - slowed once again on a YoY basis, now at its slowest since Sept 2021...

Source: Bloomberg

Recreation Services saw a significant jump on a MoM basis while Education Services saw notable deflation MoM...

Source: Bloomberg

And if you want someone to blame for higher prices - it's your Recreational time...

Source: Bloomberg

...with a record increase in Movie & Sports Admission costs... World Cup & UFC?

Source: Bloomberg

This is clearly a more convincing sign that inflation is on a downward path after November's shutdown-distorted data.

According to JPM's Market Intel team, this is the market reaction matrix, and probability:

• Core MoM prints above 0.45%. SPX loses 1.25% - 2.5%: Probability 5.0%

• Core MoM prints between 0.40% - 0.45%. SPX gains 0.25% to loses 75bps: Probability 32.5%

• Core MoM prints between 0.35% - 0.40%. SPX gains 0.25% to 0.75%: Probability 40.0%

• Core MoM prints between 0.30% - 0.35%. SPX gains 1% - 1.5%: Probability 20.0%

• Core MoM prints below 0.30%. SPX gains 1.25% - 1.75%: Probability 2.5%

Finally, for now, we seem to be avoiding a 1970s redux in Fed policy error helping to re-ignite an inflationary rebound...

Source: Bloomberg

...but time will tell.

Tyler Durden Tue, 01/13/2026 - 08:39

 

 

