Next week's macro outlook: CPI challenges the Federal Reserve's firepower, geopolitical tensions brace for a sell-off in indices

On January 10th, during the first full trading week of 2026, cross-asset gains are synchronized, and Wall Street’s risk sentiment is experiencing a renaissance. Investors’ appetite for risk is evident. The S&P 500 index rose 1.6% this week, and the Russell 2000 index increased by 4.6%. The Vanguard S&P 500 ETF (VOO) attracted $10 billion in just a few days — an astonishing speed for a passive fund. These mark a strong start to the year. On Tuesday at 21:30, the US releases December unadjusted CPI year-over-year, seasonally adjusted CPI month-over-month, seasonally adjusted core CPI month-over-month, and unadjusted core CPI year-over-year; on Wednesday at 21:30, US retail sales for November, US PPI for November year-over-year/month-over-month, and the US current account for Q3; on Thursday at 21:30, US initial jobless claims for the week ending January 10th, the New York Fed/Philadelphia Fed manufacturing indices, and the import price index for November. Additionally, Federal Reserve officials will speak intensively next week, and before Powell’s successor takes office, rate cuts are unlikely, as detailed in the attached chart. Strategists at the US Bank Global Research Department say that Friday’s data reinforce their belief that the Federal Reserve will not cut rates again before Powell’s successor assumes office. Next week, US Secretary of State Blinken plans to meet with officials from Denmark and Greenland. Turmoil triggered by anti-government protests across Iran (including the capital Tehran) may also impact market risk sentiment in the short term.