Markets (S&P 500) ended the week lower, dragged down by the Magnificent 7 (Mag 7) stocks which fell a collective 2.1%. Beyond the Mag 7, stocks had a better week, as the S&P 500 equal weight index, which deemphasizes the Mag 7, gained 0.7%. Other parts of the markets also enjoyed positive returns including small caps which ended the week at a record high having enjoyed a strong start to the year supported by some rotation out of large caps and expectations of healthy economic growth in 2026. Investors were kept busy during the week with the start of earnings season, a busy economic calendar, and President Trump’s increasingly strong rhetoric about controlling Greenland “one way or the other.”
In response to Trump’s increased rhetoric, multiple European countries voiced their objections to the US interfering in Greenland’s sovereignty. On Saturday, Trump announced plans to enact a 10% levy on eight European countries for expressing opposition to his plans. As European leaders continue to look for a diplomatic “off ramp”, they have also discussed implementing their anti-coercion instrument (ACI) which could effectively close the European market to US companies, restrict US companies’ access to European capital markets, and result in high tariffs on US goods. Should the EU move forward with enacting the ACI, it would most likely spell the end of the US-EU trade agreement the two sides approved last summer, negatively affecting both economies.
As of Friday, 7% of S&P 500 companies had reported earnings. Thus far, 79% of those companies have beaten their consensus estimate. According to industry group FactSet, consolidated earnings growth for the fourth quarter is expected to be 8.2%.