The transcript from this week’s, MiB: Ben Hunt, co-founder Perscient, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

~~~

 

Bloomberg Audio Studios, podcasts, radio News. This is Masters in business with Barry Riol on Bloomberg Radio

Barry Ritholtz: On the latest Masters in Business podcast. What a fascinating conversation. I sit down with Ben Hunt, he writes Epsilon Theory, but he is also the president and co-founder of Persuent. What a fascinating analytic story they’ve put together. They essentially take feeds of everything that’s published around the world, whether it’s in English or Chinese or Russian. They create these large language models and use artificial intelligence to identify rising narratives. In other words, they’re looking for the things that will become storylines, but haven’t quite hit that yet. I I found this conversation to be absolutely fascinating, and I think you will also, with no further ado, my conversation with Persuent Ben Hunt. Ben Hunt, welcome to Bloomberg.

Ben Hunt: Thanks for having me.

Barry Ritholtz: This is long. time coming

Ben Hunt: I love the intro. I gotta have you at all my events. It’s fantastic.

Barry Ritholtz: That’s right. I’m available for hire. I can introduce you at, at weddings bar Mitzvahs. Wherever you’re giving a toast, I’ll be happy to tee you up. This is long overdue. I’ve followed your work for so long. I’m fascinated by both what you put out in your blog, Epsilon Theory, thank you, and which is now a blog and a newsletter and, and the work you do at persuent. We’re going to get to that stuff, but before we do, I gotta ask PhD from Harvard. You were a tenured political science professor. Was academia the original career plan?

Ben Hunt: You know, it’s interesting, Barry. So I, academia was always a, I’ll call it a, a way station for me. It ended up being

Barry Ritholtz: A 10 year way station?

Ben Hunt: 10 years plus grad school.

Barry Ritholtz: That’s a little more than a way station. I

Ben Hunt: A little more than a waste station. But I bet this will be familiar for a lot of your listeners. I always had an entrepreneurial bug. You know, I started my first company when I was in grad school, started another one when I was, when I was a professor. And as I know, you know, a lot of your listeners, viewers know, it is, it is a bug. It’s not a feature.

Barry Ritholtz: Yes, for sure.

Ben Hunt: You can’t help yourself. And academia is not the place to be an aca,

Barry Ritholtz: So let me ask you a question about that.

Ben Hunt: An academia for sure. So I know why I’ve started a series of companies. I can’t work for other people. Why, why did you have that bug? What, what motivated you to say, I gotta get this out into the world?

Barry Ritholtz: I love playing games and solving problems.  I have a similar issue about working for other people, which fortunately, academia solves that to a large degree. I mean, you, you are working on your own stuff. You follow your own intellectual bliss in a way that I’ve really never rediscovered. The the problem with academia, of course, is, you know, it’s very, very low stakes. That’s why the academic fights are so vicious, because

Ben Hunt: There’s nothing at stake. Right, right. And, and that that is actually true. That’s actually true. And, and so you learn survival techniques and that kind of jungle where nothing is really at stake, at least monetarily, because the, the goal of any sort of academia conference or presentation, like, is to appear smart. Right? It’s not to actually be smart. You’re not actually listening to a presentation to listen to it. What you learn to do is you’re listening to the presentation the whole time. You’re trying to calculate your head. What’s the most devastating question I can ask?

00:04:07 [Speaker Changed] So you’re gonna rock this guy back on his heels with a devastating, a

00:04:11 [Speaker Changed] Devastating question. And boy, that gets old after a while, Barry, I gotta tell you. Yeah. It, it really does. I, I loved the teaching. I loved the, the research. ’cause like I say, nobody tells you what to work on, but the, the church of academia, the, the actual institution of academia, a it’s for the birds, even back when I was doing it. Right. And I think it’s gotten significantly worse.

00:04:40 [Speaker Changed] I can imagine. I can imagine what’s happening with that. So, but the question that this leads me to is, yeah, you’ve had all these jobs within the world of finance. How did your background in academia shape how you view investing? Risk management allocation?

00:04:57 [Speaker Changed] Barry, starting from academia and then getting into our business of investing, I think it was the best thing that could have happened for me for when I got into it, which was kind of later in life, right? Same, same. You know, after I left academia finally to start a software company. And it, after we sold that software company Yeah. A, a a buddy of mine that I think this happens a lot. A buddy of, you know, you have a buddy who’s in the

00:05:29 [Speaker Changed] Business, Hey, you seem to be pretty smart. How would you like to apply this to

00:05:32 [Speaker Changed] This? We’re always, we’re always talking about company X or technology Y why don’t, you know, why don’t you come in? Let’s, let’s give this a try. So that was my path, if you want to call it a path. And what really sold me on it was that markets, it’s the biggest game in the world

00:05:52 [Speaker Changed] For sure.

00:05:54 [Speaker Changed] And like I say, I’m a game player. I love games

00:05:57 [Speaker Changed] And a game theorist. Let’s, let’s, let’s work down that.

00:06:00 [Speaker Changed] Well, I, I don’t like to talk about that because, you know, because the,

00:06:03 [Speaker Changed] The real game theorists get angry.

00:06:05 [Speaker Changed] Yeah. Well, yes. And, and, and I, I understand I am a real one because that was, that was my field for a while. And it’s a real field and it’s a real thing. But it’s been so trivialized when some talking head will come on. Well, let’s look at the game theory of this. Right? And you just want to just, you know, right. Shoot yourself when somebody does this.

00:06:25 [Speaker Changed] So, so the other part of your research, the other part of your academic focus was on narrative theory. And so let’s talk about how did that focus develop? And, and we will talk a little later about what you do today at Persuent with the narrative machine. But what, and

00:06:46 [Speaker Changed] Believe it or not, believe it or not, it all ties together. I,

00:06:48 [Speaker Changed] I doesn’t don’t doubt that for a second. And,

00:06:50 [Speaker Changed] And it’s

00:06:51 [Speaker Changed] What initially led you down that rabbit hole.

00:06:54 [Speaker Changed] When we think about kind of who’s been an influence on you in your, in your life, had a very influential undergrad professor in political science. And then I had a very influential graduate advisor. Again, they don’t call it political science in, up at, up at Harvard. They call it government or something. Right? Something like that. But, but it’s political science. And, and the reason I say they were influential is that they really got me focused on the science side of political science

00:07:30 And that science side. Yes. It’s kind of some of the typical terrible stuff you see in all social sciences, like economics, where, you know, you’ve gotta learn how to deal with structured data. Right. And, and there was, there was a lot to learn. And I, it’s, it’s worth talking about because I see the same mistakes being made over and over again by people in our business who want to try to, well, you know, apply math to data and, and there are some real pitfalls and some, some real intellectual capital I think that you can achieve within academia that you can then bring in and apply to the, the, the investment world. What,

00:08:20 [Speaker Changed] What we’ve certainly seen amongst the quants, a very successful application of math theory to data. The, in fact, some of the best performing hedge funds are quantitatively driven. That’s not where you’re going.

00:08:37 [Speaker Changed] Well, it’s, it’s part of where I’m going. Right? So, so there, there, there’s a transition in all of all of the sciences, honestly, but certainly the, the social sciences where, where, yes, you start with numbers, structured numbers, right. Price over time, you know, things you can calculate and measure as those numbers. But what was clear immediately in politics, and I think has become increasingly clear in the world of investing, is that it’s not just the numbers that you get on your Bloomberg terminal, it’s also the words and the stories and the narratives that are told to us. Politicians have known this forever, right? So the story of politics is the story of people suggesting laws or policies and then having to present it in a way that gets them elected or keeps them in power or whatever that is. So there’s always been a focus, I’ll say more of a focus in political science than in economics with words. Economics is almost seen as a, as a sideline. Right? It, it’s somehow lesser than the numbers. Right. So what, what I was kind of early on was applying the same techniques that we have for understanding, you know, matrices and structured data, but applying it to unstructured data, which, you know, full circle, this is at the heart of all of the generative AI and the, the AI that we have today.

00:10:28 [Speaker Changed] Well, you’re, you’re getting way ahead of me now with generative ai. We’ll circle back to that. Yeah. But, but

00:10:32 [Speaker Changed] It’s all the, the math has not changed. Right. In 35 years since I started working with network math around unstructured data. I mean, we, we didn’t call it natural language processing back then, and we didn’t call it, you know, large language modeling, but that’s exactly what we were doing.

00:10:53 [Speaker Changed] So what was, what was the moment or the catalyst for you to say, Hey, I’m working in all these other areas, but the narratives continue to pop up over and over again on all sorts of different data sets. And I think in the financial markets, I can use a, a novel approach to identifying narratives and anticipate where the market’s going. What, what led to that sort of in insight,

00:11:25 [Speaker Changed] Not the, not the Great Recession, right? But the aftermath,

00:11:30 [Speaker Changed] Meaning the 2010s following the great financial crisis,

00:11:34 [Speaker Changed] Starting in, in, in 2009, and the recovery that we had out of 2009, and in particular when Win Ben Berke and the Federal Reserve move towards a very explicit effort to use their words to impact markets.

00:11:53 [Speaker Changed] So let’s talk a little bit about that. ’cause I have some really specific memories of the low, of the, the runup afterwards, all the noise Yeah. That was going on. Some of the phrases that have come out of that era, like financial repression and other such things are, are just the tip of the narrative iceberg. So, so walk us through your insight. It’s 2009. Yep. The market bottoms really kind of a v bottom and took off from that. What was that, March 9th, March 7th, something like that. Yep. Oh nine. And there was no turning back. What were you seeing? How were you integrating that into a concept of let’s identify narratives in order to anticipate market moves? Well,

00:12:47 [Speaker Changed] So I was co-founded a, a long short fund inside of a, a larger asset manager going back in oh five and oh 5, 0 6, 0 7. We did well, like everyone else did. Well. And then in oh eight we did great.

00:13:08 [Speaker Changed] Really? In oh eight, we did great. Oh eight, I think I wanna say s and p down 37% something. Yeah. We

00:13:12 [Speaker Changed] Were up 20 something net.

00:13:14 [Speaker Changed] Anything in the green, not in the red is

00:13:16 [Speaker Changed] Smith. Yeah. Amazing. And, and now I’ll tell you, and we can come back to this, like, the real question you should ask is that given what we believed, why wasn’t, why weren’t we up 40%? That, that’s actually, that, that’s actually a question you can ask. But

00:13:33 [Speaker Changed] I I’m, I’m gonna say a 47% relative price swing. I, I, I’ll take,

00:13:39 [Speaker Changed] Had a, had a, had a great year in oh eight and, and

00:13:42 [Speaker Changed] Did that continue in oh nine

00:13:45 [Speaker Changed] Flatlined.

00:13:46 [Speaker Changed] Alright.

00:13:47 [Speaker Changed] From oh nine, so from March of oh nine. So we did well in January 1st quarter, February and the first quarter, right. The rest from, from March of oh nine, our returns flatlined. So we never, we never lost money for our clients in our fund. But

00:14:01 [Speaker Changed] You didn’t catch that recovery. That

00:14:03 [Speaker Changed] V did not catch the recovery. Absolutely did not. And the, the recovery was interesting, right? You’re, you’re right. There was a v but there were, there were starts and stops to it. So the, the big move up from the bottom in late March going into April, it’s like, all right, that actually we caught a little bit of that and that that made sense, right? There was a second leg to the rally. Oh, for sure. April, may. And then in June, in June, June to October was a ferocious rally.

00:14:39 [Speaker Changed] Ferocious is the right word, but,

00:14:40 [Speaker Changed] But June in particular was a classic crap rally.

00:14:45 [Speaker Changed] Right. Meaning it was a low

00:14:46 [Speaker Changed] Quality, right. Low quality stuff. Right. The, the end of March going into April rally, it was Right. This makes sense, right? We bottomed fed the June rally. No, no, it was, we didn’t, we didn’t touch any Oh,

00:15:03 [Speaker Changed] That’s a, that’s fascinating. Go back,

00:15:05 [Speaker Changed] Go back and look at it. Right? I, and, and let me tell

00:15:07 [Speaker Changed] You, oh, I don’t, just so you know. Yeah. I, I have a vivid recollection of chatting with Jim Bianco about this, and we were both bullish, but for completely different reasons. To me, anytime US equity markets are cut in half, I’m a buyer and people say 1929, I’m like, great, you gotta go back a century to find the exception that proves the rule. But Jim was early on in the Tina trade, Hey, the Fed has made everything cash, trash bonds are, they’re forcing you into equities, which is what led my post, which everybody stole the line. This is the most hated bull market in history. Yeah, yeah. And I, I wrote that up. I send that out and I heard everybody borrow that. But I’m curious as to where the June rally took you. Well,

00:15:55 [Speaker Changed] This, and this is where I’m going about the role of forward guidance in Jim Bianco’s point about, because what the Fed did wasn’t just it’s policies around interest rates, you know, they took them to zero. And that’s where we stayed,

00:16:16 [Speaker Changed] Started buying mortgage backs and they did

00:16:19 [Speaker Changed] Qe, balance, balance sheet operations. Right, right.

00:16:22 [Speaker Changed] Quantitative easing,

00:16:23 [Speaker Changed] Actual, you know, actually, and I look, I, I think QE one, I think it saved the world. This

00:16:28 [Speaker Changed] Is what, right. And what was that? A trillion dollars something crazy.

00:16:31 [Speaker Changed] Something. Yeah, something something.

00:16:32 [Speaker Changed] 800 billion, something

00:16:33 [Speaker Changed] Something like 800 billion

00:16:34 [Speaker Changed] Unthinkable number.

00:16:35 [Speaker Changed] So I, I think that, so those were specific actions took, but, but even if you, people often say things when they’re leaving office. So, so Bernanke’s last speech is valedictory address.

00:16:48 [Speaker Changed] Right. More honest than intended.

00:16:51 [Speaker Changed] Much more so, and you see this all the time, right? George Washington leaving office.

00:16:55 [Speaker Changed] I was gonna say, I,

00:16:55 [Speaker Changed] I, I, Eisenhower Yeah.

00:16:57 [Speaker Changed] That’s a big,

00:16:57 [Speaker Changed] I mean, when, when, when, when freaking Eisenhower warns you against the defense industrial complex. You know, you might, you might. I’m just saying. No, I won’t listen.

00:17:06 [Speaker Changed] It’s general like to you. That’s

00:17:08 [Speaker Changed] Right. General, like to me, what Bernanke said when he is leaving his terms of office, he said, look, we had, we had two toolkits. One was traditional stuff, interest rates down to zero. At the time we didn’t know we could have negative interest rates. So, you know, that’s where we were. Right. Second were the balance sheet operations, large scale asset purchases, qe, quantitative easing. It said, you know, QE one was great. Did what we hoped it would do. QE two, eh, operation Twist, QE three, this is Bernanke saying, mind you. Yep. He says, I actually think that might have been a little counterproductive,

00:17:47 [Speaker Changed] Huh?

00:17:49 [Speaker Changed] They said, but we had another toolkit, and that was our communication policy. That was forward guidance, that we started using our words not to communicate to the market what we actually felt. We started using our words and coordinating our words to change the market, to change market behavior. This is what I mean about making a conscious effort to tell a story. And it, it’s not that it was necessarily lying, but they, they were using their words and choosing their words for effect

00:18:28 [Speaker Changed] To shape perception of their underlying

00:18:31 [Speaker Changed] Behavior to market, to, to shape market behavior. And he said, that worked better than we had any hope that it could. And that’s where we are now.

00:18:42 [Speaker Changed] So, so for the youngins listening, I have to point out, and you and I are old enough to remember back in the days where there were no minutes released there, there wasn’t an announcement, forget a press conference. You had to be watching the bond market to figure out what the Fed just did. Like today, there’s, we’re holding the, having this conversation. There was a fed the October meeting, a quarter point rate, cut a conversation about all sorts of stuff. I really didn’t pay a lot of attention to it. Yeah. Lack of clarity, no data, blah, blah, blah.

00:19:20 [Speaker Changed] Worse than that, Greenspan would be intentionally vague and obtuse.

00:19:25 [Speaker Changed] If you understood with you’re saying what I said then, then you misunders you misinterpreted it. Right? Exactly.

00:19:30 [Speaker Changed] Right.

00:19:30 [Speaker Changed] If you think you understand what I’m saying,

00:19:33 [Speaker Changed] You know, who led the committee to make all that change? Janet Yellen, she was vice chair. Yep.

00:19:39 [Speaker Changed] Back, back in, during the financial crisis. Yeah.

00:19:41 [Speaker Changed] So this was, it was a concerted effort. Bernanke Yellen to this is when they also started going, putting all the Fed Governors on a common calendar.

00:19:52 [Speaker Changed] Right?

