Goldman Sachs Warned again about Elevated Equity Valuations

Posted on January 8, 2026 by Ignacio Teson

The S&P 500 is trading at 22 times forward earnings—about a 36% premium to global peers—according to the investment bank.

Goldman Sachs cautioned that elevated equity valuations leave stocks vulnerable if concerns about economic growth intensify, particularly later in the year, according to a note from the firm’s strategists.

Executives led by Christian Mueller-Glissmann said U.S. equities are trading at very high valuation levels, meaning prices already reflect optimistic expectations for both the economic outlook and corporate earnings.

Goldman Sachs assesses S&P 500 valuations

The S&P 500 reached several record highs last year, rising roughly 16%. Even so, it lagged other global markets, such as the MSCI World ex-U.S. index, which gained close to 29%.

Goldman Sachs noted that the S&P 500 is trading at 22 times expected earnings, representing a 36% premium relative to its global peers.

[[SPX-graph]]

These valuation levels have raised concerns among strategists, who warn that if the U.S. economy slows or recession fears resurface, equity prices could face meaningful downside. “The macro backdrop could become less supportive in the second half of the year,” the analysts wrote, adding that an increase in recession risk could raise the likelihood of a deeper bear market given current valuations.

That said, in the near term, the report highlighted that markets have extended their rally so far this year, while global equities—particularly in Europe and emerging markets—have continued to outperform U.S. stocks.

A cautious stance

Goldman Sachs maintained an overweight position in equities for now, betting that stronger growth will remain the primary driver of risk appetite in the first half of the year.

However, strategists emphasized that elevated valuations are likely to translate into lower risk-adjusted returns, and that equity performance will need to broaden beyond capital spending tied to artificial intelligence (AI).

In other words, leadership should not be limited to companies directly benefiting from AI adoption, but also include firms positioned to gain from a more broadly based economic expansion.

Against this backdrop, Goldman Sachs recommended increasing diversification across regions, sectors, and investment styles to enhance risk-adjusted returns, rather than concentrating exposure in the large technology stocks that currently dominate the market.

Polymarket will not pay out Bets on a U.S. Invasion of Venezuela

Posted on January 8, 2026 by Ignacio Teson

The leading prediction market has reignited debate over the fine print of these investments, highlighting how outcomes often hinge more on human judgment than on purely financial factors.

Polymarket, widely regarded as the world’s largest prediction market, decided to withhold payouts from users who bet that the United States would invade Venezuela this year, arguing that the capture of Nicolás Maduro did not meet its threshold for an “invasion.” Under the platform’s rules, an invasion requires a clear intent to establish territorial control.

The decision caught many investors involved in the so-called “Operation Caracas” off guard. A large number of participants ended up taking losses, unaware that they were exposed to an especially fragile “mental model” of risk. In total, more than $10.5 million had been wagered on these contracts before the ruling was issued.

Beyond the controversy surrounding the resolution itself, the episode raises broader questions about the potential implications for prediction markets. How might platforms interpret ambiguous events—such as coups, cyberattacks, or “limited interventions”—if core terms like “invasion” are defined so narrowly? And how can these markets protect themselves against traders operating with informational advantages?

Prediction markets’ Achilles’ heel

This episode exposed what many now see as the Achilles’ heel of prediction markets: it is not enough for an event to occur—the outcome must unfold exactly as the contract language specifies.

As a result, social oracles and governance mechanisms can matter more than volatility itself. As long as significant capital is at stake, issues such as dispute resolution, platform governance, and reputation will remain central to the debate.

The incident has also reignited discussion around regulation. Following suspicions of unusually profitable trades, proposals have emerged in the United States to criminalize insider trading in prediction markets. Against this backdrop, seasoned traders increasingly focus less on the event itself and more on the resolution mechanism: who decides, based on what evidence, and under which definitions.

Meanwhile, the crypto market has started the year with Bitcoin on the rise—a signal that as capital and activity increase, so too will friction when trust breaks down. In that sense, Bitcoin is once again being positioned as one of the most attractive cryptocurrencies to invest in at the moment.

