Russell 2000 Soars to Another Record on Foreign Stability Prospects, But Strong Data Reverse Treasury Gains: Jan. 22, 2026

The ferocious rebound in stocks is continuing after President Trump announced the reaching of a Greenland framework during his Davos meeting with NATO head Mark Rutte. The vague agreement led to the US commander in chief dropping his threats to raise tariff levels on certain European nations that were protesting Washington’s ambitions related to the self-governed Danish territory. But Treasuries are giving up yesterday’s significant gains, following stronger-than-projected data, as unemployment claims came in lighter-than-anticipated at exactly the same minute that an upward revision to third-quarter GDP was reported. Meanwhile, another glimpse of the “Sell America” trade is on display today as rates and the greenback diverge sharply in bifurcated fashion, a rare occurrence. Indeed, the dollar is down a sharp 44 bps and the yield curve is jumping around 2 bps in bear-flattening motion led by the short end as Fed cuts get pushed back to June, with some financial professionals opining that political pressure on the central bank may actually be working against the administration’s imminent wishes. Still, the robust figures on the economic calendar are bolstering the cyclical areas of the equity space, sending the Russell 2000 to a fresh record for the second consecutive session; however, safe-haven assets are still catching bids, as gold and silver traded near all-time highs of their own. The other commodity majors are lower, yet natural gas is an exception. It’s nearly doubled this week as a heavy winter storm is expected to hit the Eastern side of the US especially hard, boosting demand for heat while supplies could be disrupted by the severe weather.

Labor Market Continues to Strengthen

Unemployment claims continue to point to stabilizing labor conditions, as a robust economic cycle and healthy corporate balance sheets don’t compel layoffs. Initial filings came in at 200k for the week ended Jan. 17, better than the 212k anticipated and nearly equal to the 199k in the prior period. Continuing applications fell to 1.849 million for the seven-day interval culminating on Jan. 10, lower than the 1.875 million from the previous time span. Four-week moving averages dropped on both fronts, from 205.25k and 1.887 million to 210.5k and 1.871 million. Separately, third-quarter GDP growth was upgraded to 4.4% from 4.3%, notching the strongest performance in two years.

Duration is Undervalued Here

Similar to the Treasury selloff we saw when global tensions reached their peak of 2025, these lower prices for government debt aren’t rational when analyzing the trajectory of inflation. With price pressure receding sharply and potentially coming in as subdued as 2.3% in next month’s CPI report for January, yields are simply too elevated against this backdrop. Indeed, the 10-year is roughly 200 basis points (bps) above this best-case estimate, and that magnitude isn’t justified by an unbalanced fiscal situation alongside a reacceleration in growth. The high 3s are closer to fair value for the 10-year, and the low 4s for the 30-year maturity. For investors that may fear heavy equity valuations following three years of terrific gains, positioning in duration here makes a lot of sense as the longer-tenors have a wide path for capital appreciation. That’s not to say equities can’t do well. Earnings expectations are buoyant and so are fundamentals, but bonds are poised to outperform.

International Roundup

Japan’s Monthly Trade Surplus Falls

Japan’s December surplus substantially missed expectations and sank from 316.7 billion yen in November to 105.7 billion yen last month, according to data from the Ministry of Finance. The economist consensus estimated anticipated the surplus to climb to 357 billion yen. For calendar year 2025, however, imports exceeded exports, but the deficit shrank significantly.

Shipments to foreign markets during the final month of 2025 were 5.1% higher than in the year-ago period, a deceleration from November’s 6.1% year-over-year growth. Economists anticipated a repeat of November’s print. Demand from the US sank 11.1%, largely a result of the country imposing tariffs as it seeks to increasingly onshore manufacturing. Conversely, exports to other countries grew, offsetting the impact of weak trade with the US. During the same month, stronger consumption in Japan caused imports to climb 5.3% y/y, surpassing the economist consensus estimate for a 3.6% ascent and the 1.3% growth in November. For the full year, exports climbed 3.1% despite weakening demand from the US. Electronic parts and food led the gains.

South Korea Economy Contracts

South Korea’s fourth quarter gross domestic product (GDP) sank 0.3% on a quarter over quarter basis, surprising economists that had forecasted the country’s economy to grow 0.1% following the third quarter 1.3% expansion. Relative to the year-ago period, the economy expanded 1.5% in the fourth quarter.

In the final quarter of 2025, both exports and imports fell with purchases of items from foreign markets slicing 0.2 percentage points from the quarter-over-quarter result, but the largest headwind was a 3.9% drop in construction investment. The electricity, gas and water supply category shrank 9.2% while manufacturing descended by 9.2%. On a positive note, agriculture, forestry and fishing was 4.6% higher. Services spending, furthermore, ascended 0.6% but outlays for goods retreated.

Inflation Picks Up in Hong Kong

Hong Kong inflation averaged 0.3% per month during the final quarter of 2025 and it was up 1.4% y/y during December, according to the Consumer Price Index from the Census and Statistics Department. Both rates accelerated. During 2025, prices moved northward for transport, miscellaneous services, alcoholic drinks and tobacco, housing, miscellaneous goods, meals out and takeaway food, and basic food. Consumers, however, experienced smaller stickers for durable goods; clothing and footwear; and electricity, gas and water.

Australia Labor Market Strengthens

Australia’s payrolls added 65.2k workers in December, easily surpassing the consensus expectation for only 28.3k and reversing from the 28.7k drop in November. The result pushed the unemployment rate down from 4.3% to 4.1%. Economists were anticipating a slight increase to 4.4%. Meanwhile, the labor force participation rate, or the ratio of the number of employed individuals and those seeking work relative to the working age population, moved from 66.6% to 66.7%. Among the new recruits, 54.8k took full-time positions, partially offsetting the 65.3k November drop.