00:19:53 [Speaker Changed] Follow all the, and assigning the fact, okay, you’re gonna speak this day, you’re gonna speak that day. That’s when all this started. It was an intentional effort. And again, this is something that politicians have known forever, right? Politicians craft the message and use their words. So I, I knew the, the tools to try to understand this, but what I wasn’t prepared for was how, and neither was Bernanke, was how powerful this would become to the point where today it’s not just central bankers using their words as their main policy toolkit, but it’s every CEO it’s every CEO Now, I mean, you go on this network or one of the other networks, and what makes for a good CEO is can you tell the story? Can you tell the narrative of your company to get a multiple, right? Because, because a multiple is a narrative. A multiple is a story.

00:20:52 [Speaker Changed] They’re

00:20:52 [Speaker Changed] All stories. Well look at,

00:20:53 [Speaker Changed] Look at some of the most successful CEOs throughout history. I would throw Jack Welch into that pile. ’cause he was a fabulous, fabulous. Yeah, he was a fabulous, fabulous. ’cause the stories he told were great, right? Up until the point where we found out that he was running a, a, a hedge fund with GE Capital, and they magically always beat by a penny.

00:21:17 [Speaker Changed] So I remember vividly when GE was coming to our shop, what they wanted was a fin a financial multiple, right? So they were making, they, they wanted,

00:21:33 [Speaker Changed] Even though they’re an old world industrial,

00:21:35 [Speaker Changed] Even though they’re an industrial, this, that this was, they wanted to tell a story that they should be seen as and get the multiple of a financial, that’s what GE was all about in those years leading up to the, the, the GFC. So a, my, my poster child for this is, is Mark Benioff Salesforce, because he’s pri you often see this with people who come out of sales like, like Mark did, right? But

00:22:08 [Speaker Changed] The way it’s all about storytelling.

00:22:10 [Speaker Changed] It’s all about storytelling. And

00:22:13 [Speaker Changed] What isn’t that true for go through the great, see, look, Steve Jobs, Reed Hastings, Larry Ellison at Oracle to some degree, Steve Ballmer at Microsoft, who wasn’t a great CEO, but he was a great cheerleader story, and a great storyteller, great

00:22:32 [Speaker Changed] Storyteller. What all of those companies have in common is that they’re great storytellers, and those are trillion dollar companies today. Right. What I would say to you is that you don’t remember or hear about the companies that did not have CEOs who are great storytellers.

00:22:51 [Speaker Changed] Well, Ken Lay was a great storyteller until you found out that it was all nonsense. And you could say the same thing about folks like Bernie Madoff.

00:23:00 [Speaker Changed] There are a lot of stories that get told that are not true. Right? What, and and I think even today, people think of this word narrative. They have a pejorative sense to it. It’s like,

00:23:15 [Speaker Changed] Oh, really? Really? That’s interesting. I didn’t think of it that

00:23:17 [Speaker Changed] Way. Oh, for, for, for, for for sure. That’s just your narrative, man. You know, the Big Lebowski, you know, that’s, that’s the, and it’s not that a story is a lie. It’s that the story is constructed for effect. It’s, it’s not, and it’s presented to you as if this is my true and inner thoughts, but the construction of the, the intentionality behind these stories, phenomenal. Benioff, for example, you know, created the metrics by which he wanted Salesforce to be judged. Not metrics of profitability, but metrics of what he called proforma, net revenue growth, whatever the hell that means. Right? Right. And because if you can construct the story, you can construct it in a way that, yes, I can beat and raise pretty much every quarter. So there was, there were three, I think, big changes that happened to make the role of narrative overwhelming as it is today. Whereas before, it’s always been there. To your point, it’s always been there today, it’s overwhelming. And, and I think it’s, it’s not just the success that first central bankers and then CEOs. I mean, wall Street’s the greatest copying machine. We Wall Street copies what works. Sure. So when you see that something’s working, oh, they’re, they’re getting a multiple by telling the story and going on Kramer, you know, four times a

00:24:50 [Speaker Changed] Year. It’s endless. It’s endless iteration. You’re just constantly tweaking it, doing works. And if it works, do more of it. And if it doesn’t, toss it out. So

00:24:58 [Speaker Changed] It was the, the fact that it works to tell a story and people got good at telling stories. It’s the growth of 24 7. I’m gonna use air quotes here and I’m glad we’re taping this news. Well,

00:25:11 [Speaker Changed] It’s media, social media news right

00:25:13 [Speaker Changed] Now.

00:25:14 [Speaker Changed] News, like news light.

00:25:16 [Speaker Changed] That wasn’t the case.

00:25:18 [Speaker Changed] So I wanna I wanna annotate what you said slightly. Okay. Because I think CEOs have always been storytellers, but they were storytellers to their boards, to their employees, to their shareholders. Correct. They always, the, you’re hitting now on the modern world of 24 7. Media telling a story in a boardroom is very different than sitting in a TV studio and talking about, Hey, here’s why our new chip is gonna catch up to Nvidia. Yep. And it’s the greatest thing ever. Yep. That’s a different skillset. It

00:25:52 [Speaker Changed] It changes the time horizon. It is a very different skillset because you’re not telling the story of, oh, I’m getting another, you know, turn of leverage in our operations, or, you know, our capacity utilization in this factory went up by 5%. Which are the kind of stories you would tell even on earnings call or certainly to a board. Now, this is the story where got a

00:26:16 [Speaker Changed] Gotta gotta

00:26:17 [Speaker Changed] A little bit. You, you’re, you’ve got a segment, you’re going on, Kramer, you got four you minutes and say bye bye bye. You got at most four minutes. Right? Right. How are you gonna tell that story that sings to that audience? Enormous change, change, structural change in our media, both quote unquote news media, but also financial news media. The Wall Street Journal today is a 24 7 news, financial news organization. Right.

00:26:47 [Speaker Changed] What, what isn’t It’s printed New York Times, Bloomberg, the Washington Post. Exactly. They all have websites that get updated around the clock.

00:26:54 [Speaker Changed] And here’s the thing, there’s not enough hard news to fill the time or to fill the space. So what takes the space opinion

00:27:04 [Speaker Changed] Story you were channeling

00:27:05 [Speaker Changed] Story takes the place of

00:27:06 [Speaker Changed] The hard, you were channeling Michael Creon from 25 years ago. Most of what you see in the media is speculation, opinion, and theory, not news. I,

00:27:18 [Speaker Changed] I’ve written so much about Creighton and his

00:27:21 [Speaker Changed] I know. That’s why I threw that back to

00:27:22 [Speaker Changed] You. He says he, he was, he was so far ahead

00:27:25 [Speaker Changed] This quarter century ahead of what, of what took place.

00:27:28 [Speaker Changed] And there’s a third piece though,

00:27:31 [Speaker Changed] Give us the third piece before we go to our next segment. Third

00:27:34 [Speaker Changed] Piece has changed. Everything is our smartphones

00:27:37 [Speaker Changed] That you walking around with. Right? Not only a studio, but a, a a a, a dopamine device that you’re constantly playing.

00:27:46 [Speaker Changed] It’s my dopamine machine, right. And I, we do it to ourselves. It’s not that someone forces us to hear these stories over and over again. We do it to ourselves. I mean, I get a little nervous if I, you know, pat, where’s my phone? Where’s my phone? That’s right. That’s right. I, I get a little nervous. And it’s a, it’s, it is absolutely a neurotransmitter addiction. I think it’s so important to keep that from our kids. That’s a whole nother thing.

00:28:17 [Speaker Changed] There’s a whole depression situation with teenagers today, and it all traces back to the phone and social media.

00:28:22 [Speaker Changed] These are three, I think, real secular changes we’ve had. Markets become this political utility, the success of constructing a story, structural changes in social media, and the devices that we insist on caring with our ourselves all the time,

00:28:46 [Speaker Changed] Huh. Absolutely Fascinating. Coming up, we continue our conversation with Ben Hunt, president and co-founder of Perent, explaining how he’s using AI to identify narratives in real time. I’m Barry Ltz. You’re listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My special guest this week is Ben Hunt. He is a academic fund manager, risk manager, entrepreneur, tech startup person. He is currently co-founder and president at persent, which applies AI tools to map and measure market narratives in real time. It’s really more than market mar narratives. It’s politics, it’s economics, it’s markets. You cover a whole lot of stuff. A

00:29:51 [Speaker Changed] Hundred percent. So what we’re able to do today, and this is the crazy change in the world back from when I was doing this on microfiche back in

00:30:02 [Speaker Changed] The

00:30:02 [Speaker Changed] 1980s. Yeah, exactly. We get, we have access to everything that’s published publicly in the world. And there are a couple of big data aggregators, Dow Jones, one LexiNexis another, everything that gets published in the world, all these languages, it’s available to you. And it’s, it’s not cheap, but it’s not crazy expensive like it used to be. And it’s always getting cheaper. So we’re able to take everything in the world that gets published, all the newspapers, all the websites, all the transcripts, everything that’s published publicly, we can pull in and then we can process it, process it with really, it’s the same math that I was using 30 years ago. Nobody’s invented cold fusion here,

00:30:55 [Speaker Changed] But the software tools are faster, stronger, better,

00:30:59 [Speaker Changed] And infinite. So the, the, the calculations here are not particularly complicated, but you have to do them at enormous scale.

00:31:08 [Speaker Changed] It’s, it’s a ton of volume. So,

00:31:10 [Speaker Changed] I mean, it’s crazy. The, the, just the, the scale of

00:31:15 [Speaker Changed] The numbers. Petabytes, terabytes just crazy.

00:31:17 [Speaker Changed] I mean, yeah. In the last couple of months we’ve processed over 200 billion tokens. Billion,

00:31:25 [Speaker Changed] Right. And a token is how much

00:31:26 [Speaker Changed] A, a token is like a word or a phrase. Okay. And so that’s the kind of the unit that you talk about when you’re putting through, when you’re putting something through a linguistic calculator. So 200, which is, which is what all of the, the

00:31:41 [Speaker Changed] LLMs,

00:31:41 [Speaker Changed] All the LLMs are, they’re linguistic calculators. And so, you know, we’ve processed, you know, several hundred billion tokens. Again, it’s not complex, but it is at scale. And what, what we’re doing with that is we’re reading the world’s news to understand the world’s stories and narratives. And you’re right, it’s, it’s much bigger than, or it’s much more focused that we have much higher resolution than just saying, oh, I’m bullish on financials. I mean, that’s a, that’s a narrative. Sure. Right.

00:32:20 [Speaker Changed] But

00:32:21 [Speaker Changed] There are 20 different variations of that. You’re, you’re bullish on financials. Why?

00:32:27 [Speaker Changed] So wait, let me, let me, you,

00:32:28 [Speaker Changed] And we can track all those, we can track all those stories and how they wax and wane over time. That’s really cool. So

00:32:32 [Speaker Changed] Let, really cool me roll back to, I want you to explain what Perent is. Who are the clients? I don’t mean names, but No, sorry. What type of of clients do you have and, and what do they do with Persian’s output?

00:32:47 [Speaker Changed] So we started Persent in 2018. My partner from, we were at a, a asset manager spun out there to take the, the technology that I’ve been working on for years and, and really been writing about with Epsilon theory. So we started that in 2018 to do the, the basic research into processing enormous amounts of financial news data and to track the stories and how they rise and fall and wax and wane over time. Is that, that was, that was the story. That was the

00:33:25 [Speaker Changed] Goal. So I, I love that description because there are a lot of trades going on where the storyline changes on a regular basis. Probably the Mac daddy of that is crypto first. It’s, Hey, you know, there’s fiat currency, this is outside of the system, it’s defi, then it’s a hedge for deflation, then it’s a hedge for inflation. Now it’s scarcity and,

00:33:51 [Speaker Changed] And digital gold. Right? Digital

00:33:53 [Speaker Changed] Gold.

00:33:53 [Speaker Changed] It’s, it’s, there are no fundamentals, right? With, with, with crypto. And I people will say there are, but there aren’t. Right? It’s, it’s driven by the waxing and waning of stories. And do, do they find purchase? Do they or do they kind of, people get tired of them?

00:34:11 [Speaker Changed] Well, they got tired of the defi story. And then once JP Morgan and BlackRock started creating, like, the Ibit is the fastest ETF to a hundred billion dollars. And so the old story of Defi is gone. And the new story is, oh no, this is an asset class at Wall Street’s embracing. That’s why you have to own it.

00:34:32 [Speaker Changed] That story, that story was, and very, that was a very similar story by the way, or a transition story from physical gold to GLD when that ETF came out. Right. Which was a very similar pattern because once it became a Wall Street, a, a table at the Wall Street Casino, right? Then it takes on a different meaning specifically around gold. Gold changed from being, okay, something that you bury in your backyard or you’re having your vault, you know, along with ammo and seeds for when the, the, the hard times come

00:35:11 [Speaker Changed] Bottled water, right? Bottled meals ready to eat, right, gold and lead. It

00:35:15 [Speaker Changed] Becomes a security. And its meaning changes from that, you know, apocalyptic bottled water. Right? And the meaning of gold today is as an insurance policy, a security against central bank error or government error. That’s the meaning of gold today.

00:35:35 [Speaker Changed] And is that the dominant narrative that you’re identifying as gold rallied over through 4,000? Ab

00:35:41 [Speaker Changed] Ab Absolutely. So, I mean, we’ve really been able to track that one in

00:35:46 [Speaker Changed] Specifically. So, so here’s the really big, here’s the million dollar or trillion dollar question. How do you identify a narrative and say, oh, gold is gonna double from here based on this narrative? Or, or are we not there yet?

00:36:00 [Speaker Changed] No, you, you identify the narratives. ’cause the narrative, the stories don’t ever change, right? So the, the story that leave gold aside for a while, think about you we’re talking about your bullish on company X, Y, Z because there are about, I don’t know, depending on how, again, how finely you want to resolve that. There are only about a dozen stories for why you’re bullish on something, right? They can be management change, top line growth, opportunity consolidation in the industry,

00:36:35 [Speaker Changed] Upcoming catalyst,

00:36:36 [Speaker Changed] Catalyst. So, so every catalyst story, new

00:36:38 [Speaker Changed] Products, new product, FDA’s gonna prove the new mo, new drug, new molecule.

00:36:43 [Speaker Changed] So that story, you just change the name. That’s the same story that’s repeated over and over again about any pharma or, or, or biotech company. The stories, we think that they’re amorphous and variable. The fact is that the, the core of the story, what we call the semantic signature, the meaning of a story, they’re amazingly constant over time. So what we’re looking for is for, and it’s, it could be dormant for a long time, but what you want to know is when that story starts picking up again, when someone starts playing that story, when it appears on Kramer and starts happening in the financial press, that’s the stuff we can pick up with real precision. So it’s both the stories that are starting to fade,

00:37:41 [Speaker Changed] But,

00:37:42 [Speaker Changed] But the, I think the really interesting stories are the stories that have been dormant for a long time and they start picking up again,

00:37:48 [Speaker Changed] You, you are reminding me of Campbell’s hero’s journey, that there’s only so many

00:37:54 [Speaker Changed] My hero, right? There are only so many stories Right. In the, in, in the world. And that, that’s a now I like to talk about in Hollywood, famously there are only like five scripts.

00:38:08 [Speaker Changed] That’s right. Right?

00:38:10 [Speaker Changed] Tolstoy is supposedly Tolstoy. He said there were only two stories that a man goes on a journey or a stranger comes to town. Those are the only two stories in the world. And

00:38:20 [Speaker Changed] Not quite, but he’s, he’s

00:38:21 [Speaker Changed] Not quite but you on, he’s pretty close. You’re on the right track.

00:38:23 [Speaker Changed] Right? Right. The

00:38:24 [Speaker Changed] The point is, there’s a finite number of stories, right? You can drill down. So you can get a couple of dozen about any sector you want to talk about or like, but it’s, it’s a finite number. And so what we do, and what I think is really interesting is to track that finite number of stories. And you’re right, it’s not just around markets. We track several thousand of these stories today.

00:38:50 [Speaker Changed] How so? Let’s, let’s delve into that. Yeah. So, so how do you, you have this massive database you’re sucking in every news feed. Yep. Everything magazine, newspaper, everything. Anything that you could quantify and, and run into a linguistics model. What’s the process for analyzing this? How to use artificial intelligence to, to go through this, and how do you make sense out of that heap of how do you find signal amidst all that noise?

00:39:23 [Speaker Changed] The crucial thing is you can’t just ask AI an open-ended question. Say, what are the narratives in Right? This comp for this company or for this sector? Don’t do that. Right? And this is a mistake that people make all the time. They ask open-ended questions of chat, GPT or or or whoever. The problem is chat, GPT will give you an answer.

00:39:45 [Speaker Changed] Just not a good one.

00:39:47 [Speaker Changed] Not a good one. It’ll hallucinate a lot. Yeah. Right. It’ll go out, it’ll find its own data. The, the secret to to using AI successfully is to take this magic genie because it’s a magic genie and you stuff it into that bottle, right? You do not let it out. You constrain it dramatically. You don’t let it go out and find data. You give it the data crucial thing. You don’t allow it to think. You tell it how to think. So the, the most important step that we do is we don’t ask ai what are the narratives that you look at? We tell it this is human direction. You have to have human control.

00:40:31 [Speaker Changed] So I’m hearing dataset is controlled by you as well as the thinking prompts. The seman.

00:40:39 [Speaker Changed] Yes. And it’s more than prompt, right? So the, it it, it includes prompt. But the, the phrase that’s used in this world is called not prompt engineering, but context engineering.

00:40:53 [Speaker Changed] Okay. That makes sense.

