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[2026 Outlook] Plan Ahead! Share the Investment Opportunities You Are Optimistic About
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joined discussion · Jan 16 15:20

Strong employment reinforces interest rate outlook expectations; where is the narrative for US stocks shifting?

The latest data released by the US shows that, as of January 10, 2026, the number of initial jobless claims in the US was 198,000, a decrease of 9,000 from the previous week, contrasting with market expectations of an increase to 215,000, and marking the second-lowest level in two years. During the same period, the number of continued jobless claims dropped by 19,000 to 1.884 million around the New Year, consistent with market expectations, continuing the downward trend since October of last year but still above the average level since 2022. This reflects a robust performance of the US economy, further solidifying the market's expectation that the Federal Reserve will keep interest rates unchanged during its January 28, 2026 meeting, maintaining the federal funds rate at 3.50%-3.75%. The likelihood of this outcome rose from 88.9% a week ago to the current 95.0%, as shown in the chart below. Driven by this, the US Dollar Index strengthened, as shown in the chart below, rising from 99.1 to 99.3 and remaining stable. Amid a stronger dollar and signs of easing geopolitical tensions, oil prices retreated, as shown in the chart below. Brent crude futures fell from $66.84 on January 15 to approximately $63.63 now, marking a drop of over 4.8%. Gold prices also pulled back from above $4,630 to below $4,600. Interestingly, the recent movement of the yen has been somewhat subtle. Although expectations that the Bank of Japan may raise interest rates have not subsided, the general market consensus remains that a weaker yen is the underlying tone. Japanese authorities may be consciously maintaining a weaker yen to protect Japan’s trade advantages...
The latest data released by the US shows that, as of January 10, 2026, the number of initial jobless claims in the US was 198,000, a decrease of 9,000 from the previous week, contrasting with market expectations of an increase to 215,000, and marking the second-lowest level in two years.
During the same period, the number of continued jobless claims dropped by 19,000 to 1.884 million around the New Year, consistent with market expectations, continuing the downward trend since October of last year but still above the average level since 2022.
This reflects the strong performance of the U.S. economy, and the market has further confirmed expectations that the Federal Reserve will keep interest rates unchanged during its January 28, 2026 policy meeting, with the expected proportion maintaining the federal funds rate at 3.50%-3.75% rising from 88.9% a week ago to the current 95.0%, as shown in the figure below.
The latest data released by the US shows that, as of January 10, 2026, the number of initial jobless claims in the US was 198,000, a decrease of 9,000 from the previous week, contrasting with market expectations of an increase to 215,000, and marking the second-lowest level in two years. During the same period, the number of continued jobless claims dropped by 19,000 to 1.884 million around the New Year, consistent with market expectations, continuing the downward trend since October of last year but still above the average level since 2022. This reflects a robust performance of the US economy, further solidifying the market's expectation that the Federal Reserve will keep interest rates unchanged during its January 28, 2026 meeting, maintaining the federal funds rate at 3.50%-3.75%. The likelihood of this outcome rose from 88.9% a week ago to the current 95.0%, as shown in the chart below. Driven by this, the US Dollar Index strengthened, as shown in the chart below, rising from 99.1 to 99.3 and remaining stable. Amid a stronger dollar and signs of easing geopolitical tensions, oil prices retreated, as shown in the chart below. Brent crude futures fell from $66.84 on January 15 to approximately $63.63 now, marking a drop of over 4.8%. Gold prices also pulled back from above $4,630 to below $4,600. Interestingly, the recent movement of the yen has been somewhat subtle. Although expectations that the Bank of Japan may raise interest rates have not subsided, the general market consensus remains that a weaker yen is the underlying tone. Japanese authorities may be consciously maintaining a weaker yen to protect Japan’s trade advantages...
Driven by this, the U.S. Dollar Index strengthened, as shown in the figure below, rising from 99.1 to 99.3 and remaining stable.