AI Trade Loses Steam as Investors Rotate Into Broader S&P 500 Stocks

Posted on January 8, 2026 by Ignacio Teson

Over the past three years, Wall Street’s leading portfolios have aggressively bet on artificial intelligence. However, emerging signs of fatigue are beginning to shift market sentiment, and investors are increasingly looking beyond big tech.

Ai stocks are faltering after fears about the market grow stronger.

The AI boom fueled a rally of nearly 78% in the sector’s leading stocks, led by the so-called Magnificent Seven — Apple, Microsoft, Amazon, Nvidia, Alphabet, Meta, and Tesla. But unmet promises of a profound economic transformation, combined with growing concerns about a potential bubble, are driving a rotation toward the rest of the S&P 500. Since late October, Bloomberg’s index tracking the seven tech giants has fallen 2%, while the remaining 493 stocks in the benchmark have risen 1.8%.

Warning Signs of the Market

This shift is evident in investment flows. The Defiance Large Cap Ex-Magnificent Seven ETF (XMAG), launched in late 2024, recorded six consecutive months of inflows and gained 15% last year, with most of the advance concentrated in the second half.

Against this backdrop, sectors with more moderate valuations are starting to gain traction. Banks are among the prime candidates to benefit, with names such as JPMorgan Chase and Bank of America standing out. Consumer discretionary stocks could also regain momentum if household confidence improves.

The changing leadership comes with risks. History shows that highly concentrated markets often experience bouts of volatility when dominance by a handful of stocks fades, as seen during the collapse of the Nifty Fifty in the 1970s or the dot-com bust in the early 2000s.

Warnings are also emerging from within Wall Street. Michael Burry revealed bearish positions in Nvidia and Palantir, while several firms have begun to anticipate a slowdown in the contribution of the Magnificent Seven to overall S&P 500 earnings growth. Goldman Sachs estimates they will account for 46% of earnings growth in 2026, down from 50% in 2025, while profits from the remaining S&P 493 companies are expected to accelerate to 9%.

That broader participation could attract value-focused investors, supported by wide valuation gaps and a more balanced macroeconomic outlook. Sectors such as healthcare, materials, consumer discretionary, and software are increasingly viewed as among the most attractive opportunities.

European Defense Stocks Hit New Records After Trump’s Remarks

Posted on January 8, 2026 by Ignacio Teson

Europe’s aerospace and defense sector extended its rally for a fifth consecutive session, posting a 13% gain so far this year.

European defense stocks reached fresh all-time highs on Thursday amid rising geopolitical tensions, ranging from Venezuela to Greenland, which continue to unsettle investors—a dynamic also reflected on Wall Street.

The seizure of two oil tankers linked to Venezuela in the Atlantic coincided with news that U.S. Secretary of State Marco Rubio will meet next week with Danish leaders to discuss the potential acquisition of Greenland.

The STOXX Europe Aerospace & Defense Index (SXPARO) climbed nearly 2% in early trading, marking its fifth straight session of gains and setting a new record high. The sector is now up 13% year to date and has surged more than 260% since Russia’s invasion of Ukraine in 2022.

“Investors are increasingly realizing that geopolitical threats are not going away,” analysts noted. “While military action in Greenland is unlikely, it is clear that momentum is building for higher defense spending across Europe.”

Broader European Markets Remain Under Pressure

Despite record highs in defense stocks, broader European equity markets traded lower. The Euro Stoxx 50 slipped 0.4%, Germany’s DAX fell 0.23%, and France’s CAC 40 declined 0.30%.

Economic data from the euro zone also weighed on sentiment. Business and consumer confidence in the region fell to 96.7 in December from 97.1 the previous month. While consumer confidence came in slightly better than expected, it remained below November levels.

Meanwhile, the euro zone unemployment rate edged down to 6.3% in the final month of 2025, a modest improvement of 0.1 percentage points from the prior reading.