00:40:54 [Speaker Changed] So you want to, you want to control everything around the ai because you want to limit it to being that linguistic calculator. You want it to be your operating system. That’s really the way, the thing. And, and if you do that, then it will give you the same answer twice for the same inputs and the same question. That’s the crucial thing. So it’s

00:41:18 [Speaker Changed] Consistent

00:41:18 [Speaker Changed] For this to be true for, for it to be consistent, for it to be real signal. So this is a human directed process. You can’t ask AI an open-ended question. You have to control all the inputs. You have to control the output, meaning you judge it, you run it back through a different AI system to say, how’d they do? Did they go off the rails here? But the most important thing is you have to give it the scaffolding. You have to give it the, the skeleton. You have to tell it. These are the thoughts you are allowed to think about. You know what, and those are the, those are the, the signatures.

00:41:53 [Speaker Changed] I, I’ve kind of learned, I have to avoid asking questions that have a, a, a human emotional subtext. Like, tell me what was most surprising about this? Doesn’t know what a surprise is. Tell me what was most interesting about this. It does, it’s not able to do that. You really have to treat it like it’s a dumb machine.

00:42:18 [Speaker Changed] Well, that’s right. This is why, I mean, you treat it, you, you need to treat it as an operating system. You need to constrain every bit about it, particularly in how you allow it to think because it wants to please you so badly, right? It does. So if you ask it, what’s interesting, it will look back at its history of communication with you, and it’ll think, what will Barry find interesting? And it will give that answer to you. And if it can’t find it easily, it’ll make it up. It’ll make up an answer that you will find interesting.

00:42:48 [Speaker Changed] I, I find when I, I, I try and prompt, Hey, tell me about Ben Hunt’s background and gimme the timeline of his career that it’s good at. Hey, what was Ben Hunt really good at? It has, has got no idea.

00:43:04 [Speaker Changed] So what, what you’re able to do, if you’re able to, again, put the genie in the bottle, tell it how to think about a problem, is you’re able to identify, and this does go back to the work from 35 years ago, the type of stories we tell that we humans tell the, the about stocks or politics. We tell two types of stories. We tell descriptive stories. Oh, the, you know, the fed cut rates by 25 basis points today. A descriptive story. But, and we can also tell the description of the, you know,

00:43:45 [Speaker Changed] It’s the because clause, because we’re seeing slowing increasing layoffs and slowing consumer terms.

00:43:53 [Speaker Changed] And, and that’s high resolution and dec and, and very descriptive, right? The, the Powell was surprisingly hawkish today. And he was, that’s a description. There’s another type of story we tell Barry. And that’s prescriptive,

00:44:13 [Speaker Changed] Meaning,

00:44:13 [Speaker Changed] Meaning the Fed should be hawkish. The Fed should cut by 25 basis points. Those are the stories that are indicative of an effort being made to move public opinion in a certain direction.

00:44:33 That’s like the forward guidance that the Fed still does, right? Using their words for effect. They’re using words to nudge you and how you should think about the world, how to think about the world. So the crucial thing when we’re doing these, when we’re asking the AI to here’s, here’s all the text in the world, here are the stories that we want you to identify. We can also boil that down into identify the stories that are trying to tell the reader how they should think or how policy should go that we find has a lot of predictive capability to it.

00:45:18 [Speaker Changed] So you are in the business of analyzing the world’s narratives every day. How is that even possible? It seems like that is an impossible

00:45:29 [Speaker Changed] Test. That’s seem crazy.

00:45:30 [Speaker Changed] Crazy, right?

00:45:31 [Speaker Changed] And, and, and it used to be, it used to be crazy. I, I mean, Barry, I I really do remember my, in the academic days, I would literally hire grad students and give them a cup of dimes. So they go down to the microfiche machine.

00:45:46 [Speaker Changed] I remember those machines in the library. You

00:45:47 [Speaker Changed] Remember those

00:45:48 [Speaker Changed] Machines? Yes.

00:45:48 [Speaker Changed] Yes. You remember those machines? I would code, hand code the, or hand record the coded data. I would type it into remote access for a digital equipment mini frame. And the next day, you know, something would churn out for me. Right? Today it’s, I say we are, we’re processing hundreds of billions of tokens. We get millions of documents overnight like that.

00:46:16 [Speaker Changed] Is there there

00:46:17 [Speaker Changed] Any, is there infinite computing resources available to us? I,

00:46:20 [Speaker Changed] Is there anything you can’t access that you wish you had access to any data source?

00:46:28 [Speaker Changed] So one of the things that’s happened on Wall Street is that the banks and the sell side have become very jealous of their publications because they tend to think in their wrong that they’re good at it. Right? They’re that they’re good at analysis. I personally don’t think they are. Well,

00:46:49 [Speaker Changed] Let, let’s just say some are better than others. Some

00:46:52 [Speaker Changed] Are better than others, but, but none of ’em are really, if if they were, if there was, I’ll call it kind of significant alpha there, they wouldn’t be a bank.

00:47:04 [Speaker Changed] They’d be a hedge fund.

00:47:05 [Speaker Changed] Yeah. They wouldn’t be a ba on the, on the sell side. Now, so I’m interested in reading the sell side research, not because I think there’s some nugget of truth in there, but because I wanna see what they’re all talking about,

00:47:17 [Speaker Changed] Right? It’s reflective of, if not a consensus. Yeah. Certainly a a popular set of ideas.

00:47:24 [Speaker Changed] And, and this is a crucial thing to talk about what we do. I I don’t know what the truth is, right? I have

00:47:31 [Speaker Changed] No idea. Does it matter?

00:47:32 [Speaker Changed] And I don’t think it matters. I I want to provide this information to people who do have a view on the truth. Let’s say you’re a, you’re a value investor, right? You’re running a fund, you’ve got your views, you’ve done a, your homework, you’ve done your research,

00:47:47 [Speaker Changed] You’ve got a good back test. Yeah.

00:47:49 [Speaker Changed] You, yeah, yeah. You’ve got, so I’d say I’ve got, here are the companies where I think I’ve identified something special, something that’s valuable that the market does not recognize. And so I wanna buy it, and then I’m just gonna wait. I gotta wait until one day the market realizes the market comes to their senses and says, oh, wow, that should trade at a higher multiple or a higher price. Because that special thing that you saw, that source of value, the rest of the world comes to see that. Well, what I can think I can show you is when the rest of the world starts to wake up to whatever it is you’re looking for.

00:48:31 [Speaker Changed] So you’re catching the early lift off the bottom. That’s the

00:48:35 [Speaker Changed] Goal. I see. When the, when, when a value investment only works, when the market recognizes it. And we are tracking when something like that gets discovered by the market.

00:48:46 [Speaker Changed] So before Nvidia is 5 trillion, when it, when it starts ramping up to 500 billion, hey, something’s going on here.

00:48:57 [Speaker Changed] What I have found in my experience as an investor is that you make the most money on a trade during what I call the discovery phase of a trade. When the rest of the world wakes up to something that you had noticed and identified before, that’s when the money is made. Once it gets out there,

00:49:19 [Speaker Changed] Then it’s reflect then the, the market be ev is eventually efficient.

00:49:23 [Speaker Changed] It’s a different, it is a different risk and reward profile. Let me, let me put it that way. Fair. You, you, you get, you get a lot more ups and downs post that discovery phase than you do when you’re enjoying the discovery phase. It’s a lot harder. Once you have the, now you may say, oh, but there’s gonna be this other catalyst. And then say, well,

00:49:45 [Speaker Changed] But that, that discovery phase is, I’m gonna quote Doug, Cass, that’s the, there’s a phrase he uses it, it’s like a, a contrarian perspective. A variant perspective where a perspective, you have some insight that is not widely held. Right. And the market being mostly kind of sorta of eventually efficient if there’s a truth or at least a good story in your variant perspective, all

00:50:15 [Speaker Changed] It is a story, right? All it takes is a story. It’s

00:50:17 [Speaker Changed] Gotta be a good story though. Yeah.

00:50:19 [Speaker Changed] It’s gotta be a, well, I’ll call it, it’s gotta be a compelling story, right? Right. And that’s, that’s why you are looking for a CEO who can tell that compelling story. You’re looking for the ability to tell a compelling story, because that is what gives you a multiple. So let me multiple is story.

00:50:37 [Speaker Changed] So let me ask you a few more questions on, on Perent before we go into a few other areas. Sure. So first, you, you’ve been doing this for seven years. What are you doing today? That was unimaginable 4, 5, 6, 7 years ago.

00:50:54 [Speaker Changed] I, I tell you something that was unimaginable really two years ago. That’s amazing. And that is the ai. So what we were doing in our early days, we were basically doing small language models. We were making the language models essentially by hand. And, you know, we did our first models and our first versions of this, and we licensed it to some big banks. And here’s the problem, Barry. We, we had constructed a net and it was a pretty good net. I mean, when we would dip it into a data stream, we’d catch a fish meaning a signal. And the signal, oh, that, that signal works. You know, good, good. Hit on the, the signal that we put up. The problem was we were missing too many damn fish, right? Our, our net was too small. And we’d say, oh, we got this one. And then we’d look back at whatever it was.

00:51:46 We were designing the model. So we say, well, how did we miss all these other fish? And the answer was the small language model we were constructing. It’s incredibly complex if you are building these models without the probabilistic approach that modern LLMs allow you to take, right? So this is the whole notion of embedding. So that there are a million ways to say I’m bullish about the management change at company X, Y, Z. There are a million ways you can say that. And if you’re in the business as we were of kind of handcrafting, let’s write down all the ways you can say that. Oh, really? You miss a lot. Yeah. You’ve made a small net and what you’re trying to, to, to,

00:52:33 [Speaker Changed] And a and a small data set, and it’s

00:52:35 [Speaker Changed] A pretty small data set. So we, we rebuilt all of our software, again, using AI as an operating system context, engineering control, how you dole out the text data, how you test it, how you allow it to think. And we thought, all right, you know what? We’re building a bigger net. I bet we see five, maybe even six x improvement in our signal

00:53:05 [Speaker Changed] Catching. And what did you end up with over

00:53:06 [Speaker Changed] A hundred x?

00:53:07 [Speaker Changed] That’s unbelievable.

00:53:08 [Speaker Changed] Over a hundred x, it’s over. And now it’s, we’ve had a multiple of that. Again, it’s, it’s, it is hard to describe in, in the, in the, the expansion of the net is in so many different directions. Everything we were doing before was just English language,

00:53:23 [Speaker Changed] Right? So now you’re global and how many languages are you pulling into the,

00:53:29 [Speaker Changed] Anything, anything that an AI has been trained on, we read it and we can say we can,

00:53:35 [Speaker Changed] Is that 40 languages? Is that like how many languages? Well, there

00:53:38 [Speaker Changed] Are only a, you know, there are about a dozen languages that are useful in markets. So

00:53:43 [Speaker Changed] It’ll be Japanese, Chinese, a variety of European languages. So

00:53:47 [Speaker Changed] We can, we can

00:53:48 [Speaker Changed] Tell Indian,

00:53:49 [Speaker Changed] Here’s the, here’s a story here. The story about Chinese domestic markets. There’s a western story, western narrative,

00:53:57 [Speaker Changed] And there’s a domestic Chinese story. And the domestic

00:53:59 [Speaker Changed] Chinese story,

00:54:00 [Speaker Changed] Which is very different.

00:54:01 [Speaker Changed] Often it’s very different. So we were able, for example, picking up, we were able to pick up way before it, it, it got picked up in Western press. The demand for luxury goods in China went off a cliff.

00:54:19 [Speaker Changed] Cliff, yeah.

00:54:21 [Speaker Changed] In last November.

00:54:23 [Speaker Changed] Listen, you can’t go from a double digit GDP to like, low to mid single digits and not have it affect, especially in a country like that. Well,

00:54:31 [Speaker Changed] And, and, but, but it’s interesting, right? Because, because they’ve had, you know, ups and downs on business cycle before, but this is the first time where you saw consumer behavior that really was kind of similar to what you might find in a Western consumer behavior point being you didn’t hear that from LVMH or the Macau gaming guys until February. And we were picking that up in, in, in November from the domestic Chinese media.

00:54:58 [Speaker Changed] So, so that raises a, a really interesting question. You know, at the end of the day, clients want to be able to make money on your research. How are people putting this to work? How, how does what you are building help your clients generate alpha?

00:55:15 [Speaker Changed] What we think we’ve discovered is an entirely new source of data. And what we’re confident is that we’ve built the systems that are very different from what you see with this sort of analytics that are out there from anyone else. Right? So this is not sentiment, right? We’re not tracking or using mean words or nice words. By

00:55:37 [Speaker Changed] The way, that was a big thing, I dunno, was that 10 years ago we’re s we’re scanning Twitter to identify investor sentiment. Oh

00:55:44 [Speaker Changed] My god. I mean I, but I was just looking today and not to pick on Bloomberg, but you know, it was their live coverage of the Fed statement, right? Were at those meeting, they were analyzing the sentences and the fed statement for hawkish and dovish sentiment,

00:56:02 [Speaker Changed] How it changed from the last meeting. And,

00:56:05 [Speaker Changed] And

00:56:05 [Speaker Changed] So, so so you’re saying there’s not a whole lot of signal there.

00:56:08 [Speaker Changed] Hmm. I wanna be careful with what I say, right? Which is that there are a number of, I’ll call ’em high frequency stat arb guys, where if it’s important for you to note the difference in word choice on a millisecond level, I think there, I think you can get something outta that. I do. And so there are firms that can do that very well. That’s not our game, right? This is not the, what we’re trying to, to identify is not just sentiment, not just word choice. This is not Google trends and how many times did they mention AI in the earnings report, right? There’s, we’re able to track the actual stories that drive behavior.

00:56:54 [Speaker Changed] So that, that’s the next question. And, and I’m gonna give Dave not a credit for asking this. Does every narrative turn into a decision? How do you know when something is merely noisy versus where there’s a, a significant tradable signal?

00:57:14 [Speaker Changed] I don’t. Right. So this is, my goal is not to, oh, you know, do the trades. My goal is Mr. Hedge fund guy, Mr. Asset, allocator, you’ve got a, you know China, right? You know your companies, you know your commodities. Here is data that I think you’ll find useful. The efficacy of it though is up to you. I don’t know what you would, what, what you wanna do with it. I want to sell the picks and shovels honestly for this vast new data set that we all know is important. But we haven’t been able to measure it in a very predictive way before.

00:57:59 [Speaker Changed] So let’s talk about a few things related to that. Can I say one more

00:58:02 [Speaker Changed] Thing? Sure. And it’s not just about using this for investment. So we have a product for financial advisors, right? Which is your clients coming in, you’ve got a portfolio. You need to be able to say, what, what is, what is my client? What, what are they worried about? What are they nervous about? What are they hopeful for? What are the stories they’re reading?

00:58:26 [Speaker Changed] And you are pulling this out of the flow of media and

00:58:29 [Speaker Changed] We can tell you exactly for of, for the portfolio you’ve got for that client, here’s what they’re gonna be asking about, worried about. And here are the answers you can give them to show this is when has happened before, when this story has come up. Stay the course, it’s gonna be fine. This is the sort of stuff we can do for financial advisors. Huh.

00:58:46 [Speaker Changed] That’s really interesting. I would, I would love to see some of that. It’s not just

00:58:49 [Speaker Changed] In markets. Barry, I gotta tell you, the

00:58:53 [Speaker Changed] Policy makers, corporate executives, bankers,

00:58:56 [Speaker Changed] Policy. So we did a, you know, we did before in the run up to the Russian invasion of Ukraine and we published this on Epsilon Theory. And this is my old academic work, right? The book Getting to War before a country starts a war, they mobilize public opinion, right? And so we were looking at domestic Russian media looking at and saying, friends, this isn’t gonna li be a limited thing.

00:59:22 [Speaker Changed] This is happening.

00:59:23 [Speaker Changed] This is happening. It’s gonna be a full scale invasion. Because that was the messaging in domestic Russian media to the Russian people.

00:59:31 [Speaker Changed] Wow.

00:59:32 [Speaker Changed] So brands, right? So you are, you know, we’re working with some, some it sounds, but pro sports teams, you want to tell a story to

00:59:44 [Speaker Changed] Your fan

00:59:45 [Speaker Changed] Base, build a stadium,

00:59:46 [Speaker Changed] Sell some tickets to sell some

00:59:47 [Speaker Changed] Stadium. Yeah. Sell tickets, build a stadium, gimme some examples of people who have told good stories and how did that work for them? How can we do the same thing? So let’s,

00:59:56 [Speaker Changed] Let’s just start looking

00:59:57 [Speaker Changed] At storytelling.

00:59:58 [Speaker Changed] If Jeff Bezos was a subscriber to this back when he was trying to build a tax funded HQ on the Hudson, had he had your data and you were crunching all the New York City news stories about this, might you have been able to give him advice that he

01:00:19 [Speaker Changed] Suffered? A percent

01:00:20 [Speaker Changed] Suffered such a backlash. Because you

