Above the Noise: Look beyond distracting headlines

Key takeaways

Bullish on stocks

Markets are broadening despite the incessant noise from ongoing geopolitical maneuvering and Fed independence.

US Treasuries

We maintain our view that investors will gradually diversify away from US assets, suggesting continued US dollar weakness.

AI perspective

Artificial intelligence has challenges that require thoughtful regulation, but the potential benefits may be extraordinary.

Hall of Fame football coach Bill Parcells, during the New York Giants’ 1986 title run, was asked by a reporter if he was scared to play Washington for the third time. Parcells replied, “Let me tell you what I’m scared of: Snakes, spiders, and the IRS.”

I’m so often asked what scares me about the ongoing market advance that I’ve been tempted to borrow Parcells’ line.

Venezuela? A small economy.¹ Iran? Same.²

Federal Reserve (Fed) independence? It’s critical, but I won’t be concerned unless inflation expectations break meaningfully above current levels.³

Greenland? Tariffs? It’s not ideal, but we’ve navigated tariffs before. Following Liberation Day, a “yippie” bond market had the Trump administration pausing tariffs, and the S&P 500 Index posting its third-best one-day return in 30 years.⁴

So, what does scare me?

It’s not snakes and spiders. I’ll be concerned when signs emerge of excessive leverage building across the US economy, inflation expectations drifting meaningfully outside the Fed’s comfort zone, a clear rollover in economic activity, credit spreads blowing out, and bankers tightening lending standards.⁵

None of that’s happening today.

Until it does, I remain bullish on stocks, despite the incessant noise in the headlines and the ongoing geopolitical maneuvering. 

It may be confirmation bias but…

… the much‑anticipated broadening of the US stock market does appear to be taking hold. This pattern is typical as the Fed eases policy and economic activity improves. Historically, during easing cycles, the equal‑weight S&P 500 Index (a proxy for broader market participation) has tended to outperform the market‑cap‑weighted index. (See chart below.) Early signs suggest this dynamic is emerging. Market cap has still outperformed equal weight over the past year, but that gap has been narrowing.⁶

It was said (part 1)

“Kevin’s too good on television to send to the Fed.”

—President Donald Trump⁷

President Trump’s recent comments about Kevin Hassett, long viewed as the perceived front‑runner for the Fed Chair role, effectively reopened the competition for the top job, with candidates such as Kevin Warsh and Christopher Waller emerging as leading contenders. Alas, my name still hasn’t appeared on any lists. I’m beginning to think I’m not in the running for the final rose!

As we’ve incessantly said, Fed independence remains critical. It has been modestly concerning to see inflation expectations drift higher in January, even if they’re within the Fed’s comfort zone.⁸ Investors should remember that the next Fed Chair will not wield unilateral control, because the governors generally lack deep political ties, the Biden‑appointed members remain in place, and Trump appointees like Waller and Michelle Bowman have been voting in line with the current Fed. This bears watching (pun intended!), as rising concerns over Fed independence represent the primary downside risk to our outlook. Nonetheless, we continue to expect the institution’s integrity to hold.

It was said (part 2)

“Europe owns Greenland, it also owns a lot of Treasuries.”

—George Saravelos, Deutsch Bank FX Strategis⁹

George Saravelos makes an interesting argument. There’s $3.5 trillion of US Treasury debt held in Europe, which is 9.8% of US outstanding debt.¹⁰ In fact, Europe owns far more than China, even though Chinese ownership of US debt has long been viewed as a powerful potential geopolitical tool.

It’s important to keep this in perspective, however. There’s not going to be a mass sale of US assets by European governments.

• First, most of the US assets held in Europe are owned by the private sector, including insurance companies, pension plans, banks, and individual citizens. (The Danish pension fund announced that it will divest itself of $100 million in US Treasuries, representing 0.4% of its account and 0.00026% of total US Treasury debt.¹¹)
• Second, they’d be selling against themselves, because it’s unclear who’d be willing to take the other side of such a trade.
• Third, the US remains the largest, deepest, and most liquid market in the world, which makes reallocating elsewhere extremely difficult.