U.S. Employment Shows Signs of Cooling as Fed Remains Split

Posted on January 7, 2026 by Ignacio Teson

The latest labor market data are carrying more weight than usual after Federal Reserve Chair Jerome Powell urged caution last month regarding further interest rate cuts.

The S&P 500 declined after the unemployment report was released.

The U.S. labor market once again showed signs of cooling, with private surveys pointing to weaker-than-expected job creation in December and official data revealing a slowdown in hiring during November. The developments come amid increasingly visible divisions within the Federal Reserve over the future path of interest rates, as Chair Jerome Powell enters the final months of his term.

The December ADP employment report showed private-sector job growth of just 41,000 positions, below expectations of roughly 45,000. Employment gains were concentrated entirely in the services sector, while manufacturing jobs declined. Following the release, U.S. Treasury yields moved lower.

Specifically, service-sector employment rose by 44,000 jobs, while goods-producing industries shed 3,000 positions during the month. This pattern aligns with the ISM non-manufacturing employment index, also released Wednesday, which rose three points to 52—marking a notable rebound from November, when a revised loss of 29,000 jobs was reported (originally -32,000).

At the same time, job openings fell to their lowest level in more than a year, while hiring slowed further, signaling continued softening in labor demand amid heightened economic uncertainty. According to data from the Bureau of Labor Statistics (BLS), the JOLTS survey showed job openings declined to 7.146 million in November, below the expected 7.648 million and down from 7.449 million in October, which was revised lower by more than 200,000 positions.

The Key Jobs Data Ahead

While Wednesday’s data were anticipated given the recent softening trend in the U.S. labor market, the most important figures are due Friday with the release of December’s official employment report.

Consensus estimates project the unemployment rate to have edged down to 4.5% from 4.6% in November, while nonfarm payroll growth is expected to reach around 70,000 jobs, up from the 64,000 created previously.

November’s unemployment reading marked the highest level in four years, though it was partially distorted by the 43-day federal government shutdown, which also disrupted household survey data collection in October. As a reminder, October’s unemployment rate was not published for the first time since the series began in 1948.

Looking ahead to 2026, the labor market is expected to act as both a headwind and a stabilizing force. Downward pressure stems largely from tariffs, which are placing significant strain on small businesses. Companies with 20 to 49 employees have not generated net job growth over the past two years, as cost-cutting efforts have resulted in near-zero hiring.

At the same time, layoffs remain remarkably low, a trend analysts expect to persist as long as large-cap corporate fundamentals remain solid—which continues to be the case.

The Fed’s Dilemma

Labor market strength or weakness is likely to be the decisive factor shaping future Federal Reserve policy. Weaker-than-expected employment data would likely prompt more rate cuts than the one or two reductions currently projected for this year.

These uncertainties are increasingly reflected within the Fed’s leadership, which is set to meet on January 27–28 amid elevated internal disagreement—particularly as Powell’s term as Fed Chair expires in May.

On Tuesday, Richmond Fed President Thomas Barkin struck a cautious tone, noting that tax cuts, deregulation, and lower interest rates could provide stimulus to the economy this year. However, he emphasized that future policy decisions must balance both sides of the Fed’s dual mandate: keeping unemployment below 4.5% while maintaining inflation at 2% annually.

Wall Street Closes Mostly Lower as Investors Focus on Key Economic Data

Posted on January 7, 2026 by Ignacio Teson

U.S. equities wobbled after weaker-than-expected labor market data, although technology stocks managed to stay in positive territory.

Wall Street closed mostly lower on Wednesday, January 7, as investors shifted their focus to a series of key economic indicators, moving past recent geopolitical tensions. Analysts noted that markets appear to be looking beyond the shock generated by last weekend’s U.S. intervention in Venezuela, which resulted in the capture of the country’s former president, Nicolás Maduro.

In this context, the Dow Jones Industrial Average fell 0.9% to 48,996.19 points, the S&P 500 slipped 0.3% to 6,921.53 points, while the Nasdaq Composite edged up 0.2% to 23,584.28 points.

