Members of the Raymond James Investment Strategy Committee share their views on the markets, the economy and key themes that are impacting investors.

  
Read the full
Investment Strategy Quarterly

All expressions of opinion reflect the judgment of Raymond James and are subject to change. Investing involves risk including the possible loss of principal. Past performance may not be indicative of future results.

Four red flags to watch for.

Medicare fraud has huge costs for older adults. In 2024, scammers were charged with major fraud totaling billions. Scammers contact Medicare recipients to steal Medicare or Social Security numbers and file false claims. Protect yourself by watching for:

• “Too good to be true” promises:  Free medical supplies or medications, tests not ordered by your doctor, or “pre-approvals” for new plans with better benefits may be scams.
• Unexpected asks for personal information:  Medicare won’t call you unless you request it. Don’t share your Medicare number with anyone calling unexpectedly.
• Suspicious links:  Scammers send fake emails or texts with links to steal your data. Don’t click unexpected messages.
• Threats to terminate benefits:  Your coverage can’t be taken away for not joining specific plans, for example.

Source: National Council on Aging

Doug Drabik discusses fixed income market conditions and offers insight for bond investors.

The Federal Open Market Committee (FOMC) meets this week for the first of this year’s eight formal meetings to discuss whether to keep policy as is or adjust interest rates. It is largely expected that they will leave interest rates unchanged. The struggle they are facing is the difference of opinion between the potential impact of a weakening labor market, which would incentivize easing policy by lowering the Fed Funds rate, and the risk of inflation reigniting, which might prompt a desire to raise the Fed Funds rate to slow its effects.

Fed Funds are the rate at which banks lend to one another for reserve balances. This rate strongly impacts the US short-term rate environment and is set by the US central bank, the Fed. There can be collateral influences on longer-term interest rates; however, longer-term interest rate changes rarely run parallel with changes in short-term interest rates. History will attest to this.

Two influences of long-term interest rates are inflation and economic growth expectations. Inflation remains a concern. Core Personal Consumption Expenditure (PCE) is the Fed’s favored inflationary measure.

Although it has fallen considerably from its pandemic-driven peak, it remains elevated (2.8%) from the desired 2.0% goal. Economic growth is measured by the Gross Domestic Product (GDP). The latest quarterly GDP release showed the 3^rd quarter of 2025 at 4.4%, an impressive reflection of US economic growth. Other influences exist, including savings rates, demographic effects, perceived future risks, and, of course, central bank actions. All of these influencers are fluid and very challenging to predict their ultimate effect on future rates. The takeaway is not to solely align long-term investment plans with potential FOMC policy actions, nor to rely on outsmarting directional rate changes.

Forget the noise and the desire to outmaneuver the masses; focus on what we do know. Trying to time the market based on Fed actions can be difficult. It is equally difficult to know how long-term rates may be influenced. For the past three years, intermediate- and long-term rates have been hovering at elevated levels relative to the previous decade. This means that lower-risk individual bonds provide investors with an opportunity to lock in strong, long-term income levels, which can help preserve accumulated wealth. This may be highly appreciated by investors nearing or in retirement. Economic cycles can run for long periods. Should interest rates fall and or equity prices level off, there is no assurance of how long the economic cycle takes to return to today’s levels. Take advantage of what we know and how today’s interest rate levels can provide positive long-term security to your portfolio.

The author of this material is a Trader in the Fixed Income Department of Raymond James & Associates (RJA), and is not an Analyst. Any opinions expressed may differ from opinions expressed by other departments of RJA, including our Equity Research Department, and are subject to change without notice. The data and information contained herein was obtained from sources considered to be reliable, but RJA does not guarantee its accuracy and/or completeness. Neither the information nor any opinions expressed constitute a solicitation for the purchase or sale of any security referred to herein. This material may include analysis of sectors, securities and/or derivatives that RJA may have positions, long or short, held proprietarily. RJA or its affiliates may execute transactions which may not be consistent with the report’s conclusions. RJA may also have performed investment banking services for the issuers of such securities. Investors should discuss the risks inherent in bonds with their Raymond James Financial Advisor. Risks include, but are not limited to, changes in interest rates, liquidity, credit quality, volatility, and duration. Past performance is no assurance of future results.

Investment products are: not deposits, not FDIC/NCUA insured, not insured by any government agency, not bank guaranteed, subject to risk and may lose value.

To learn more about the risks and rewards of investing in fixed income, access the Financial Industry Regulatory Authority’s website at finra.org/investors/learn-to-invest/types-investments/bonds and the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market Access System (EMMA) at emma.msrb.org.

Review the latest Weekly Headings by CIO Larry Adam.

Key takeaways

• The Fed is widely expected to hold rates steady next week
• Market breadth is off to a strong start to the year; tech giants are lagging
• Tech fundamentals remain strong, despite lagging performance YTD

A major winter storm is set to sweep across the country this weekend, bringing heavy snow, dangerous ice and bitter cold to more than 175 million Americans from central Texas all the way to the Northeast. With that many people in the storm’s path, power outages and travel headaches could linger for days before things slowly return to normal.

