The S&P 500 rose 145 bps in January, while the Bloomberg Barclays U.S. Aggregate Bond Index increased 11 bps. The S&P 500 Equal Weight Index gained 339 bps, outperforming the market-cap-weighted S&P 500 by 194 bps and signaling a meaningful broadening of market participation. AI euphoria is continuing in some stocks and leaving others as we move into the execution phase. Depending on the day, there is also heightened concern around capital-expenditure discipline. In fixed income, the 2-year to 10-year Treasury yield curve steepened. Treasury auction metrics show that indirect bidding—often used as a proxy for foreign central-bank demand—has declined over the past year, particularly for notes. Meanwhile, Federal Reserve rate cuts have not reduced inflows into money-market funds, suggesting that “money on the sidelines” is less interest-rate sensitive than commonly assumed. We view the recent steepening as a return toward normality following the flat and inverted yield curves that have dominated the past five years.
Our shipping holdings benefited from distinct but supportive trends across subsectors. Among dry bulk positions, Capesize rates rose counter-seasonally due to increased shipments of iron ore and bauxite, driving equity prices higher. Among tanker holdings, fundamentals improved as India shifted crude sourcing away from Russia. This improvement was further supported by Venezuelan crude and naphtha moving from the dark fleet to the compliant fleet, alongside increased Middle Eastern shipments. Added to the mix, Sinokor Maritime, backed by funds from the MSC shipping billionaire, Gianluigi Aponte, aggressively started consolidating the VLCC market, with 40 secondhand acquisitions and a swollen charter-in portfolio. Shipping names in general are benefiting from the presence of the US Navy in the Persian Gulf, which is providing equities with a geopolitical risk premium.
Goldman Sachs recently noted that investor risk appetite is at its highest level in five years. We take a more nuanced view. Risk appears elevated in certain segments—most notably AI-related equities—while remaining more contained in areas such as energy infrastructure and shipping. We continue to monitor indicators including the Atlanta Fed’s GDPNow model, which as of January 26, 2026, projected preliminary Q4 2025 GDP growth of 5.4%. Gasoline prices remain low, rent increases are subdued, and overall economic conditions remain sound. The national economy is fine.
With rising electricity demand from data centers, industrial electrification, and fuel switching, the risk of winter power shortages is increasing across NYISO, PJM, and ISO New England. Historically, blackouts have been driven by peak summer air-conditioning demand; winter reliability stress represents a relatively new phenomenon. In New England during Winter Storm Fern, oil-fired generation in ISO New England rose to approximately 35% to 40% of the energy mix due to natural gas constraints, driven by a refusal to add needed pipeline capacity. In New York City next-day power prices jumped 31% on January 27th, breaking records for a third straight day. In each of these states, they continue to choose energy policies regardless of cost and now complain when it is too expensive. Mikie Sherrill, the newly elected governor of New Jersey, proposed solutions to rising electricity rates in early January including electricity price controls, more solar energy and a pause on utility rate increases or cost recoveries. New Jersey residents, according to the Wall Street Journal, can look forward to more power outages and longer delays to restoration. Politicians will continue to blame data centers and utilities. However, to quote Walt Kelly’s Pogo, “We have met the enemy and he is us.”
