Emerging market stocks climb, plus could the Fed keep rates paused in January?

Key Concepts

• Emerging Market Potential: Venezuela’s situation is reshaping emerging market dynamics, potentially benefiting countries like Brazil due to geopolitical neutrality and resource abundance.
• Federal Reserve Shift: New voting members on the Federal Reserve committee introduce uncertainty regarding interest rate policy, with a likely pause in rate cuts anticipated in the near term.
• Precious & Industrial Metal Outlook: Supply-demand imbalances, geopolitical risks, and central bank activity support holding silver, copper, and gold, but current price levels require cautious allocation.
• AI & Tech Driven Growth: The AI trade is a significant driver for emerging markets and specific companies like Microchip Technology.
• Geopolitical Risk & Diversification: Increasing geopolitical tensions are driving central banks to diversify away from the US dollar and increase gold holdings.

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Market Overview & Emerging Markets (Part 1)

The market opened with gains, with the Dow Jones Industrial Average potentially reaching a record high (~+0.25%), the S&P 500 up ~0.4%, and the Nasdaq Composite up ~0.5%. Commodities were also rising, including Bitcoin, crude oil (influenced by Venezuelan developments), and gold (+1.1%). Within the S&P 500, the healthcare sector (XLV ETF) outperformed technology (XLK ETF), potentially indicating a “catch-up trade” fueled by strong performance from pharmaceutical companies like Eli Lilly (+2%), Novo Nordisk (+5%), and AstraZeneca. Amgen’s acquisition and the upcoming JP Morgan Healthcare Conference are also contributing factors.

Discussion focused on the impact of events in Venezuela on emerging markets. Ben Mandel (Jubarte Capital) highlighted a “paradigm” of winners and losers at the country level due to evolving US international policy, positioning Brazil as a potential beneficiary due to its geopolitical neutrality, trade advantages in the US-China trade war, and abundant natural resources. Derek Irwin (Allspring Global Investments) emphasized the renewed attention on Latin America, noting its undervaluation and potential for outperformance in 2026, driven by indirect conflict and a preference for less direct confrontation with China. He also pointed to the AI trade and South Africa’s potential. Irwin argued that emerging markets are becoming less risky than developed markets.

Federal Reserve & Analyst Calls (Part 1)

The Federal Reserve is undergoing a shift with four new voting members. Jennifer Shamberger (Yahoo Finance) identified Beth Hammock and Lori Logan as hawkish influences, while Anna Pollson leans dovish, concerned about the job market and tariffs. Neil Kashkari’s stance remains unclear. The appointment of a new Federal Reserve chair in May adds further uncertainty. A 90% probability of a pause in rates at the next meeting is expected, with a cleaner jobs report anticipated this Friday. Analysts Stephanie Roth (Wolf Research) and Colin Martin (Schwab Center for Financial Research) predict a pause in rate cuts, forecasting 75,000 payrolls and emphasizing the importance of economic growth. They both agree the Fed is unlikely to act aggressively in the first half of 2026.

Top analyst calls included United Healthcare (UNH) initiated with an “Outperform” rating and $400 price target by Evercore ISI, Chipotle (CMG) & Starbucks (SBUX) designated as top picks for 2026 by Deutsche Bank, and Mobileye (MBLY) upgraded to “Neutral” from “Underweight” by JP Morgan. Trending tickers included AIG (down 6.83% due to CEO retirement), Microchip Technology (MCHP) (up 8% on strong preliminary earnings driven by the AI boom), and Ford (F) (up 35% over the past year due to hybrid vehicle sales).

Precious & Industrial Metals Outlook (Part 2)

The discussion centered on silver, copper, and gold, emphasizing the importance of allocation over chasing price increases. Silver’s strength is attributed to geopolitical hedging qualities and an “artificial” supply-demand imbalance created by US tariffs prompting a rush of shipments, causing scarcity in London and China. Copper faces a unique supply constraint due to pre-emptive ordering ahead of expected tariffs, locking up supply within the US. However, Mike cautioned against buying copper at current “stretched” levels, citing its “autocorrelated” nature and the impact of “elasticity” on demand at high prices.

Gold’s outlook is supported by potential increased central bank buying, driven by a trend of diversifying away from the US dollar following events like Switzerland seizing Maduro’s assets. The average central bank holds around 20% gold reserves, while China currently holds about 8%, with a target of 30% over the long term. Phil advised waiting for opportunities created by economic data releases, such as a significant drop in the unemployment rate potentially strengthening the dollar and creating a buying opportunity in gold.

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Conclusion

The market currently presents a complex landscape with emerging market opportunities, a shifting Federal Reserve policy, and a nuanced outlook for precious and industrial metals. While geopolitical risks and supply-demand imbalances support investment in these metals, cautious allocation and a focus on fundamental value are crucial. The AI trade continues to be a significant driver, particularly for emerging markets and technology companies. Ultimately, a strategic, allocation-focused approach, rather than attempting to time the market, is recommended for navigating these evolving conditions.