[[SPX-graph]]

Key U.S. Economic Indicators Take Center Stage

U.S. private employers added fewer jobs than expected in December, although the figure marked a rebound from the sharp contraction seen the previous month. Private payrolls increased by 41,000 in the final month of 2025, compared with a decline of 29,000 in November, according to ADP data. Economists had forecast an increase of 49,000 jobs.

Meanwhile, another closely watched indicator is expected to show that job openings—a measure of labor demand—declined slightly in November to 7.61 million.

The health of the labor market remains a critical factor in recent Federal Reserve interest rate decisions. U.S. central bank policymakers cut borrowing costs aggressively throughout 2025, prioritizing a weakening labor outlook over persistent inflation signals.

Investors are also awaiting the release of a key gauge of U.S. services-sector activity. Services account for more than two-thirds of the U.S. economy, making the ISM data a key snapshot of economic conditions at the end of the fourth quarter.

Notable Stocks and Corporate Moves

The S&P 500 pared earlier gains after hitting a fresh record high earlier in the session, driven in part by renewed optimism surrounding artificial intelligence.

Alphabet Inc. Class A shares jumped more than 2% after Canaccord Genuity raised its price target to $390 from $330, citing confidence that AI-related investments will drive stronger growth.
Nvidia gained 1%, helping support the broader tech sector and offset weakness in Meta Platforms (-1.8%) and Apple (-0.8%).
Shares of Vertical Aerospace Ltd rose 1.5% after William Blair initiated coverage with an “Outperform” rating.

Oil Prices Slide, Drawing Investor Attention

Oil prices came under pressure after President Donald Trump announced Tuesday that the United States and Venezuela had reached an agreement allowing Caracas to export up to $2 billion worth of crude oil to Washington.

[[USOIL-graph]]

Earlier, Trump had demanded that Venezuela and interim president Delcy Rodríguez grant U.S. oil companies full access to the country’s vast energy sector, warning that failure to comply could trigger a renewed U.S. military intervention.

In a social media post, Trump stated that Venezuela would deliver between 30 million and 50 million barrels of “sanctioned” crude oil to the United States.

Oil Slides Toward $60 as European Energy Stocks Tumble

Posted on January 7, 2026 by Ignacio Teson

Oil prices extended their decline on Wednesday amid growing geopolitical uncertainty driven by Donald Trump’s plans regarding Venezuela’s oil reserves, pressuring global prices and dragging down energy stocks.

The Impact of Venezuela might be felt at the pumps. — The Impact of Venezuela might be felt at the Pumps.

Crude continued to slide as markets digested Trump’s proposal to seize Venezuelan oil reserves and his latest move involving Greenland, which together put a pause on the New Year rally. Brent crude futures fell 0.31% to $60.52 per barrel, while WTI dropped 0.6% to $56.78. This marked a third consecutive session of losses following the capture of Nicolás Maduro over the weekend.

Trump reiterated in recent hours that Venezuela would deliver up to 50 million barrels of oil to be sold at market prices. At the same time, uncertainty over what Trump might do next—and how China could respond if its interests are affected—remained top of mind for investors, even if difficult to fully price into most asset classes. This new geopolitical backdrop has introduced risks that markets have yet to fully reflect.

[[USOIL-graph]]

Sharp Declines in European Energy Stocks

The news weighed heavily on European oil stocks. Shares of Repsol fell as much as 2%, while TotalEnergies and Shell declined 2.3% and 2.4%, respectively. In contrast, Chevron traded up as much as 0.6% in Wall Street’s premarket session.

According to Trump, the proceeds from the oil sales would be controlled by his administration “to ensure they are used for the benefit of the people of Venezuela and the United States.” He added that he had instructed Energy Secretary Chris Wright to implement the plan immediately, noting that the oil would be shipped via storage vessels and delivered directly to U.S. ports. Trump also described the oil as “high quality” and “sanctioned.”

The Wall Street Journal reported on Tuesday that Trump plans to meet at the White House on Friday with executives from major U.S. oil companies—including Chevron, ConocoPhillips, and Exxon Mobil—as well as other domestic producers, to discuss “significant investments” in Venezuela’s oil sector. Chevron is currently the only major U.S. oil company operating in Venezuela and exported roughly 140,000 barrels per day in the fourth quarter of 2025, according to energy consultancy Kpler.