01:00:22 [Speaker Changed] Know what we have today? We have polls. Right? Right. Because,

01:00:24 [Speaker Changed] Which are terrible,

01:00:26 [Speaker Changed] Terrible, terrible. Right. Which are mostly terrible now, you know, and, and I love the poly market stuff and other things where you try to get as many people as possible to put money on something. Right?

01:00:34 [Speaker Changed] So, you know, when you ask a person a question, you’re asking them, Hey, what do you think you think? And what do you think you’re gonna do in the future when we know people are terrible at both of those things?

01:00:45 [Speaker Changed] Terrible at both of those things.

01:00:45 [Speaker Changed] But if you put a little money on it, alright, maybe they might be a little more circumspect that,

01:00:50 [Speaker Changed] That, that helped. That helps a ton. So, so in places where you can have a make a bet, I think that improves the kind of information you can get. It still lends itself to a lot of manipulation. Sure. And a lot of,

01:01:02 [Speaker Changed] They’re not issues around it, poly markets and cashie and all those things. It’s not the bond market. It’s not a hundred and something trillion dollars. It’s a couple of bucks on each of these. And sometimes that’s right, a million dollars moves a half a million dollars can move a market.

01:01:17 [Speaker Changed] But for a lot of things, let’s say you’re polling for a political candidate, right? You can’t ask them to put money down on something. Right? Right. You, but, but you really wanna know the, these, these policies that my candidate is thinking about taking on, is that popular? Does it resonate? Is it a compelling story? We can absolutely see if that is true by looking at local media, local social media, all of that. So it’s, it’s pretty wild there. I mean, once you start looking at how important stories are and once you’ve got a tool where you can actually measure them and visualize them, it’s like, it’s like, I feel like it was like when they invented whoever was Lovin Hook or whoever invented the microscope when you’re actually to see something that we all know is there,

01:02:05 [Speaker Changed] Well now we do back then. Right? Like remember germ theory took what a century to catch on it.

01:02:10 [Speaker Changed] It took a century. Yeah. And it takes, it takes seeing it, right? It takes the instrument to actually measure it before you actually believe in it. And so I, I, I feel like that’s kind of where we are right now. It’s these early days. But to actually see and measure the storytelling at this level of resolution, this magnification is pretty freaking cool.

01:02:29 [Speaker Changed] So, so we’re having this conversation with market at all time highs, and you’ve written about the ravine. Yep. Tell us a little bit about what is the ravine, how does, does your data identify that? Tell us what this means.

01:02:46 [Speaker Changed] Well there’s, there’s, there’s clearly been a change in policy regime out of, of Washington and

01:02:53 [Speaker Changed] New administration, and a radically different,

01:02:56 [Speaker Changed] Radically different

01:02:57 [Speaker Changed] Approach, even from the first Trump presidency,

01:02:59 [Speaker Changed] Even from the, the, the first presidency. And so what we’re able to, to measure, really measure is how does that, I’ll say play, but also what comes, narratives never happen in a vacuum. There’s always a counter story. For every bull story, there’s a bear story. And they, they, they, you can almost kind of see the battlefield of ideas, the battlefield of stories and how it emerges. So my strong sense, Barry, is that we are going towards politically in this country towards trench warfare, greater and greater, I’ll call it narrative violence. And it, if you look historically how that plays out in countries, it doesn’t, it doesn’t play out well.

01:03:56 [Speaker Changed] Civil war, domestic political violence, things like that.

01:04:01 [Speaker Changed] Sadly. Yes. Exactly like that. Exactly like that. So there’s that element. And so that’s a, that’s a sad one, you know, or a, a very troubling one and trying to, well, how do we navigate that? But even when in, in markets, and I alluded to this earlier, how capital markets have become a political utility and the, the role of markets in our society, you can really see how that changes in the stories we tell ourselves about the role of markets, what it’s there for. And I

01:04:38 [Speaker Changed] End of day options and speculation, what else is it supposed to be there for?

01:04:43 [Speaker Changed] But that, but that’s kind of what I’m getting at, Gary, right? You, you can see an enormous change in the meaning of markets. And it connects with a, yes, they’ll call it the speculation layer, but it also connects with financial nihilism, yolo, it, it, it leads to a very, I think, less attractive future for how we think about money and the role of markets and the role of capitalism

01:05:20 [Speaker Changed] Coming up. We continue our conversation with Ben Hunts, president and co-founder of persuent, discussing how money managers use their output to generate alpha. I’m Barry Ritholtz, you, you’re listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest today is Ben Hunt. He is president and co-founder of Persuent, a data analytics narrative, storytelling, large language model, using artificial intelligence to find some signal amongst the noise firm. Their clients range everything from large money managers to hedge funds to academics and corporate America. So you write Epsilon Theory and some of it is for subscribers. Some of it is public. A lot of

01:06:35 [Speaker Changed] It’s public. Yeah.

01:06:36 [Speaker Changed] One of the things you wrote is absolutely my favorite item from the first few months of the Trump presidency because I like to talk in probabilities. ’cause I don’t know what’s gonna happen. Yep. But here’s the best case scenario. Here’s the worst case. Here’s all the middle scenarios. You wrote a piece, the end of Pax Americana that I thought was the most cogent, imaginative, well thought out. Hey, here’s the worst case scenario, and we are becoming dangerously flirting with this possible outcome. And I use that as all right, so here’s what I think is high probability. Yep. Here’s the best case. But if you really want to think about how this can go off the rails, check out what Ben wrote. And so tell us a little bit about how did Perent inform the end of Pax Americana? Because I, I get the sense that domestically that wasn’t really where a lot, what, how a lot of people were thinking. But I got the sense from overseas that was a much more common thought. Tell, tell us a little bit about both the piece and, and how the data informed it.

01:07:55 [Speaker Changed] I’ll start with the, I’ll call it the, the international dimension. I wanna come back to the domestic dimension because I, I think we’ve got some really interesting data recently to, to, to share. It goes back to this, yeah. Again, I, I cringe what I was talking about, but, but, but it is, it is game theory, right? And all game theory is, is strategic interaction. It’s that the, the United States, yes. Is the most powerful player on the world stage, but every country has some degrees of freedom and some autonomy in their, in the policies that they, that, that they implement this. There is not a dominant strategy, meaning an outcome. An equilibrium outcome. Again, I hate using these words, but I’ll use them anyway. All an equilibrium means is, it’s a balancing point where both parties, let’s call ’em the United States and a European country, where do they end up? Where they all say, okay, I can live with this, where I can live with this and the America first set of policies, and it’s all these set of policies. What you end up with is less potential economic growth, trade, all all of these things,

01:09:12 [Speaker Changed] All the things that we enjoyed post World War ii, that realignment, that imbued to our benefits so greatly,

01:09:20 [Speaker Changed] Enormously to our, to our, to our, to our advantage. Our advantage, yeah. Enormously to our advantage. It, it goes by the name of a soft power and you know, the dollar system, the bread, Bretton wood system, all of this

01:09:30 [Speaker Changed] Reserve currency on and off

01:09:32 [Speaker Changed] The reserve currency to finance our deficit. All of this is enormously to our advantage. And yes, there are free riders on that system. Yes, there are cost to that, particularly on defense and some other, some other areas. Tariffs are in other area where there’s absolutely free riders on that. So there’s improvement that can be made in that system, for sure. Right. But this is not, this is a different system. This is a different set of rules of the road. And it leads to a different strategic interaction between, between countries. So that’s what the note was about. And it’s, it’s, I’m not trying to predict, I’m just, I’m just trying to observe that. And which is a great line actually by George Soros, which is, you know, I’m, I’m not predicting, I’m observing, which I love that as a line I’m not. And our technology is not there to try to predict the future is trying to tell you what is true in the present today.

01:10:30 [Speaker Changed] I, I’m amazed how many people think they can forecast the future when they have no idea what’s happening. Right. I

01:10:36 [Speaker Changed] Wanna, I want to now cast what I want do. That’s exactly, yeah. Not, not forecast. I want to now cast. And that gets the, I wanted to talk about kind of domestic. So we started tracking the different narratives around immigration policy early last year and what you saw in some of the kind of simp

01:10:59 [Speaker Changed] This is during the run up to the election.

01:11:01 [Speaker Changed] Yes, exactly. And what you saw, and really going back, ’cause we can take, we take this stuff back for a decade or more. And what you absolutely saw up to last October, there’s a, there was an event from last October, not the election, but an event from last October. You see a steady increase in, regardless of your political affiliation. You know what immigration isn’t working for us isn’t as, as Americans saw a steady increase starting with the, they’re eating the, the cats.

01:11:37 [Speaker Changed] They’re eating the cats, they’re eating their dogs. They’re

01:11:40 [Speaker Changed] Eating the dogs. When you saw one, the, the Columbus mo when you, that, that moment,

01:11:45 [Speaker Changed] One of the most, that’s where things, the real moments in debate history.

01:11:49 [Speaker Changed] And we see very clearly in our media data, and this is, this is not mainstream media. This is everything that we’re pulling up. We’ve seen an, a really significant decline in the volume and density of, oh my God, immigration is a problem. We need mass deportations. On the contrary, we’ve seen an enormous increase, again, regardless of political affiliation, including Republicans. No, immigration is a good thing for this country. Huh? This is the stories of America that are pro-immigrant and immigration. Now, you would not believe that if you were looking at the policies that the White House has implemented during these first, you know, 10 months of the administration.

01:12:38 [Speaker Changed] So, wait, when did you first notice that? Regardless of policy, we think immigration is a net benefit to America. When did that first start showing up?

01:12:49 [Speaker Changed] It started changing right? In October because it, following

01:12:52 [Speaker Changed] The dogs,

01:12:53 [Speaker Changed] Cats, it was too far. It was, it was like, this is just silly stupid. This is silly and stupid. And it’s been a steady increase. You know? And you wouldn’t, you wouldn’t believe that if you were I immersed in Twitter stuff. But, but,

01:13:06 [Speaker Changed] So this

01:13:07 [Speaker Changed] Is, our country is actually quite pro-immigrant. I know that sounds cr

01:13:13 [Speaker Changed] But we are a nation of immigrants here. Here’s another data point that’s kind of mind blowing. We were talking about a different data point in, in the entirety of the US history, 2025 looks like the first year where the US population will decrease. Yeah, yeah, yeah. So it’s a decrease in legal immigrants. Not, not only illegal immigrants, but legal immigrants. Add that with the deportations and just people staying away.

01:13:41 [Speaker Changed] Well, this, this gets back to the, the, the economic picture and from other, so what, what you’ve had is a clear, and again, we, we, we see this in our data from other countries. There’s a clear effort to repatriate assets and funds away from the us. There’s been a clear effort outside the us You see this with central banks, but also with

01:14:03 [Speaker Changed] Cor hence gold. The big and gold. Gold. Correct.

01:14:07 [Speaker Changed] Treasuries used to be a safe haven asset. Right?

01:14:11 [Speaker Changed] No

01:14:11 [Speaker Changed] More. That’s, that’s, it’s, it’s,

01:14:13 [Speaker Changed] Do you understand how significant that charge is? That you’re making, you’re basic, enormous, basically accusing the president, well, of submarining one of the single greatest assets America halts. Well,

01:14:26 [Speaker Changed] That it’s a, it is built up to such a, an extent, right? That the way I think of this is an iceberg that is melting, but it is melting. What we do not see, we do not see capital flight.

01:14:40 [Speaker Changed] Right? We, we saw it for like a week in April, and then that was quickly

01:14:44 [Speaker Changed] Reversed. That was it. So there’s, there, there is, there’s no capital flight there, there are no,

01:14:47 [Speaker Changed] But there was some fear US

01:14:48 [Speaker Changed] Investors that leaving the country that there were fears, and we can track it. If that starts to happen, we’ll see it immediately. That’s not happening. Repatriation continues to happen.

01:15:00 [Speaker Changed] Slowly measured, balanced,

01:15:01 [Speaker Changed] Melting iceberg. Right? Because there are limits to, if you’re a Bermuda reinsurer, I mean, you’re kind of, you’re, you’re stuck with treasuries, right? Right. I mean that, that

01:15:11 [Speaker Changed] You’re, you could buy some gold to offset it, but you can’t sell a hundred billion dollars worth of treasuries. No, you

01:15:16 [Speaker Changed] Can’t. You can’t. So it’s a melting iceberg. But we can clearly see that the dog is not barking yet and maybe never will is capital flight. What we see in politically domestically is that actually, and this was validated by a Gallup poll they’ve been doing 20 years, which also showed what we had saw, started seeing a lot earlier where immigration as a thing is actually pretty darn popular in the United States.

01:15:47 [Speaker Changed] Yeah. But so are, so is restricting assault rifles and we can’t get any change on that. I that’s 75, 80% or the actual

01:15:57 [Speaker Changed] Large. I, I gotta tell you, I gotta tell you that depends very much in how that question is asked.

01:16:01 [Speaker Changed] Well, that’s true for all polling. Well,

01:16:04 [Speaker Changed] This is the benefit of what I’m trying. So, so when, when we’re doing these seman, we call the semantic signatures, it has nothing to do with how you’re phrasing the question. We’re not doing polling. We’re seeing what people are actually the meaning of what they’re talking about in, in media.

01:16:20 [Speaker Changed] So how does that play out if people are legitimately saying no immigration is a good thing for America. Is there an impact on population and the economy? Is there an impact on markets? Is there an impact on policy and politics?

01:16:35 [Speaker Changed] I think there’s an impact on the election, the midterms next year.

01:16:40 [Speaker Changed] So we’re talking, we’re talking literally 12 months from now.

01:16:45 [Speaker Changed] Yeah. ’cause that’s how this, the stuff gets ca on the political front narratives and opinions. They get cashed out in elections. Right. Mark are different. You, you cash stuff out every day. The right, the market’s

01:16:59 [Speaker Changed] Open every day. The feedback loop is so rapid with markets.

01:17:02 [Speaker Changed] Ex Exactly. Politics is a different story. So Right. It gets cashed out in the elections.

01:17:08 [Speaker Changed] If you were to ask me before this conversation, what’s the most significant impact on the midterm elections? There was just a Gallup poll yesterday, GOP questions on the economy. They were plus 14% two years ago. They’re minus 4% this year. Yeah, I,

01:17:26 [Speaker Changed] I saw that.

01:17:27 [Speaker Changed] And, and that’s an amazing swing. And I’m, I’m saying to myself, you know, listen, the out of power party usually picks up, you know, 10, 15 seats. Yeah. You have the redistricting question, which may blunt that. But if, if the most important question during the election was on the economy, and that’s an 18% swing, this is looking like a pretty substantial shift. What I’m hearing from you is, hey, this isn’t just about the economy.

01:17:55 [Speaker Changed] It’s not,

01:17:56 [Speaker Changed] It’s not what, so it’s the economy, it’s immigration. What else? What else are you seeing? That’s interesting. That’s

01:18:01 [Speaker Changed] It. That’s, that’s pretty. Now there are other aspects though, where the, the stories, it, this is, this is people talking about immigration as a thing. Now, whether, now whether that gets translated into a political party position. ’cause I gotta tell you, the Democratic party I is enormous enough. But there, there are no, there are no narratives that are being put forward by the Democrats that are powerful. Or, or, or, or popular. So I

01:18:31 [Speaker Changed] I I don’t, other than the mayoral contest in New York. Yeah,

01:18:34 [Speaker Changed] Yeah.

01:18:35 [Speaker Changed] Right. That what I, that’s this

01:18:36 [Speaker Changed] One. What I’m saying is that the, is that the many of the policies that are being presented by this administration are unpopular, not just with the Democrats, but with Republicans. And increasingly so immigration being one of them. I think economy being another one,

01:18:58 [Speaker Changed] Tariffs aren’t really popular amongst, but people perceive that as a tax increase or, or a pressure on small business

01:19:07 [Speaker Changed] Government shut down. Right? So both also not popular. And also in this, it, it’s, it’s that ’cause the, the question, oh, well, the Democrats will get blamed. Well, that’s not really true. That’s not what’s happening now. How that all

01:19:19 [Speaker Changed] Pay, pay and by the out and listeners should know. It is a long way off. You are not a hard, you’re not a Democrat. Oh my

01:19:25 [Speaker Changed] God. No.

01:19:26 [Speaker Changed] Like, like I know you and your politics and the stuff you’re saying, I, I could hear people shrugging and saying, oh, that Ben Hunt is just a liberal Democrat. I’m like, no, no, no. That’s not who Ben is.

01:19:37 [Speaker Changed] No, no, it’s not.

01:19:39 [Speaker Changed] You are just talking about here’s what I see in the data.

01:19:42 [Speaker Changed] I’m saying I’m observing. I don’t, I’m observing. And I think that a lot of times, if we are like me very online and on Twitter too much, right? You,

