S&P 500 and Dollar Congestion Face CPI, Supreme Court Tariff Decision, JPMorgan Earnings and More

The first full week of trade in 2026 is behind us and there is no distinct commitment to trend from the global market’s benchmarks. The S&P 500 earned a record high without a trend while the Greenback continues its slow recovery. Another round of event risk may add conviction to trend. 

Talking Points:

• The S&P 500 closed at a record high close – joined by a range of global indices at or near records of their own – though a clear guide for enthusiasm remains elusive
• A moderate recovery for the Dollar seems to contradict fundamental concerns associated to a growing deficit outlook, geopolitical antagonism and the ‘diversification’ narrative
• Top scheduled event risk in the week ahead includes: US CPI, earnings from JPM and TSM as well as a possible Supreme Court ruling on tariffs

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Technical Reticence Confronts Fundamental Instigation

We have passed the first full week of the 2026 and there remains a general bullish course setting as far as ‘risk appetite’ in the markets is concerned, but the lack of conviction that plagued the final weeks and months of the past year remains an indelible feature of our landscape. While extremes in market price – like the record highs in the major US indices – can pose a tension that may need to be eventually ‘resolved’ against traditional metrics of ‘value’, there is far less urgency to normalize relative price as compared to measures of activity. On the activity front, conditions are very staid. Accessible implied measures of volatility are notably deflated.

The VIX volatility index has trended towards sanguine levels over months – though the longer tenor gauge like the 12-month measure has trended higher over that same period. Seeing this calm tangibly at work in the market, we have seen expectations for short-term charge around event risk like last week’s NFPs (via the 1-day VIX) or anticipation for the upcoming earnings release (through implieds from JPM options) notably capped compared to more active historical periods. It can be more difficult to shake markets from this sort of anchored complacency.

Chart of S&P 500 Index Overlaid with VIX 1-Month to 1-Year Spread (Daily)  

Source: TradingView.com; Standard & Poor’s

 

However, the clear technical definition will eventually find its fundamental motivation to at least clear impending technical barriers that require resolution purely from impending terminal points. The S&P 500 is a good example of closing barriers on its daily chart. Price swings from November have progressively contracted into shorter lived switch backs between bullish and bearish control. Aligning to the larger trend from the past nine months, the bullish legs of the congestion have earned modest progression in fresh cycle highs with each iteration, and ultimately leading to this past Friday’s record-high close. 

Though this is progress, it is marginal with the floor of support through this three-month congestion rising up at a much faster pace. This leads to a so-called ‘ascending wedge’ formation which covers less than 100 points at its current path, which is less than double the 20-day average true range for the index at 56 points. This is just one example of a technical congestion that is primed for resolution. Without discrete provocation, such patterns are more likely to end (break) according to the ‘path of least resistance’. To generate the more unexpected technical outcome – and certainly to do so with any level of conviction or follow through – a clear and impactful fundamental motivation is an important market usher for muddled sentiment.

Chart of S&P 500 Index with 20-Day ATR (Daily)  

Source: TradingView.com; Standard & Poor’s

 

What Fundamental Light is the Dollar Following?

Are the global markets ready to align behind a critical fundamental theme again now that we are moving earnestly into the new year? And, if we are to take up a guiding light, will it be one of the familiar north stars from this past year or something completely new and unpredictable? There are countless drivers and story lines to wade through from traditional economics, emergent headlines and loosely ominous potential grey swans just outside the frame of focus. 

In the absence of a core and universal driver, individual markets, regions and assets will look to idiosyncratic developments. With that kind of environment, it is best to focus on a target market, familiarize oneself with the particulars of its fundamental landscape, monitor scheduled updates and set expectations of smaller and slower market moves. Alternatively, the re-emergence of a systemic motivator can override the inertia, revive correlations and feed momentum. 

In monitoring some of the more prominent and consistent fundamental themes, I believe the US Dollar is a particularly useful bellwether for traders and investors for most major markets to keep tabs on. The ‘greenback’ has advanced 8 of the past 10 trading days, but it has traversed limited territory over that time frame. Over the past 8 months, the currency has consolidated in a limited price band between 100.40 and 96.20 – the smallest range since March 2020 (on a rolling 160-day historical range basis) and developing an ‘inverse head and shoulders’ pattern in the meantime. 

Looking for the spark to relieve the build-up in pressure; the prevailing matters to watch for are: meaningful changes in monetary policy expectations; agitation along the lines of the currency’s particular ‘safe haven’ status or a return to the trade- and geopolitical-motivated isolationism spurring diversification into other currencies. The correlation to the implied Fed cuts through 2026 (monetary policy) and VIX (safe haven demand) have oscillated substantially but the 20-day correlation for both to the dollar is currently positive. Trade wars and escalated geopolitical headlines may be a factor in the week ahead between the Supreme Court’s expected ruling on Trump’s tariff powers and the President’s warnings to Iran over its treatment of protests and his designs for Greenland.