The latest data released by the US shows that, as of January 10, 2026, the number of initial jobless claims in the US was 198,000, a decrease of 9,000 from the previous week, contrasting with market expectations of an increase to 215,000, and marking the second-lowest level in two years. During the same period, the number of continued jobless claims dropped by 19,000 to 1.884 million around the New Year, consistent with market expectations, continuing the downward trend since October of last year but still above the average level since 2022. This reflects a robust performance of the US economy, further solidifying the market's expectation that the Federal Reserve will keep interest rates unchanged during its January 28, 2026 meeting, maintaining the federal funds rate at 3.50%-3.75%. The likelihood of this outcome rose from 88.9% a week ago to the current 95.0%, as shown in the chart below. Driven by this, the US Dollar Index strengthened, as shown in the chart below, rising from 99.1 to 99.3 and remaining stable. Amid a stronger dollar and signs of easing geopolitical tensions, oil prices retreated, as shown in the chart below. Brent crude futures fell from $66.84 on January 15 to approximately $63.63 now, marking a drop of over 4.8%. Gold prices also pulled back from above $4,630 to below $4,600. Interestingly, the recent movement of the yen has been somewhat subtle. Although expectations that the Bank of Japan may raise interest rates have not subsided, the general market consensus remains that a weaker yen is the underlying tone. Japanese authorities may be consciously maintaining a weaker yen to protect Japan’s trade advantages...
Amid a stronger dollar and signs of easing geopolitical tensions, oil prices retreated, as shown in the figure below. Brent crude futures fell from $66.84 in early trading on January 15th to around $63.63 now, marking a drop of over 4.8%. Gold prices also retreated from above $4,630 to below $4,600.
The latest data released by the US shows that, as of January 10, 2026, the number of initial jobless claims in the US was 198,000, a decrease of 9,000 from the previous week, contrasting with market expectations of an increase to 215,000, and marking the second-lowest level in two years. During the same period, the number of continued jobless claims dropped by 19,000 to 1.884 million around the New Year, consistent with market expectations, continuing the downward trend since October of last year but still above the average level since 2022. This reflects a robust performance of the US economy, further solidifying the market's expectation that the Federal Reserve will keep interest rates unchanged during its January 28, 2026 meeting, maintaining the federal funds rate at 3.50%-3.75%. The likelihood of this outcome rose from 88.9% a week ago to the current 95.0%, as shown in the chart below. Driven by this, the US Dollar Index strengthened, as shown in the chart below, rising from 99.1 to 99.3 and remaining stable. Amid a stronger dollar and signs of easing geopolitical tensions, oil prices retreated, as shown in the chart below. Brent crude futures fell from $66.84 on January 15 to approximately $63.63 now, marking a drop of over 4.8%. Gold prices also pulled back from above $4,630 to below $4,600. Interestingly, the recent movement of the yen has been somewhat subtle. Although expectations that the Bank of Japan may raise interest rates have not subsided, the general market consensus remains that a weaker yen is the underlying tone. Japanese authorities may be consciously maintaining a weaker yen to protect Japan’s trade advantages...
Interestingly, the recent movement of the yen has been somewhat subtle. Although expectations of a potential interest rate hike by the Bank of Japan have not subsided, the general market consensus remains that a weak yen is still the underlying tone. Japanese authorities may consciously maintain a weak yen to protect Japan's trade advantages. Meanwhile, Japan’s fiscal deficit, which far exceeds that of other developed countries, also does not support a stronger yen.
Thus, against the backdrop of a strong dollar, the yen against the dollar briefly rose (before falling back), which was somewhat confusing. The reason might be related to a technical rebound following its continuous decline, as well as market expectations regarding whether the Bank of Japan will keep interest rates unchanged next week.
The latest data released by the US shows that, as of January 10, 2026, the number of initial jobless claims in the US was 198,000, a decrease of 9,000 from the previous week, contrasting with market expectations of an increase to 215,000, and marking the second-lowest level in two years. During the same period, the number of continued jobless claims dropped by 19,000 to 1.884 million around the New Year, consistent with market expectations, continuing the downward trend since October of last year but still above the average level since 2022. This reflects a robust performance of the US economy, further solidifying the market's expectation that the Federal Reserve will keep interest rates unchanged during its January 28, 2026 meeting, maintaining the federal funds rate at 3.50%-3.75%. The likelihood of this outcome rose from 88.9% a week ago to the current 95.0%, as shown in the chart below. Driven by this, the US Dollar Index strengthened, as shown in the chart below, rising from 99.1 to 99.3 and remaining stable. Amid a stronger dollar and signs of easing geopolitical tensions, oil prices retreated, as shown in the chart below. Brent crude futures fell from $66.84 on January 15 to approximately $63.63 now, marking a drop of over 4.8%. Gold prices also pulled back from above $4,630 to below $4,600. Interestingly, the recent movement of the yen has been somewhat subtle. Although expectations that the Bank of Japan may raise interest rates have not subsided, the general market consensus remains that a weaker yen is the underlying tone. Japanese authorities may be consciously maintaining a weaker yen to protect Japan’s trade advantages...