Markets, interestingly enough, felt their own version of a “deep freeze” this week. Geopolitical flare-ups, fresh tariff threats and a mini-meltdown in Japan’s bond market briefly rattled investors and pushed volatility sharply higher.

Conditions did stabilize by week’s end, helped by President Donald Trump softening his tariff rhetoric and Japanese yields recovering part of their steep slide, but the atmosphere remains fragile. Plenty of potential catalysts are still out there, any of which could stir markets back up. With that backdrop in mind, here are the two key areas we’re watching closely in the week ahead:

Powell’s press conference and upcoming leadership transition

After three straight rate cuts last year, the Federal Reserve is widely expected to keep interest rates unchanged at next week’s meeting (January 27–28). We may see another dissent (in favor of an additional cut) from Governor Miran before his term ends on January 31, but the real focus will be on Chair Jerome Powell’s press conference.

• Rate outlook: Investors want to know whether this will simply be a one-meeting “pause” or the beginning of a longer hold. Right now, the economy still looks surprisingly sturdy. The Atlanta Fed’s GDPNow model has fourth-quarter growth tracking at a strong 5.4%. The job market remains steady, with weekly jobless claims hovering near 200,000 and continuing claims actually declining. And importantly, inflation continues to come in better than expected, defying predictions of a tariff-driven surge. With tax season approaching, expectations for larger than usual refunds could also add more fuel to consumer spending. All of that has pushed market expectations for the next rate cut out to July. That said, the data has been unusually noisy, partly because of the recent government shutdown, which makes the timing of the Fed’s next move even more dependent on what incoming numbers show. We still expect one rate cut this year, but the path to get there is less clear than usual.
• Will Powell stay or go?: This meeting also kicks off the final stretch of Chair Powell’s tenure – he’ll likely preside over just three more meetings before his chairmanship ends May 15. Markets will be listening closely for any hints about his long-term plans: Will he stay on the Fed board for the remaining two years of his full term or step aside entirely? Powell is almost certain to deflect those questions, but betting markets still assign a roughly 70% chance he leaves the Fed by year-end, which would give President Trump another opportunity to reshape the central bank. As for who might replace him as the next chair, former Fed Governor Kevin Warsh remains the front-runner, with BlackRock’s Rick Rieder emerging as a close contender. Whoever ultimately gets the job, the Fed’s design – with staggered terms and limits on how much any one person can influence policy – helps preserve the institution’s independence.

Mega-cap fundamentals come into focus next week

Market breadth is off to a strong start in 2026, and this year it’s the rest of the market – not the tech giants – leading the charge so far.

• Technology lagging early not unusual: Year-to-date, the S&P 500 is up roughly 1%, small-cap stocks have surged an impressive 10%, while our mega-cap tech composite (MAGMAN*) is down 4.1%. That’s the biggest early-year lag for mega-cap tech versus the broader market since 2010. But while the headline may sound dramatic, this kind of slow start isn’t unusual. In fact, MAGMAN has trailed the S&P 500 at this point in three of the last five years – and in four of those five years, mega-cap tech still went on to finish the year ahead of the broader market. We expect a similar story this time around. The reason? Fundamentals, specifically better earnings growth.
• Technology’s potential path forward: As we head into the busiest week of 4Q25 earnings season next week with 34% of the S&P 500’s market cap reporting, mega-cap tech’s strong earnings picture should come back into focus. Three heavyweights (Apple, Meta, and Microsoft) are set to report, and their outlooks for 2026 will be crucial. With AI investment still ramping up and profit margins expanding, Wall Street expects mega-cap tech to deliver another year of standout earnings growth: +25% versus +15% for the broader S&P 500. And valuations may appear more compelling. MAGMAN’s forward price-to-earnings relative to the rest of the market is now the lowest it’s been since 2017. Taken together, the setup may suggest that despite the early stumble, mega-cap tech still has plenty of room to outperform as the year unfolds, and this is why it remains one of our favorite sectors.
• Will higher rates derail equities?: The 10-year Treasury yield’s move above 4.2% this week was noteworthy, especially since it has been stuck in a tight 4.0%–4.20% range since September. And while rising rates can pressure stocks, particularly as the 10-year moves above 4.5%, higher yields aren’t necessarily bad, especially for the lower-leveraged tech sector. What matters is why rates are rising. When yields climb on stronger growth and earnings, markets have historically handled it well. That seems to be what’s happening now.

View as PDF

*MAGMAN represents a composite of Microsoft, Apple, Google, Meta, Amazon, Nvidia. The foregoing is not a recommendation to buy or sell MAGMAN stocks.

All expressions of opinion reflect the judgment of the author(s) and the Investment Strategy Committee and are subject to change. This information should not be construed as a recommendation. The foregoing content is subject to change at any time without notice. Content provided herein is for informational purposes only. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices and peer groups are not available for direct investment. Any investor who attempts to mimic the performance of an index or peer group would incur fees and expenses that would reduce returns. No investment strategy can guarantee success.

Economic and market conditions are subject to change. Investing involves risks including the possible loss of capital.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Diversification and asset allocation do not ensure a profit or protect against a loss.

The S&P 500 Total Return Index: The index is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 7.8 trillion benchmarked to the index, with index assets comprising approximately USD 2.2 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.