By Louis Navellier
January lived up to its reputation as a seasonally strong month and year, given the rule: “As January goes, so goes the year.” More importantly, stock selection is especially vital during times of heavy rotation. In January, small capitalization stocks beat large-cap stocks, reflecting a shift to more domestic stocks rather than the big multinational stocks, which dominate the S&P 500. The U.S. is leading global GDP growth, and global money is now rushing into domestic stocks, which helps many small and mid-cap stocks.
We are now in the midst of fourth quarter 2025 announcements, and I expect wave after wave of positive announcements to propel stocks higher, and stocks tend to beat analyst estimates while providing positive guidance. Some profit taking is expected as earnings wind down, but I view such pullbacks as buying opportunities, since the analyst community expects double-digit earnings growth in 2026.
Speaking of pullbacks, when President Trump picked Kevin Warsh as the next Fed Chairman, it triggered a rally in the U.S. dollar, plus a major selloff in gold and especially silver. Essentially, even though Kevin Warsh is a strong critic of the Fed’s quantitative easing, he is an independent thinker and is not a Trump “puppet” who will slash key interest rates too far. During his Senate confirmation hearings, I expect Mr. Warsh to avoid signaling he will slash key interest rates and assure Senators the Fed will be independent under his leadership, while sticking to the Fed’s Congressional mandate of controlling inflation and job growth.
Here are the most important developments recently and what they mean:
– The Financial Times reported that some economists are skeptical of Fed Chairman nominee Kevin Warsh’s opinion that AI will be deflationary. Specifically, Warsh said that AI will trigger “the most productivity-enhancing wave of our lifetimes – past, present and future.” As a result, Warsh expects that the AI productivity wave will expand output and pave the way for the Fed to cut key interest rates without triggering a rise in prices. Naturally, these comments are going to make Warsh’s Senate confirmation hearing much more interesting.
– It has become increasingly obvious that Kevin Warsh was Treasury Secretary Scott Bessent’s choice. Warsh has called for a closer relationship between the Fed and the Treasury Department. Specifically, yield curve management and open market actions by the Fed would apparently be coordinated between the Fed and the Treasury Department. The Treasury yield curve is now the steepest in the past four years, so Treasury Secretary Bessent has been very successful in fixing the inverted Treasury yield curve that existed under his predecessor, Janet Yellen. It appears that when Warsh is confirmed as the next Fed Chairman, Bessent will become an even more influential Treasury Secretary, which will be crucial in helping the Fed to lower interest rates.
– On Fox Business, President Trump told Larry Kudlow that if Warsh “does the job that he’s capable” of, then “we can grow at 15%, I think more than that.” Trump said, “I think he is going to be great, and he’s a really high-quality person.” In the meantime, Warsh’s Senate confirmation may be delayed, since Senator Thom Tillis, a retiring Republican from North Carolina, is pledging to block any Fed confirmation as long as the Trump Administration is pursuing a Justice Department probe into Powell and a Fed building renovation project.
– The Commerce Department on Tuesday announced that retail sales in December were unchanged. However, November’s retail sales were revised up to 0.6% (up from 0.3% previous reported). Economists were expecting retail sales to rise 0.4% in December, so this report was disappointing. The bottom line is that due to the federal government shutdown, the Commerce Department is a month late with its data, and due to the substantial November upward revision, the retail sales data is not being taken as seriously as it has been in the past. Treasury yields declined after the retail sales report, which raises the odds of another Fed key interest rate cut.
– The Labor Department on Wednesday announced that payrolls rose 130,000 in January, which was substantially above economists’ consensus expectation of a 75,000 increase. The November and December payrolls declined by a cumulative 17,000. Interestingly, government jobs declined by 42,000 in January, so the private sector created 172,000 jobs according to the Labor Department. The unemployment rate declined to 4.3%. Average hourly earnings rose by 0.4% to $37.17 in January and 3.7% in the past 12 months. Treasury bond yields rose after the payroll report on the anticipation that the Fed may not cut key interest rates until May, when Kevin Warsh takes over as the new Fed Chairman.
– In the wake of Super Micro Computer’s (SMCI) 123% sales growth, Nvidia (NVDA) has also woken up, and expectations for its quarterly announcement on February 25th remain high. Due to a replacement cycle since the Vera Rubin GPUs are five times more powerful and ten times more energy efficient, the long-term outlook for Nvidia remains amazing, so it will likely be a $10 trillion market cap company by the end of the decade.
– Taiwan Semiconductor Manufacturing (TSM) reported that its January sales rose 37%, which is its fastest growth in several months and well above its 2026 guidance for 30% sales growth. TSM makes the high-end chips for Microsoft Surface laptops, Apple computers, and, of course, Nvidia’s GPUs. This strong sales growth for TSM likely means that the AI boom is still accelerating, which bodes well for Nvidia’s guidance on February 25th.
– The U.S. Navy seized the eighth crude oil tanker from Venezuela in the Indian Ocean after a month-long pursuit. Specifically, the Aquila II tried to evade the U.S. blockade of Venezuela. The fact that the U.S. Navy is now pursuing and seizing “shadow tankers” is expected to concern Iran and Russia, which have also been known to rely on such shadow tankers to transport crude oil despite sanctions.
– Since no central banks are set up to cope with shrinking societies unable to service their government debt – like China, Japan, Britain and France – lower interest rates, quantitative easing (money printing) and possible currency devaluations are the only available options. This lack of sound currencies is why gold has been surging so much in the past year and why I expect $10,000-gold by the end of 2029.
In summary, the U.S. remains an oasis for international investors have been fueling the buying pressure in gold and stocks. The U.S. dollar should continue to strengthen this year, since the U.S. has stronger GDP growth, higher real interest rates, a more positive outlook, and military dominance.
*Views expressed in this article are opinions of the author and do not necessarily reflect the views of USNN World News.