Chart of the DXY Dollar Index Overlaid with VIX Volatility Index and Implied Fed Cuts (Daily) 

Source: TradingView.com; ICE; CME Fed Funds Futures; Standard & Poor’s; John Kicklighter

 

Another Week of Heavy US Event Risk

Looking at the scheduled and expected event risk for the week ahead, there is potential to tap veins of traditional macro-economic interest as well as more headline-driven matters. At the forefront, we have US inflation data that will act as the counterpoint to last week’s December employment update; but other US data such as housing data, retail sales and industrial production will give a rounded picture of the largest economy. Earnings season should also dominate a fair percentage of the financial headlines with the major US banks and Taiwan Semiconductor Manufacturing Co due to report. Arguably, the expected ruling from the Supreme Court on the tariff powers of the Executive Branch are the most loaded event risk between the difficulty to discount a particular outcome and the scale of impact between allowance and restriction.

Calendar of Top Global Macro Event Risk
 
Source: John Kicklighter

 

Monitoring Fed Speculation as a Leading Market Driver

Not the first fundamental theme to monitor over the coming week according to chronological order, but one that will come with a more practical range of likely outcomes, is the December US consumer price index (CPI) update from the Bureau of Labor Statistics. After a few months of disruption with delayed and even skipped data release due to the US government shutdown in October and November, this important fundamental series seems to be back on its expected release schedule. That said, the questions over the data’s accuracy are even more prevalent with survey participation and absent data drawing heavy scrutiny over November’s significant adjustment – particularly with October’s update being skipped. This will certainly be read through the lens of Federal Reserve monetary policy pressure, but the wait-and-see shift of December’s FOMC meeting will likely render any headlines over the President’s pick for the next Chairman (come Powell’s term ending in May) more productive in charting the future course of rates.

Chart of the US Unemployment Rate and Core CPI (Monthly)

Source: John Kicklighter; US Bureau of Labor Statistics

 

Earnings Season Begins with JPMorgan and TSM Topping the Watch List

As far as the range of options for capital market themes to seize control of the global macro picture (rather than the typical inverse of that relationship), the corporate earnings season is arguably the most reliable object to pop up on the radar. That doesn’t mean that particular strength or weakness in the business sector’s performance update will readily override more pressing themes, but we are notably lacking for a clear motivation at present. There are a number of big tickers due to cross the wires before and after the typical New York exchange hours in the week ahead, but I will be monitoring two in particular: JPM and TSM. JPMorgan is the largest financial name on the stock exchange and the 11th largest market cap in the US markets. 

It’s performance will stand as a notable baseline for the financial sector, but there is further value to be found in the vocal CEO’s penchant to weigh in on prevailing market themes. Matters such as AI’s impact on the economy, the housing market’s benefit from Trump’s restriction of institutional buying of single-family homes and the importance of Fed independence are likely references that will be absorbed. Meanwhile, Taiwan’s largest company, TSM, will report on Thursday offering a gauge as to the momentum in AI’s growth given the important role the chip manufacturer plays in the global supply chain. It is possible this company could revive this favorite market theme for the speculative bulls.

Chart of JPMorgan Stock Chart with FINRA Short Volume and Implied Earnings Range (Daily)

Source: TradingView; FINRA; SpotGamma; John Kicklighter

 

Will the US Supreme Court Revive the Charge in Tariff Headlines?

Finally, no top three event risk list for the coming week would be complete without a warning to the US Supreme Court’s expected opinion on the President’s ability to apply reciprocal tariffs on the country’s trade partners under the guise of national security. Since the Liberation Day announcement and walk back in April, the market has recovered all of its lost ground and subsequently seen the theme of trade wars lose much of its headline pull. The White House pushed for this power to be fast tracked through the Judiciary and a ruling is expected Wednesday around the start of its public session at 15:00 GMT (10:00 Eastern). There are three general outcomes likely: they rule in favor of the President’s tariff authority, against it or their view is inconclusive.

A ruling that approves Trump’s ability to use steep levies as a punitive negotiating tool with trade partners could invite significant uncertainty into the global growth outlook which is not reflected in equity indices pushing record highs. It would likely generate general ‘risk aversion’ as well as debate over the need for international investors to diversify away from the United States. Alternatively, an opinion that says unilateral tariff decisions are not covered as a tool to address national security risks at the Executive’s discretion could offer some measure of ‘relief’ to a lingering threat. But how much discount to this risk remains in a market where the complacent bid has been so strong for months? An inconclusive outcome where another delay is posted could allow for more time for another theme to gain traction and ultimately crowd out the influence of an eventual decision.

Google Trends Global Search Level for Key Fundamental Themes 

Source: Google Trends

 

-- Written by John Kicklighter, Global Head of Content

 

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