The most likely outcome, analysts say, is a boost to global economic activity from additional oil supply. While this is clearly negative for crude prices themselves, lower energy costs are broadly supportive for the global economic outlook. The downside, however, is that rising geopolitical uncertainty could ultimately overshadow any positive economic effects.

Gold Slips as Markets Reevaluate U.S.–Venezuela Developments

Posted on January 7, 2026 by Ignacio Teson

Like gold, other precious metals such as silver, platinum, and palladium also posted losses.

Gold’s Resilience Deepens as Rate-Cut Bets and Geopolitics Shape Outlook

Gold weakened as investors reassessed the situation following the U.S. military intervention in Venezuela, while a stronger dollar added further pressure to prices.

Spot gold fell 0.7% to $4,459.80 per ounce, after briefly touching a more-than-one-week high earlier in the session. On December 26, bullion reached a record high of $4,549.71, while U.S. gold futures for February delivery slipped 0.5% to $4,471.30.

[[XAU/USD-graph]]

Gold pressured by a stronger dollar and U.S. policy moves

The start of the year has been particularly volatile, making profit-taking and a reassessment of the Venezuelan situation appear timely.

On Tuesday, U.S. President Donald Trump unveiled a plan to refine and sell up to 50 million barrels of Venezuelan crude oil currently stranded in the country due to U.S. sanctions. At the same time, the dollar hovered near two-week highs, making dollar-priced metals more expensive for holders of other currencies.

Spot silver dropped 2.3% to $79.40 per ounce, retreating from its record high of $83.62 reached on December 29. Among other precious metals, platinum slid 6% to $2,297.56, pulling back from Monday’s all-time high of $2,478.50, despite having risen as much as 3% earlier in the session. Palladium also declined, falling 4.5% to $1,740.12.

Traditional markets

Market attention now turns to U.S. macroeconomic data, with investors focusing on Wednesday’s ADP private payrolls report and JOLTS job openings. The official employment report is due on Friday.

Major Wall Street indices traded lower in Wednesday’s premarket session, stepping back from Tuesday’s gains. As geopolitical tensions gradually fade from the forefront, U.S. economic indicators are once again taking center stage.

In this context, the S&P 500 was down 0.12% in premarket trading, while the tech-heavy Nasdaq Composite slipped 0.30%. The Dow Jones Industrial Average, meanwhile, edged 0.05% higher.

Among early movers, Albemarle (+2.4%), Regeneron (+1.9%), and Energy (+1.7%) led gains, while First Solar (-4.38%), Deckers Outdoor (-3.35%), and Newmont Goldcorp (-2.11%) posted the sharpest declines.

Record U.S. Debt Fuels Bitcoin’s Rise as an Alternative Asset

Posted on January 6, 2026 by Ignacio Teson

The world’s leading cryptocurrency is once again positioning itself as a hedge asset amid expectations of dollar depreciation.

U.S. national debt has reached a new all-time high, surpassing $38 trillion. Beyond the headline figure, the rapid pace of federal borrowing is reinforcing a narrative that is gaining traction among investors: the structural erosion of the dollar’s value and the growing appeal of alternative assets such as Bitcoin (BTC).

The U.S. economy continues to run persistently large fiscal deficits, driven by higher defense spending, expanded social programs, and the rising cost of servicing debt in a higher interest-rate environment. Interest payments alone are on track to exceed $1 trillion per year, becoming one of the fastest-growing items in the federal budget. This dynamic narrows fiscal flexibility and increases the likelihood that long-term adjustment will come through inflation or currency depreciation.

[[BTC/USD-graph]]

Bitcoin gains ground amid rising U.S. debt

Against this backdrop, Bitcoin is once again emerging as a hedge against fiscal deterioration. Its fixed supply—capped at 21 million coins—stands in stark contrast to the steady expansion of U.S. debt and the monetary base.