01:19:53 You don’t see the broader picture of what is happening on blog posts and local newspapers and, and, and everything else. So I think having the ability to read everything and track these stories that, you know, they don’t, they, they, like I say, they wax and wane, but they don’t, they don’t ever go away. The, it’s, it’s, it’s something we’re very excited about to track the stories of America. I’ll, I’ll give you another one. And this one actually, I don’t know what to do with this. One of the stories of America is that America has raised the world’s wealth, right? That, that that

01:20:48 [Speaker Changed] Global standard of living,

01:20:49 [Speaker Changed] Global standard of living, that, that America has been this powerful force to, and, and capitalism and America have been this powerful force to raise people outta poverty. That’s a story that in other periods of time has been out, has been prominently talked

01:21:08 [Speaker Changed] About. Very resonant.

01:21:09 [Speaker Changed] That story is non-existent today.

01:21:11 [Speaker Changed] Well, you cut things like HIVA few million dollars to inoculate all of Africa from HIV. That’s gonna have repercussions.

01:21:21 [Speaker Changed] Well, it, it’s, it’s not just that, that that has the con those those repercussions that you’re describing. Right. What I’m saying is that the story that would support that, it’s gone.

01:21:37 [Speaker Changed] Is it gone forever? Has no, has

01:21:39 [Speaker Changed] No, that’s, these things are never gone. These stories, stories have, they never die. Right? They’re, they’re, they’re waiting for a new force to give them life.

01:21:49 [Speaker Changed] The next version of it, if us is not seen as a force for raising people out of poverty around the world, do people see China as that force?

01:22:00 [Speaker Changed] Haven’t looked at that. We’ve been looking at the, the US store. But I, but I I, my my personal sense is, is that we’ve essentially seeded the field

01:22:09 [Speaker Changed] CEDD with a C not

01:22:10 [Speaker Changed] An S Yeah. With a C. Not in s particularly in South Asia and Africa to, to, to China. I, I mean, that, that seems, that seems pretty,

01:22:20 [Speaker Changed] You know, pretty clear. This is, I’m glad I asked the question about the end of Pax Americana. ’cause I, I, I’ve just found that piece so insightful and so useful, and I could keep you here talking about this stuff for hours. But out of deference and respect for our listeners’ time, I’m gonna jump to our favorite questions that I ask. Oh, sure, sure. All of our cl all of our guests. But before I do, there’s a question that I, I have to pose to you, which is, so you get to see things before they sort of bubble up into the mainstream before they become a well understood narrative. What’s a narrative that you are just starting to sniff out? That most of the world, or most of the country, or most of Wall Street and finance hasn’t seen yet?

01:23:15 [Speaker Changed] It’s a story that people are talking about since tricolor and first brands went out,

01:23:23 [Speaker Changed] Right? The, the,

01:23:24 [Speaker Changed] So it’s the story on, on credit, story of credit, and

01:23:29 [Speaker Changed] I mean, first brands is legitimate. It sounds like felonies were happening there. So we’ll have to see what, how that plays out. I

01:23:37 [Speaker Changed] Probably try color as, as as well. But my point is that every day you have a new bank, CEO come out and say, no, no, everything’s fine. Right? So yesterday it was David Solomon at Goldman Sachs saying, no, no, it’s fine. Today I was hearing the Brookfield guy saying, no, no, it’s fine. For every story, every interview, the guy says it’s fine. You’re getting two articles in the ft or the journal saying ain’t fine. So

01:24:09 [Speaker Changed] The, you think thou death protested too much. Is it that

01:24:12 [Speaker Changed] Well, I’m, I am I, all I’m saying is I am observing. I’m not predicting, I am observing the level of volume for Hmm. Alternative asset managers, their exposure to private credit. This is problematic. Oh, I’m wondering what’s gonna happen when the music stops. Oh, I think that these, this blows back into the commercial banking system. Those stories, those narratives are higher by an order of magnitude than they’ve been at any point in the last 10 years. Hmm. At any point, including during COVID during when you had similar concerns over, oh my god, private credits.

01:24:51 [Speaker Changed] I was easy to rationalize everything. Hey, listen, we’re all frozen. Just ignore it.

01:24:55 [Speaker Changed] But I, this is a story that has legs. It is growing in a way that I rarely see. And once a story like this grows, it doesn’t just go away. And it’s not fixed by Bernanke saying, oh, subprime is contained. Right.

01:25:13 [Speaker Changed] It’s immediately what I thought of as soon as you

01:25:15 [Speaker Changed] Mentioned it. Absolutely. It does not get fixed by people saying, don’t worry, there’s no problem.

01:25:21 [Speaker Changed] Jim Grant said he was right. It was contained to Earth. Yes. Yes. The rest of the solar system was fine. Which turned out to be a very witty and clever observation. This

01:25:31 [Speaker Changed] Story, this worry, this concern absolutely has legs. And we’re seeing no signs of it easing off in financial media and press. So

01:25:43 [Speaker Changed] The, the big question is, is it systemic? Or I don’t, is it the specific, like

01:25:49 [Speaker Changed] I say, I, I don’t know the truth, right? I don’t know reality. All I can tell you is

01:25:55 [Speaker Changed] We’re seeing more of this.

01:25:56 [Speaker Changed] Well, we’re seeing this is, this is the story.

01:25:59 [Speaker Changed] Huh. Really, really interesting. Let, let’s jump to our favorite questions, starting with who are your mentors who helped shape your career?

01:26:09 [Speaker Changed] Hmm. That’s good. Well, I, you know, I mentioned that the people both in undergrad and graduate school, who turned to me on to the science part of political science. And in particular in graduate school, Gary King, who runs the whole social science research center up there at Harvard and has for a long time now. He wrote the original, really the book on inference. You hear about inference all the time now.

01:26:34 [Speaker Changed] Well, Cialdini, of course.

01:26:36 [Speaker Changed] So the, the notion of inference taking large data sets and pulling out,

01:26:41 [Speaker Changed] Oh, inference. I thought you said influence. No, no, no, no. Inference. Inference.

01:26:46 [Speaker Changed] So the science of inference, the, I learned that from Gary, you know, 30 years ago. And it’s so interesting to see that come full circle because that’s at the core of, you know, Jensen Wong’s always talking about it and the whole notion of AI to that inference spend. They talk about, I was there at the beginning for how you, what inference is and why it is so powerful. That was a huge influence on me.

01:27:14 [Speaker Changed] Let’s talk about books. What are you reading now? What are some of your favorites?

01:27:19 [Speaker Changed] I’m a science fiction guy.

01:27:21 [Speaker Changed] Okay. I really am. You’re talking to another sci-fi guy. So let’s, so I I I give us something new and something classic. Well,

01:27:27 [Speaker Changed] Something classic would be Lu Hin and the Three Body Problem. Right.

01:27:32 [Speaker Changed] By the way, the Netflix show on that was surprisingly watchable.

01:27:36 [Speaker Changed] I thought it was excellent before that. And you know, I named the company after him was the Foundation Trilogy

01:27:44 [Speaker Changed] Asimov with

01:27:44 [Speaker Changed] Asimov. Those books hold up Less well, honestly. And I thought the, the series was, it had its moments. I

01:27:50 [Speaker Changed] Didn’t love the series. Yeah.

01:27:51 [Speaker Changed] It was, it was so pretty soso to me. Current science fiction. Rebecca goes, she goes by RF kwong and she wrote a book called Babel, and she’s got a new one out two B or

01:28:07 [Speaker Changed] One BBAB.

01:28:08 [Speaker Changed] Like Tower of Babel. Right. B-A-B-E-L. And she’s got a new one out Caba I think it is, but science fiction dealing with language and linguistics. I love that stuff.

01:28:19 [Speaker Changed] That, that, I love that stuff. That sounds like that’s right in your, your sweet spot. Let’s talk about streaming. What are you watching or listening today? Podcasts or Netflix or whatever? So,

01:28:29 [Speaker Changed] Honestly, I don’t listen to any podcasts. Isn’t that terrible to admit?

01:28:31 [Speaker Changed] Well, if you host, I will say this. If you host a podcast, you’re either preparing for a podcast Yeah. Doing a podcast or ordering a podcast. Alright. Right. So it’s like, all right. That’s three or four.

01:28:43 [Speaker Changed] That’s all it is. Yeah.

01:28:44 [Speaker Changed] Right. Every now and then I’ll, I’ll catch something. ’cause I wanna either listen to this, a specific guest, like IWI will not listen to any podcasts that you are on before we do our podcast. Right. ’cause I don’t wanna steal anybody else’s Yeah. Or narrative or questions or line of thinking. So I, that’s purposeful. But every now and then, so I listen to, the things I listen to are like John Pirelli’s Radio Deluxe. Yeah, yeah. Which is sort of like a podcast slash music series. Something

01:29:17 [Speaker Changed] A little different. Yeah, exactly Right. What,

01:29:20 [Speaker Changed] What about streaming? What are you watching? Well,

01:29:22 [Speaker Changed] You, you and I are both Big Godfather fans. So we love all the, the mobster. I Have you seen Mob Land yet? With, with No. Alright. Worth your time. Okay. Pierce Brosnan eats up every scene. Tom Hardy is awfully good. I just love him in anything. If you, I don’t know if you ever saw Peaky Blinders, right. Started as a modern

01:29:40 [Speaker Changed] Version of Pinky Blinders. I started, I kind of fall, so couldn’t get into it. So my issue is I have to watch something that my wife tolerates. Like I have, I have friends

01:29:49 [Speaker Changed] That’s a struggle

01:29:50 [Speaker Changed] Who, like, he goes into this room, she goes into that room, they don’t watch anything together. Like, I don’t know how that works. Like it’s, she’ll watch some stuff without me. I will watch some stuff without her. Right.

01:30:02 [Speaker Changed] You gotta have your own space.

01:30:02 [Speaker Changed] But 80% of what we watch, so I have fallen that’s hard down the British upstairs. Downstairs Gilded Age. Yeah. So we watched The Crown, we watched the Gilded Age. We finally, let

01:30:15 [Speaker Changed] Me give you one, lemme lemme

01:30:16 [Speaker Changed] Give you one. We went back to Downton Abbey, which I missed when I first rolled out.

01:30:20 [Speaker Changed] Check out. So my guilty pleasure, and I do watch this with my wife, is a diplomat.

01:30:25 [Speaker Changed] Ju the new series, just the new season just dropped new season. Yeah. And that’s teed up for this weekend. I’m looking forward to that. Excellent. That the first, was this season two or season three? The first season was great.

01:30:36 [Speaker Changed] Yeah.

01:30:37 [Speaker Changed] Yeah. And I’m gonna give you, if you like that. So my wife finds these really interest. She got me into Killing Eve, which was a little more spy fair than diplomacy. And if you get a chance to watch Slow Horses, oh,

01:30:52 [Speaker Changed] That’s the one I’ve gotta see. Yeah.

01:30:54 [Speaker Changed] It’s really, that’s the one. So the first season is great and people have told me the most recent season, it, it, some people will say, I don’t like the second kinds in the middle. I, I know people who loved it all the way through. But it’s, it’s really, it, it’s really an interesting well told beautiful cast. Just fantastic. Yeah. You’ll, you’ll love that. Our final two questions. Yeah. What sort of advice would you give a recent college grad interested in either investing or working with large language models, working with narrative analysis and artificial intelligence? Hmm.

01:31:35 [Speaker Changed] Don’t, and I, I say that tongue in cheek. I I,

01:31:41 [Speaker Changed] You had a lot of fits and starts going back seven, eight years

01:31:44 [Speaker Changed] For, for sure. And I, I tell you what I, I think’s I important you have to, what, what you, what I think you can accomplish in academia, either in grad school or whatever it is, is you build your intellectual capital. And so I think a lot of times when you get out of college, you say, okay, I’m just ready to kind of live my life and start something. And you haven’t built that intellectual capital yet. The the issue is though, is that once you enter, particularly the investment world where particularly if you’re responsible for managing other people’s money, brother, that’s it. Right? I mean, you’re, you’re, there’s, there’s not, you’ve, that’s got to be your, your total focus. You are spending your intellectual capital, you’re not gaining intellectual capital once you take on a role like that. So I, my first advice is find a a path where, and that’s often in, in, in academia where you’re building intellectual capital. Because once you leave that environment,

01:33:02 [Speaker Changed] Then you’re spending it down.

01:33:03 [Speaker Changed] You’re spending it down.

01:33:05 [Speaker Changed] Makes sense. You’re spending it down. Our, our final question. What do you know about the world of, fill in the blank in investing data analytics? Narrative storytelling today would’ve been helpful 25, 30 years ago

01:33:22 [Speaker Changed] In investing. I wish, I wish I had understood the role of, lemme step back a second. I, I think that whether you’re talking about data or whether you’re talking about investing, and I’ll speak for myself, but I think there are a lot of people like me. We think there’s an answer with a capital A right there in the, in the numbers. And if you just look hard enough, and if you work hard enough, you’ll find that answer. Right? You’ll find the secret, the secret formula.

01:34:00 [Speaker Changed] And you have learned since then,

01:34:03 [Speaker Changed] Ain’t no such thing. Right now, there is magic and there are patterns, but it’s, it’s, it’s not in the structured data, it’s not in the numbers, it’s actually in the error. It’s in the probabilities, it’s in, we’re calling, you know, the stochastic element, right? The, the, the role of chance and understanding that there are patterns and there’s real magic in understanding that I didn’t get that when I was either starting with data analysis or with investing. I was looking for the answer with a capital A as opposed to a process with a capital

01:34:43 [Speaker Changed] PII love that answer because, so my exercise in confirmation bias is I love the fact that you looking back, we all have the benefit of hindsight. Yeah. And unfortunately, that can be a bias to certain people. But when you’re looking back at it, you know how it happens at the moment when you don’t know what the outcome is, thinking about it, probabilistically is a much healthier approach than saying, here’s a binary up or down, yes or no. And I’m either right or wrong, and I see people struggle with that constantly,

01:35:21 [Speaker Changed] Constantly. When I first started in the investing world, again late, I got two pieces of good advice, right? One was never go all in. Right?

01:35:31 Which is, which is really interesting because it’s this, this business of investing. It’s a wonderful life. You were solving puzzles, we meet interesting people. We get to have these sort of conversations. It’s a, it’s a career for a lifetime. And the two pieces of advice are really, it never go all in. And also, reputation is absolutely the most important thing. And again, especially when you’re young, you think, oh, well that’s not the most important thing. You know, being right’s the most important thing. It ain’t, it’s playing the long game here, which you want to, it’s never go all in. And the reput reputation

01:36:16 [Speaker Changed] Is never go all in by never go in. You mean never put everything at risk so that if it doesn’t work out, you’re, you’re outta the game. You’re done, you’re out.

01:36:25 [Speaker Changed] Stay in the

01:36:25 [Speaker Changed] Game was the Gerald Loeb’s book, the Battle for Investment Survival? Stay

01:36:29 [Speaker Changed] In the Game, avoid that risk of ruin You, you, you just, or don’t ever risk ruin.

01:36:36 [Speaker Changed] That makes sense, right?

01:36:37 [Speaker Changed] Because once

01:36:37 [Speaker Changed] You, people don’t think in those terms, but that’s really, they don’t, they don’t all in means risk of ruin.

01:36:42 [Speaker Changed] It’s the risk of ruin. And it also connects with reputation because once you,

01:36:50 [Speaker Changed] Once you blow up, it’s tough to go back

01:36:53 [Speaker Changed] And you start saying, oh, I can fix it by taking this shortcut or doing this other thing. Right? And once you do that never ends Well, it never ends well. Right? And you tell yourself, oh, just this one time. It’s never this one time,

01:37:07 [Speaker Changed] Ben, this has been absolutely delightful. I’m so glad we’ve finally me too gone around to doing this. I, I I’m just entranced by your thought process. Some of the things like, I love reading stuff of yours that I totally disagree with. And then ’cause it forces me to say, well, he’s not just making this up. I know how you, your brain works. And it’s like, all right, if Ben is saying this, then I’m gonna make this my worst case than I’m, ’cause it’s easy to dismiss it. Everybody gets out seeking, confirming information and rather than being dismissive of it, alright, you claim to think probabilistically, where does this fit into the range of probabilities? And once you start thinking in those terms, it’s like, oh. So the worst case scenario is worse than my worst case scenario. I gotta move the bottom of my range down further. ’cause if this goes off the rails, this is really bad. That’s what your Pax Americana piece did with me. Well, thank you. And it really, it really helped me figure out how to think about, especially in that week between April 2nd and ninth, where everyone was losing their mind. It’s like, oh no. So they’re losing their mind. ’cause hey, this could happen. But maybe something good comes out of it. Trying

01:38:26 [Speaker Changed] To avoid tunnel vision. I think it’s so important in our business or any business, but especially our

01:38:31 [Speaker Changed] Business. In our business in particular. Well, thank you for being so generous with your time. We have been speaking with Ben Hunts. He is the co-founder and president of Prescient. And you can find his writing at Epsilon Theory. If you enjoy this conversation, well check out any of the 593 we’ve done over the past 11 and a half years. You can find those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your favorite podcasts. Be sure and check out my new book, how Not to Invest the ideas, numbers, and behaviors that destroy wealth and how to avoid them at your favorite bookseller. I would be remiss if I did thank the Crack staff that helps put these conversations together each week. Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my podcast producer. Short Sage Bauman is the head of podcasts here at Bloomberg. I’m Barry Riol. You’ve been listening to Masters in Business on Bloomberg Radio.

