This year has seen a notable trend in the bond market, specifically regarding maturity risk. Although a few weeks might not indicate an overall trend, evidence from various ETFs suggests that, so far in 2026, investors are increasingly gravitating towards longer maturities in fixed income as of January 16.
● The Making of a Permabear: The Perils of Long-term Investing in a Short-term World
Jeremy Grantham with Edward Chancellor
Review via The Wall Street Journal
Grantham’s Wall Street journey appears to align perfectly with the adage of “buy low, sell high.” However, the narrative is laced with challenges that ultimately enrich the reader’s experience of his memoir, “The Making of a Permabear,” co-authored with financial journalist Edward Chancellor.
As a co-founder and chief investment strategist at GMO, a Boston-based investment management firm, Grantham has navigated a rocky road marked by his nonconformist views. He remains steadfastly against overpaying for stocks and bonds, advocating for a return to value-oriented investing. His principle of mean reversion is established on the notion that “capital moves toward profits: excess returns attract competition, while poor returns push capital away.” It’s an insight that resonates widely.
The homebuilder sector has experienced surprisingly weak performance over the past two years. Despite a significant under-investment that has resulted in a housing shortage, particularly against a backdrop of increasing demographic-driven demand, an ETF tracking homebuilder stocks has yielded returns on par with the broader equity market over the last five years, albeit with much more volatility.
The current landscape of stock market winners and losers reflects a markedly different trajectory in 2026, as an examination of equity sectors reveals. Although it’s still early, and the potential for a lasting leadership change remains uncertain, there is clear evidence that sentiment has shifted towards the materials and energy sectors, as indicated by a range of ETFs through January 14.
As of now, the premium for the US 10-year Treasury yield is hovering near what is deemed a fair value. Based on the average of three models executed by CapitalSpectator.com, the latest assessment indicates a sustained neutral stance for the benchmark rate, following several years of elevated market premiums.
It remains premature to make definitive assessments about how the new year may differ from 2025 in regard to the US equity market. However, there are potential indicators suggesting that a shift might be taking place, particularly when examining performance metrics across US equity factors early in 2026.
This week brings another layer of complexity to the market landscape, particularly with President Donald Trump’s escalating tensions with the Federal Reserve. Critics argue that this is a thinly disguised attempt to influence the central bank into lowering interest rates.
● Blood and Treasure: The Economics of Conflict from the Vikings to the Modern Era
Duncan Weldon
Review via The Economist
In human endeavors, war is remarkably irrational, often leading to exorbitant costs and immense suffering. Wars can be triggered by personal ego or misguided patriotism, as seen in historical events like Napoleon’s Russian campaign or Japan’s 1941 attacks. Surprisingly, Duncan Weldon, a former writer for The Economist, argues in “Blood and Treasure” that economics—often viewed through the lens of rational self-interest—has much to say about wartime motivations.
Tariff Pass-through into Retail Prices: Measurement, Replacement, and Shrink-flation
Liang Bai (King’s College London), et al.
December 2025
This study investigates how significantly import tariffs impact retail prices. Existing data on the U.S.-China trade war show complete pass-through to U.S. border prices but no impact on retail prices. Combining barcode country-of-origin data with retail scanner data, we find that tariff pass-through into retail prices is 14%, while pass-through into price per unit weight is 44%. This discrepancy is attributed to product replacement bias: pass-through is primarily observed through product turnover favoring smaller packages, despite consistent firm-product combinations. Our findings suggest the potential for full tariff pass-through into retail prices cannot be dismissed.
Anticipation is building as the High Court prepares to announce rulings potentially affecting President Trump’s global tariffs. Decisions expected to be revealed soon could lead to significant financial ramifications, including billions in tariffs refunds and a substantial challenge to the President’s authority over trade policy. The Supreme Court’s ruling could have lasting impacts on markets and the economy, making it a key event to watch.
Conclusion: As financial landscapes evolve in 2026, it becomes increasingly essential for investors to stay informed about key trends and potential shifts, particularly in the bond market and sectors like homebuilding and energy. Ongoing developments, such as Supreme Court rulings on tariffs, will likely have ripple effects across various market dynamics. By keeping an eye on these indicators, stakeholders can better navigate the complexities of the current economic landscape.