The conclusion is that the current debate over Greenland doesn’t point to a sudden liquidation of US Treasuries. Instead, we maintain our view that investors will likely gradually diversify away from US assets, which suggests continued weakness in the US dollar. This supports our expectation that international assets will likely outperform in 2026.

Think/rethink

Think: Geopolitical events have a meaningful impact on the stock market.

Rethink: The average one-year return of the S&P 500 Index following a peak in the Geopolitical Risk Index is 15.40%.¹²

Phone a friend

Why are Japanese bond yields surging, and should investors be concerned? I posed the question to Rob Waldner, Chief Strategist and Head of Macro Research for Invesco Fixed Income. His response:

“Japanese bond yields¹³ have jumped on the back of a much larger‑than‑expected fiscal package and fears that the Bank of Japan (BoJ) has been too slow to raise rates, despite the December rate hike. Prime Minister Sanae Takaichi’s stimulus, equivalent to nearly 3% of gross domestic product (GDP),¹⁴ raised concerns about increased bond issuance and future fiscal expansion, pushing yields higher.

Markets now view the central bank as behind the curve, a perception reinforced by the unusual combination of rising rates and a weak currency.¹⁵ This dynamic is likely to be resolved, but will likely entail increased market volatility, including further increases in Japanese bond yields, until the BoJ is forced to tighten more aggressively. That would then likely be followed by stabilization and a rally in the yen.”

On the road again

My travels took me to Phoenix, where I was on an agenda with the technology and science writer and CBS News Correspondent David Pogue. David’s session focused on artificial intelligence (AI), and while he acknowledged the many concerns surrounding tech, he reminded us that society has always feared new innovations. Remember when it was believed that traveling 50 miles per hour on a steamship would drive a person mad?

David made clear that although AI will bring challenges that require thoughtful regulation, the potential benefits are likely to be extraordinary. He delivered on his promise to end with mind-blowing examples, ranging from AI interpreting a confusing parking sign to David Beckham appearing in an advertisement speaking multiple languages he doesn’t know.

But the example that truly struck me was Google AI releasing structural predictions for nearly 200 million proteins known to science. When you know the structure of a protein thought to be involved in disease, it increases the probability of discovering a drug molecule that will bind to it and alter its behavior, hopefully curing or mitigating the disease. Before this breakthrough, it’s estimated that scientists had known the structure of only 0.085% of all known proteins. David believes this development will unlock transformational medical breakthroughs, including treatment and cures for many of the most debilitating illnesses.