~~~

 

 

 

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JPM Kicks Off Q4 Earnings Season With Rare Miss Driven By Weakness In Debt Underwriting

Ahead of the official start of earnings season this morning when JPM reported Q4 results, Goldman's head of Delta One Rich Privorotsky wrote that "attention now turns to JPM to set tone for earnings seasons. Prices/multiples are elevated across the sector so hard to argue expectations are low.  Focus on NII/NIM durability as deposit costs and loan pricing adjust… trading and IB momentum… expense discipline against the now well-telegraphed ~$105bn 2026 expense guide (~10% increase) … and any change in credit quality (likely still benign near-term)."  

With that in mind, moments ago JPM reported Q1 earnings that while beating on sales and trading, unexpectedly missed on revenue and earnings, with traders pointing to a rare miss in investment-banking fees which fell in Q4, missing the firm’s own guidance from just last month. The biggest US bank generated $2.35 billion from the business in the last three months of 2025, down 5% from a year earlier, according to a statement Tuesday. The firm said in December that it expected a percentage gain in the “low single digits.”

The investment-banking results were largely driven by a surprise 2% decline in debt-underwriting fees while analysts expected a 19% gain. 

This was partially offset by stronger than expected Q4 trading revenue, which came in at $8.24 billion, ahead of even the highest estimate of analysts in the survey, with both equity and fixed-income traders beating expectations.

As we previewed yesterday, JPMorgan kicks off the banking industry’s Q2 results Tuesday, with megabank rivals Bank of America, Wells Fargo, Citigroup, Goldman Sachs Group Inc. and Morgan Stanley slated for Wednesday and Thursday. The group’s is expected to post its second-highest annual profit ever, boosted by President Donald Trump’s policy changes.

Here is a snapshot of what JPM reported:

• Net Income $13.0BN, down 7% YoY 
• Full year 2025 Net Income was $57 billion, which short of beating its 2024 record, which was the highest annual profit in the history of American banking.
• EPS $4.63, Missing estimates of $4.97
• Adjusted revenue $46.77 billion, beating estimates $46.35 billion; This was driven by NII of $25.11B, up 7% YoY; and NIR of $21.7B, up 7% YoY
  • Markets revenue of $8.2B, up 17% YoY
  • FICC sales & trading revenue $5.38 billion, +7.5% y/y, estimate $5.27 billion
  • Equities sales & trading revenue $2.86 billion, +40% y/y, estimate $2.7 billion
  • Investment banking revenue $2.55 billion, -1.9% y/y, estimate $2.65 billion
  • Advisory revenue $1.03 billion, -2.5% y/y, estimate $953.9 million
  • Equity underwriting rev. $416 million, -16% y/y, estimate $499.5 million
  • Debt underwriting rev. $898 million, -2.5% y/y, estimate $1.1 billion

Some more highlights here:

• NII ex. Markets of $23.9B, up 4% YoY, reflecting the impact of higher deposit balances, as well as higher revolving balances in Card Services, largely offset by the impact of lower rates
• NIR ex. Markets of $14.7B, up 7% YoY, driven by higher asset management fees in AWM and CCB, higher auto operating lease income and higher Payments fees, partially offset by lower card income
• Expense of $24.0B, up 5% YoY, driven by higher compensation, including higher revenue-related compensation and growth in front office employees, as well as higher auto lease depreciation, higher brokerage expense and distribution fees and higher occupancy expense, partially offset by an FDIC special assessment accrual release

Especially notable is that in Q4, JPM's reserve build soared to $2.1BN, highest since Covid, reflecting $2.2BN reserve established for forward purchase commitment of Apple credit card business, which must have been an epic disaster under Goldman. Combined with $2.51BN in charge offs (which was below estimates of $2.56BN), this meant that total credit costs were a whopping $4.7 billion, also highest since covid.

