Severe Weather Adds to Market Chaos — But Here's the Biggest Financial Story

A massive snowstorm affecting much of the United States is adding to the market's sense of chaos early Monday morning. Political animosities are at extreme levels due to the ICE situation in Minnesota, but the biggest financial story is receiving limited coverage.

The dollar is down very sharply on speculation that the U.S. could help the Bank of Japan support the yen. The yen has been under intense pressure due to political issues in Japan, which drove it to an 18-month low. A strong yen versus the dollar has a profound impact on trade, interest rates, and precious metals. 

Gold is spiking to over $5,000 for the first time in history, and commodities across the board are higher. There are also increased concerns about the possibility of new tariffs on Canada and a potential government shutdown due to heightened political animosity.

Federal Reserve Speculation and Earnings Outlook

One issue that is helping Monday morning is that bonds are higher and interest rates are lower on increased speculation that Rick Rieder of BlackRock  (BLK)  is Trump’s choice as the next Chairman of the Federal Reserve. Rieder is believed to be both dovish and a supporter of U.S. business.

This swirl of macroeconomic issues is the backdrop for what was already likely to be a very volatile week as earnings reports from the Magnificent Seven  (MAGS)  begin to hit. The Mag 7, with the exception of Alphabet  (GOOGL) , have been laggards for a while and expectations are lower than usual, but the key issue will be the level of investment in more AI data-center capacity. Any signs that the hyperscalers are taking a more cautious approach will have a domino effect. Reassurance about spending and investment would calm many fears.

Small-Cap Rotation and Trading Strategy

Another issue to watch is the recent rotation into small-cap stocks. A record-breaking streak of outperformance by the Russell 2000  (IWM)  came to an end on Friday, and there was some reverse rotational action back into the Mag 7, but there is a good likelihood that pockets of relative outperformance in secondary stocks will continue.

My game plan is to manage positions tightly and make strategic reductions if support levels start to break. I am also looking to add to my favorite names that are pulling back in front of upcoming earnings reports that are likely to be solid. It is very messy and chaotic out there and the weather is not helping matters.

At the time of publication, Rev Shark was long GOOGL.