For a growing segment of the market, record levels of indebtedness strengthen the case that the dollar faces structural pressures that are difficult to reverse without significant economic costs. The logic is straightforward: the higher the debt burden, the more dependent the system becomes on accommodative monetary policy to support Treasury financing. That dependence fuels expectations of future easing cycles—an environment that has historically favored scarce, non-sovereign assets like BTC.

It is no coincidence that each new peak in U.S. liabilities revives the debate over Bitcoin’s role as “digital gold.”

A more institutional crypto market

Rising debt levels are also coinciding with deeper institutional adoption of crypto assets. Exchange-traded funds, investment banks, and asset managers are increasingly incorporating Bitcoin into diversified portfolios—not merely as a speculative bet, but as a macro hedge.

For these investors, U.S. fiscal deterioration underscores the need for assets that are not tied to political decision-making. That said, the impact is neither immediate nor linear. Bitcoin remains sensitive to global liquidity conditions, real interest rates, and overall risk appetite.

In the short term, elevated debt can coexist with restrictive monetary policy that caps performance. Over the medium to long term, however, the record level of U.S. debt reinforces Bitcoin’s underlying narrative.

Venezuela: Morgan Stanley and Wells Fargo Forecast Its Impact

Posted on January 6, 2026 by Ignacio Teson

After the U.S. intervention that led to Maduro’s capture, markets assess the impact on the energy sector.

New York, September 28, 2016: A Wells Fargo retail location in Manhattan.

The world is still digesting the U.S. military intervention in Venezuela, which ended with the capture of President Nicolás Maduro. Among the many consequences of this action is a significant shift in the energy sector, with both economic and geopolitical implications.

Venezuela holds the largest proven oil reserves in the world, meaning that U.S. involvement in its production could reshape global energy dynamics. Against this backdrop, Morgan Stanley and Wells Fargo—two of Wall Street’s leading investment banks—have outlined their views on the geopolitical outlook and the future of Venezuelan energy markets.

Venezuelan stocks, bonds, and oil

Morgan Stanley expects the U.S. intervention to primarily affect Venezuelan bonds (VENZ and PDVSA), forecasting price gains of up to five points “as markets price in a higher probability of debt restructuring and potentially higher recovery rates.” However, the bank anticipates stronger performance over time as spreads compress relative to sovereign benchmarks.

“The impact on oil prices is more nuanced: short-term risks of production disruptions are likely to be offset by the prospect of higher output in the medium term if political conditions stabilize. Gold prices also show an upward bias due to heightened geopolitical uncertainty,” Morgan Stanley noted in its latest client report.

The bank added that well rehabilitation efforts could significantly boost output, potentially restoring production to around 2 million barrels per day—levels last seen in the mid-2010s—within one to two years.

Wells Fargo, meanwhile, struck a more cautious tone. “We do not believe that the removal of Nicolás Maduro by the United States will act as a catalyst capable of destabilizing global or Latin American financial markets, nor oil prices,” the bank stated.

It also noted that Venezuelan sovereign and PDVSA debt have been among the best-performing assets since the Trump administration took office in January 2025, nearly doubling in value over the past 12 months. “While most emerging-market assets rallied last year, the degree of outperformance in Venezuelan assets reflects, in our view, growing market confidence in a potential regime-change scenario.”

Geopolitical realignment

On the geopolitical front, Wells Fargo highlighted that Latin America is already deeply divided between countries aligned with the United States and those closer to China, and that Washington’s role in Maduro’s removal is likely to exacerbate these fractures.

Current alignments include Argentina leaning toward the U.S. and Nicaragua toward China, but shifts may occur. Colombia and Brazil could move closer to China following tensions with Washington, while Chile may gravitate toward the U.S. after the election of José Antonio Kast as president.

In this context, Wells Fargo warned that “the global economy is likely to continue facing negative consequences stemming from fragmentation and bloc formation. The magnitude of the adverse impact will depend on which countries align with which blocs, but in aggregate, lower global GDP growth is the outcome of a fractured world economy.”