Although the Bank of Japan may follow the standard operation of most global central banks currently cutting interest rates and shift towards raising rates, after adjusting for inflation, Japan’s real interest rates remain in negative territory. The yen has not strengthened due to the rate hike cycle, with USD/JPY still hovering at a weak level of around 158.
Meanwhile, Japan's stock market continues to strengthen and repeatedly hits new highs, as a weak yen benefits export-oriented Japanese listed companies. Moreover, there is speculation that Masanobu Takahashi might call for an early election next month to push forward more aggressive fiscal spending plans, further pressuring the yen.
However, it should be noted that these economic stimulus measures will benefit the growth prospects of Japanese companies, further pushing up the valuations of Japanese listed companies, which is why the Japanese stock market keeps performing well.
U.S. Stock Narrative Shifting to AI and Financial Stocks?
After expectations for the Fed's interest rate decision this month stabilized, the focus of U.S. stocks shifted to corporate fundamentals.
$Taiwan Semiconductor (TSM.US)$ The recently announced Q4 2025 results showed strong performance driven by AI demand.
More importantly, during the earnings call, when asked whether their clients' demand for AI computing power was genuine, Taiwan Semiconductor's management stated that the company would invest between $52 billion and $56 billion in capital expenditures in 2026. If they were not cautious, it would pose a significant risk to Taiwan Semiconductor. Therefore, over the past three to four months, they spent considerable time communicating with their clients and their clients’ customers to ensure the demand was real. Their responses satisfied C. C. Wei, and these clients demonstrated evidence showing that AI genuinely benefits their businesses. Hence, he believes AI is not only real but is also starting to integrate into people’s daily lives.
Wall Street has recently been concerned about a potential bubble in AI investments, which has pressured the stock prices of large U.S. tech companies. Encouraged by Taiwan Semiconductor's management confirming the genuineness of AI, these tech stocks rebounded. Taiwan Semiconductor's largest client $NVIDIA (NVDA.US)$ rose 2.13% in a single day, maintaining its market cap at $4.55 trillion; Advanced Micro Devices (AMD.US) increased by 1.93%, reaching a market value of $371.1 billion.
Driven by Taiwan Semiconductor’s better-than-expected outlook, other peers in the upstream supply chain as well as Taiwan Semiconductor’s own suppliers saw even stronger share price movements. Applied Materials (AMAT.US) surged 5.69%, Lam Research (LRCX.US) jumped 4.16%, ASML Holding (ASML.US) soared 5.37%, and SanDisk (SNDK.US), benefiting from a shortage of memory chips, rose another 5.53%. The stock’s cumulative increase year-to-date has reached 72.40%, making it the best-performing component in the S&P 500 index.
Overnight, Wall Street’s sentiment towards AI investment seemed to shift from pessimism to optimism, but this emotional reaction remains fickle and could reverse at any time.
On the other hand, investment banks that recently announced earnings also showed very strong performance, but not due to investment banking activities—it was because of trading operations, similar to JPMorgan (JPM.US). $Morgan Stanley (MS.US)$ Morgan Stanley achieved robust growth driven by better-than-expected fixed income and trading revenue. Unlike JPMorgan’s decline in investment banking, Morgan Stanley's investment banking benefited from a surge in M&A and IPO activities in 2025, delivering impressive performance, resulting in a 5.78% jump in its share price.
Another investment bank that announced quarterly results $Goldman Sachs (GS.US)$ surged 4.63%, leading gains on the Dow Jones. Market volatility propelled Goldman Sachs’ equity business revenue up 25% year-over-year, while fixed income, forex, and commodities trading revenue grew 12%. Stable investment banking operations drove its quarterly fee income up 25%, and M&A deals boosted advisory revenue by 41%.
Conclusion
Currently, as the path of the Federal Reserve's interest rate policy becomes clearer and geopolitical tensions begin to ease, the macro narrative of the market has temporarily given way to a micro-level examination of listed companies' fundamentals. However, this does not mean the market has entered a stable period. Volatility remains a constant backdrop, with investors’ sentiment and consensus still fragile. Any new “whiff of change” — whether it be unexpected economic data, shifts in policy signals, or the escalation of geopolitical events — could swiftly overturn the existing narrative and trigger a repricing of market direction.
Author: Mao Ting
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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