Next week's macro outlook: CPI hard hits the Federal Reserve's firepower, geopolitical tensions face off against index sell-off

In the first full trading week of 2026, cross-asset prices rose in sync, and risk sentiment on Wall Street is thriving again. The appetite for risk among investors is evident. The S&P 500 index rose 1.6% this week, while 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 pace for a passive fund. These mark a strong start to the year.

On Tuesday at 21:30, the U.S. December unadjusted CPI year-on-year, adjusted CPI month-on-month, adjusted core CPI month-on-month, and unadjusted core CPI year-on-year; on Wednesday at 21:30, U.S. November retail sales month-on-month, U.S. November PPI year-on-year/month-on-month, and U.S. third-quarter current account; on Thursday at 21:30, U.S. initial jobless claims for the week ending January 10, U.S. January New York Fed/Philadelphia Fed manufacturing index, and U.S. November import price index month-on-month. Additionally, Federal Reserve officials will be speaking intensively next week, and it is unlikely that rates will be cut before Powell's successor takes office, as detailed in the attached chart. Strategists from Bank of America Global Research stated that Friday's data reinforced their belief that the Fed will not cut rates again before the successor to Chairman Powell takes office. Next week, U.S. Secretary of State Rubio plans to meet with officials from Denmark and Greenland. The nationwide unrest in Iran (including the capital Tehran) triggered by anti-government protests may also impact market risk sentiment in the short term.