—

Originally Posted January 20, 2026

Above the Noise: Look beyond distracting headlines by Invesco US

 Footnotes

• 1Source: World Bank, Dec. 31, 2024. Venezuela’s gross domestic product (GDP) in current US dollars was $119 billion at the end of 2024.
• 2Source: World Bank, Dec. 31, 2024. Iran’s gross domestic product (GDP) in current US dollars was $475 billion at the end of 2024.
• 3Source: Bloomberg, L.P., based on the 3-year US Treasury breakeven rate. A breakeven inflation rate is a market-derived estimate of future inflation, calculated by comparing the yield on a standard government bond (nominal) to the yield on a Treasury Inflation-Protected Security (TIPS) of the same maturity.
• 4Source: Bloomberg, L.P. Dec. 31, 2025. The S&P 500 Index advanced by 9.5% on April 9, 2025. The two best days in the market over the past 30 years ended Dec. 31, 2025, are Oct. 13, 2008 (+11.6%) and Oct. 28, 2008 (+10.8%).
• 5Source: Bloomberg, L.P., Jan. 20, 2026, based on the year-over-year percent change in nonfinancial us corporate borrowing, the 3-year US Treasury inflation breakeven, the Conference Board Leading Economic Indicator, the option-adjusted spread (OAS) of the Bloomberg US Corporate Bond Index, and the Senior Loan Officer Opinion Survey (SLOOS) net percentage of bankers tightening lending standards to small/mid-sized businesses.
• 6Source: Bloomberg, L.P. and US Federal Reserve, Jan. 19, 2026. The S&P 500 Index is a market-capitalization-weighted index of the 500 largest domestic US stocks. The S&P 500 Equal Weight Index is an equally weighted index of the 500 largest domestic US stocks. Investments cannot be made directly in an index. Past performance does not guarantee future results.
• 7Source: Reuters, “Trump tells Hassett he may want to keep him at White House,” Jan. 16, 2026.
• 8Source: Bloomberg, L.P., Jan. 20, 2026, based on the 3-year US Treasury breakeven rate.
• 9Source: Business Insider, “Trump’s Greenland play puts Europe’s $8 trillion US bonds and equities in the spotlight,” Jan. 20, 2026.
• 10Source: Deutsche Bank, Dec. 31, 2025.
• 11Source: Bloomberg, US Treasury, AkademikerPension, Jan. 20, 2026.
• 12Source: Economic Policy Uncertainty, Dec. 31, 2024. The Caldara and Iacoviello GPR index reflects automated text-search results of the electronic archives of 10 newspapers: Chicago Tribune, the Daily Telegraph, Financial Times, The Globe and Mail, The Guardian, the Los Angeles Times, The New York Times, USA Today, The Wall Street Journal, and The Washington Post. Caldara and Iacoviello calculate the index by counting the number of articles related to adverse geopolitical events in each newspaper for each month (as a share of the total number of news articles). Investments cannot be made directly into an index. Past performance does not guarantee future results. The Geopolitical Risk Index peaks were Oct. 1962, Jun. 1967, Oct. 1973, Dec. 1979, June 1982, Aug. 1990, Feb. 1991, Oct. 2001, March 2003, March 2022, and Oct. 2023.
• 13Source: Bloomberg, L.P. Jan. 20, 2026. The yield on the 30-year Japanese government bond has climbed from 3.38% at the end of 2025 to 3.85% on Jan. 20, 2026.
• 14Source: Statistics Bureau of Japan, Dec. 31, 2025.
• 15Source: Bloomberg, L.P. Jan. 20, 2026. At the start of Oct. 2025, the exchange rate was 147 Japanese yen for 1 US dollar. As of Jan. 20, 2026, the exchange rate is 158 Japanese yen for 1 US dollar.

Important information

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Image: Sarah Ehlen / Stocksy

All investing involves risk, including the risk of loss.

Past performance does not guarantee future results.

Investments cannot be made directly in an index.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Artificial intelligence (AI) technology companies are sensitive to specific risks such as small markets, business cycle changes, economic growth, technological progress, obsolescence, and regulation. These companies may have limited products, markets, resources, or personnel, making their securities more volatile, especially for smaller start-ups. Rapid technological changes can adversely affect their results. AI companies often rely on patents, copyrights, trademarks, and trade secrets to protect their technology, but there’s no guarantee these protections will be sufficient. Significant research and development (R&D) spending doesn’t ensure product or service success.

The Bloomberg US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes US dollar-denominated securities publicly issued by US and non-US industrial, utility, and financial issuers.

The Conference Board Leading Economic Index (LEI) is an economic indicator used for forecasting changes in the business cycle based on a composite of 10 underlying components.

Credit spread is the difference in yield between bonds of similar maturity but with different credit quality.

Diversification does not guarantee a profit or eliminate the risk of loss.

Fixed income investments are subject to the credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.

The federal funds rate is the rate at which banks lend balances to each other overnight.

The Geopolitical Risk Index measures adverse geopolitical events based on a tally of articles covering geopolitical tensions from 10 different newspapers.

Gross domestic product (GDP) is a broad indicator of a region’s economic activity, measuring the monetary value of all the finished goods and services produced in that region over a specified period of time.

Inflation is the rate at which the general price level for goods and services is increasing.

Leverage measures a company’s total debt relative to the company’s book value.

Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.

Option-adjusted spread (OAS) is the yield spread that must be added to a benchmark yield curve to discount a security’s payments to match its market price, using a dynamic pricing model that accounts for embedded options.

The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues. Review.

The Senior Loan Officers Opinion Survey (SLOOS) is conducted by the US Federal Reserve to provide qualitative and limited quantitative information on bank credit availability and loan demand, as well as on evolving developments and lending practices in the US loan markets.

Spread represents the difference between two values or asset returns.

In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic, and political conditions.

Tightening monetary policy includes actions by a central bank to curb inflation.

Treasury Inflation-Protected Securities (TIPS) are US Treasury securities that are indexed to inflation.

The opinions referenced above are those of the author as of Jan. 21, 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.