Some more details from the quarter: 

• Loans $1.49 trillion, +11% y/y, beating estimate $1.45 trillion
• Total deposits $2.56 trillion, missing estimate $2.58 trillion
• Compensation expenses $13.12 billion, +5.2% y/y, beating estimate $13.74 billion
• Non-interest expenses $23.98 billion, +5.4% y/y, higher than estimate $24.65 billion
• Net yield on interest-earning assets 2.54% vs. 2.61% y/y, beating estimate 2.53%
• Standardized CET1 ratio 14.5% vs. 15.7% y/y, estimate 14.8%
• Managed overhead ratio 51%, missing estimate 53.1%
• Return on equity 15%, missing estimate 15.7%
• Return on tangible common equity 18%, missing estimate 18.9%
• Tangible book value per share $107.56, beating estimate $106.66
• Book value per share $126.99, estimate $126.47
• Cash and due from banks $21.74 billion, estimate $22.24 billion

Some more:

Assets under management $4.79 trillion, beating estimate $4.73 trillion

Turning to the all important Commercial and Investment Bank division, it was a story of two opposing halves: solid Markets revenue and disappointing Banking performance. Starting with the former: 

• Markets revenue of $8.2B, up 17% YoY
  • Fixed Income Markets revenue of $5.38B, beating est of $5.27B, up 7% YoY, driven by strong performance in Securitized Products, Rates and Currencies & Emerging Markets, largely offset by lower revenue in Credit
  • Equity Markets revenue of $2.86B, beating est of $2.7B, up 40% YoY, driven by higher revenue across products, particularly in Prime
• Securities Services revenue of $1.5B, up 13% YoY, driven by higher deposit balances as well as fee growth on higher market levels and client activity

That's the good news. The not so good news was the surprising weakness in Investment Banking and especially Debt Underwriting:

• IB revenue of $2.6B, down 2% YoY; IB fees down 5% YoY, driven by lower fees across all products
  • Equity underwriting rev. $416 million, -16% y/y, missing estimate $499.5 million
  • Debt underwriting rev. $898 million, -2.5% y/y, missing estimate $1.1 billion
• The only silver lining: advisory revenue $1.03 billion, which also declined 2.5% y/y, but beat estimates of $953.9 million

“The U.S. economy has remained resilient,” said CEO Jamie Dimon adding that “while labor markets have softened, conditions do not appear to be worsening. Meanwhile, consumers continue to spend, and businesses generally remain healthy.” Dimon said those conditions “could persist for some time, particularly with ongoing fiscal stimulus, the benefits of deregulation and the Fed’s recent monetary policy. However, as usual, we remain vigilant, and markets seem to underappreciate the potential hazards—including from complex geopolitical conditions, the risk of sticky inflation and elevated asset prices.”

 

In the first three quarters of last year, the biggest banks increased their loan books at the fastest pace since the financial crisis — boosting net interest income.

JPMorgan’s loans climbed 4% in the last three months of the year from the previous quarter. NII climbed 7% from a year earlier. The bank said in a presentation Tuesday that it expects to earn about $103 billion in NII in 2026.

 

The bank also reiterated that it expects to spend about $105 billion this year. Marianne Lake, who runs the bank’s consumer and community bank, previewed that outlook — which was higher than analysts had been expecting — at an industry conference last month, saying the biggest driver is “volume- and growth-related expenses.”

 

    +1% pre mkt... PPNR beat driven by better NII, fees and lower expenses (lower comp). In his commentary, Dimon noted a resilient economy with consumers continuing to spend though acknowledged that labor markets have softened and the market seems to underappreciate potential hazards... the key focus here will be

Finally, while the historical numbers were mixed, all eyes were on the bank's guidance. Here, JPM reiterated what we already knew - expenses would be $105bn for FY26...

... and NII ex markets was $95bn...

... but the bank gave a markets NII of ~$8bn, putting total NII modestly above consensus, and helping stabilize the stock.

Putting it all together, the market reaction was mixed, with the price first sliding in premarket trading on the IB miss, before rebounding on the strong markets revenue and the NII forecast which was modestly above consensus, before eventually stabilizing to unchanged as much of what was reported was already known.

Full Q4 investor presentation below (pdf link).

JPM Q4 Earnings by Zerohedge

Tyler Durden Tue, 01/13/2026 - 08:18

JPM Kicks Off Q4 Earnings Season With Rare Miss Driven By Weakness In Debt Underwriting

Ahead of the official start of earnings season this morning when JPM reported Q4 results, Goldman's head of Delta One Rich Privorotsky wrote that "attention now turns to JPM to set tone for earnings seasons. Prices/multiples are elevated across the sector so hard to argue expectations are low.  Focus on NII/NIM durability as deposit costs and loan pricing adjust… trading and IB momentum… expense discipline against the now well-telegraphed ~$105bn 2026 expense guide (~10% increase) … and any change in credit quality (likely still benign near-term)."  

With that in mind, moments ago JPM reported Q1 earnings that while beating on sales and trading, unexpectedly missed on revenue and earnings, with traders pointing to a rare miss in investment-banking fees which fell in Q4, missing the firm’s own guidance from just last month. The biggest US bank generated $2.35 billion from the business in the last three months of 2025, down 5% from a year earlier, according to a statement Tuesday. The firm said in December that it expected a percentage gain in the “low single digits.”

The investment-banking results were largely driven by a surprise 2% decline in debt-underwriting fees while analysts expected a 19% gain. 

This was partially offset by stronger than expected Q4 trading revenue, which came in at $8.24 billion, ahead of even the highest estimate of analysts in the survey, with both equity and fixed-income traders beating expectations.

As we previewed yesterday, JPMorgan kicks off the banking industry’s Q2 results Tuesday, with megabank rivals Bank of America, Wells Fargo, Citigroup, Goldman Sachs Group Inc. and Morgan Stanley slated for Wednesday and Thursday. The group’s is expected to post its second-highest annual profit ever, boosted by President Donald Trump’s policy changes.

Here is a snapshot of what JPM reported:

• Net Income $13.0BN, down 7% YoY 
• Full year 2025 Net Income was $57 billion, which short of beating its 2024 record, which was the highest annual profit in the history of American banking.
• EPS $4.63, Missing estimates of $4.97
• Adjusted revenue $46.77 billion, beating estimates $46.35 billion; This was driven by NII of $25.11B, up 7% YoY; and NIR of $21.7B, up 7% YoY
  • Markets revenue of $8.2B, up 17% YoY
  • FICC sales & trading revenue $5.38 billion, +7.5% y/y, estimate $5.27 billion
  • Equities sales & trading revenue $2.86 billion, +40% y/y, estimate $2.7 billion
  • Investment banking revenue $2.55 billion, -1.9% y/y, estimate $2.65 billion
  • Advisory revenue $1.03 billion, -2.5% y/y, estimate $953.9 million
  • Equity underwriting rev. $416 million, -16% y/y, estimate $499.5 million
  • Debt underwriting rev. $898 million, -2.5% y/y, estimate $1.1 billion

Some more highlights here:

• NII ex. Markets of $23.9B, up 4% YoY, reflecting the impact of higher deposit balances, as well as higher revolving balances in Card Services, largely offset by the impact of lower rates
• NIR ex. Markets of $14.7B, up 7% YoY, driven by higher asset management fees in AWM and CCB, higher auto operating lease income and higher Payments fees, partially offset by lower card income
• Expense of $24.0B, up 5% YoY, driven by higher compensation, including higher revenue-related compensation and growth in front office employees, as well as higher auto lease depreciation, higher brokerage expense and distribution fees and higher occupancy expense, partially offset by an FDIC special assessment accrual release

Especially notable is that in Q4, JPM's reserve build soared to $2.1BN, highest since Covid, reflecting $2.2BN reserve established for forward purchase commitment of Apple credit card business, which must have been an epic disaster under Goldman. Combined with $2.51BN in charge offs (which was below estimates of $2.56BN), this meant that total credit costs were a whopping $4.7 billion, also highest since covid.

Some more details from the quarter: 

• Loans $1.49 trillion, +11% y/y, beating estimate $1.45 trillion
• Total deposits $2.56 trillion, missing estimate $2.58 trillion
• Compensation expenses $13.12 billion, +5.2% y/y, beating estimate $13.74 billion
• Non-interest expenses $23.98 billion, +5.4% y/y, higher than estimate $24.65 billion
• Net yield on interest-earning assets 2.54% vs. 2.61% y/y, beating estimate 2.53%
• Standardized CET1 ratio 14.5% vs. 15.7% y/y, estimate 14.8%
• Managed overhead ratio 51%, missing estimate 53.1%
• Return on equity 15%, missing estimate 15.7%
• Return on tangible common equity 18%, missing estimate 18.9%
• Tangible book value per share $107.56, beating estimate $106.66
• Book value per share $126.99, estimate $126.47
• Cash and due from banks $21.74 billion, estimate $22.24 billion

Some more:

Assets under management $4.79 trillion, beating estimate $4.73 trillion

Turning to the all important Commercial and Investment Bank division, it was a story of two opposing halves: solid Markets revenue and disappointing Banking performance. Starting with the former: 

• Markets revenue of $8.2B, up 17% YoY
  • Fixed Income Markets revenue of $5.38B, beating est of $5.27B, up 7% YoY, driven by strong performance in Securitized Products, Rates and Currencies & Emerging Markets, largely offset by lower revenue in Credit
  • Equity Markets revenue of $2.86B, beating est of $2.7B, up 40% YoY, driven by higher revenue across products, particularly in Prime
• Securities Services revenue of $1.5B, up 13% YoY, driven by higher deposit balances as well as fee growth on higher market levels and client activity

That's the good news. The not so good news was the surprising weakness in Investment Banking and especially Debt Underwriting:

• IB revenue of $2.6B, down 2% YoY; IB fees down 5% YoY, driven by lower fees across all products
  • Equity underwriting rev. $416 million, -16% y/y, missing estimate $499.5 million
  • Debt underwriting rev. $898 million, -2.5% y/y, missing estimate $1.1 billion
• The only silver lining: advisory revenue $1.03 billion, which also declined 2.5% y/y, but beat estimates of $953.9 million

“The U.S. economy has remained resilient,” said CEO Jamie Dimon adding that “while labor markets have softened, conditions do not appear to be worsening. Meanwhile, consumers continue to spend, and businesses generally remain healthy.” Dimon said those conditions “could persist for some time, particularly with ongoing fiscal stimulus, the benefits of deregulation and the Fed’s recent monetary policy. However, as usual, we remain vigilant, and markets seem to underappreciate the potential hazards—including from complex geopolitical conditions, the risk of sticky inflation and elevated asset prices.”

 

In the first three quarters of last year, the biggest banks increased their loan books at the fastest pace since the financial crisis — boosting net interest income.

JPMorgan’s loans climbed 4% in the last three months of the year from the previous quarter. NII climbed 7% from a year earlier. The bank said in a presentation Tuesday that it expects to earn about $103 billion in NII in 2026.

 

The bank also reiterated that it expects to spend about $105 billion this year. Marianne Lake, who runs the bank’s consumer and community bank, previewed that outlook — which was higher than analysts had been expecting — at an industry conference last month, saying the biggest driver is “volume- and growth-related expenses.”

 

    +1% pre mkt... PPNR beat driven by better NII, fees and lower expenses (lower comp). In his commentary, Dimon noted a resilient economy with consumers continuing to spend though acknowledged that labor markets have softened and the market seems to underappreciate potential hazards... the key focus here will be

Finally, while the historical numbers were mixed, all eyes were on the bank's guidance. Here, JPM reiterated what we already knew - expenses would be $105bn for FY26...

... and NII ex markets was $95bn...

... but the bank gave a markets NII of ~$8bn, putting total NII modestly above consensus, and helping stabilize the stock.

Putting it all together, the market reaction was mixed, with the price first sliding in premarket trading on the IB miss, before rebounding on the strong markets revenue and the NII forecast which was modestly above consensus, before eventually stabilizing to unchanged as much of what was reported was already known.

Full Q4 investor presentation below (pdf link).

JPM Q4 Earnings by Zerohedge

Tyler Durden Tue, 01/13/2026 - 08:18

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