Economic Pulse: January 2026
Executive Summary
Phew. The start of the year may have been the most eventful month in recent market history. (At least since I've started working on this project.) The US military has captured Venezuelan President Maduro on January 3rd, sparking a global discussion about legality and drastic change in the interpretation of "sovereign nation". (Which happened a few times last year as well.)
While manufacturing broke back into expansion for the first time in a year (would not interpret this too strongly), the benchmark labor revision erased nearly 900,000 jobs from 2025.
This and many AI capex guidance "explosions", a new FED nomination to succeed Powell, and markets? Still finished the month green. It's becoming harder and harder to understand the sheer amount of liquidity available to purchase equities through uncertainty these days.
Big Picture: Manufacturing Rebound, Jobs Data Rewritten
Manufacturing is growing again. The ISM Manufacturing PMI rose to 52.6, it's first time to revisit a reading above 50 for a whole year. New orders jumped to 57.1, up about 10 points. But this comes on the back of a big caveat (imho): the tariff policies announced by the US government are likely to have triggered a huge about of "front-running" to fill stock piles before they go into effect in the various affected industries globally. Until we see this hold steady, I'd not interpret it as genuine "organic" demand. Services held steady at 53.8.
Now the big data point of the month: the labor market got a (crazy?) revision. While January payrolls data was a strong +130,000 (strongest release for over a year), the headline was completely overshadowed by the annual revision, slashing total 2025 employment growth from +584,000 to just +181,000 (= 898,000 jobs !) This completely destroyed the "resilient labor market" narrative we heard from the US government throughout the year.
The Fed held at 3.50–3.75% with Powell saying it's "hard to look at the data and say that policy is significantly restrictive right now."
Inflation dropped to 2.4% YoY — but the October data gap continues to distort the interpretation and geopolitical interventions (see below) are threatening to throw inflation off the track to target.
Venezuela: Operation Absolute Resolve
The US military has captured Venezuelan president Maduro on January 3 and flew him to a New York prison on narco-terrorism charges. The Dow started rallying 595 points the following Monday on bets that Chevron (+7%) and Exxon (+4%) will be coming out winners and developing Venezuelan oil infrastructure with US government guarantees.
To me, the bigger market question is whether this sets a precedent for further US interventions, particularly given the escalating rhetoric toward Iran.
Q4 205 Earnings: AI Capex exploding
Q4 2025 earnings are coming in hot, but to me the real story is capex guidance: Meta alone guided $115–135B for 2026. The combined hyperscaler AI spend for the year is tracking well above $600B. (!?!?) The market is rewarding revenue growth but has now started to punish these capex accelerations with Microsoft falling 6.6% post-earnings on Azure deceleration concerns.
What does it mean for us?
The Sector Navigator's AI-driven momentum leaders are pulling away even faster, but we're seeing cracks in how the market rewards that leadership. Revenue beats get cheered; capex expansions get punished and sold.
The Momentum Chaser will need to navigate a market that's hitting new highs and starting to doubt the return on its largest-ever investment cycle at the same time. The February rebalance could reflect the manufacturing recovery, but the benchmark revision means the macro backdrop is much weaker than previously assumed.
Data Sources:
BLS. Consumer Price Index (January 2026, released February 2026)
BLS. Employment Situation & Benchmark Revision (January 2026, released February 2026)
Federal Reserve. FOMC Statement (January 28, 2026)
ISM. Manufacturing & Services PMI (January 2026)
IMF. World Economic Outlook Update (January 19, 2026)
World Bank. Global Economic Prospects (January 13, 2026)
FactSet. S&P 500 Earnings Season Update (January 30, 2026)
CFR. US Confrontation With Venezuela (January 2026)