Federal Reserve personnel changes shift market sentiment, causing global stocks, bonds, and commodities to decline simultaneously.

The Federal Reserve leadership change is signaling major shifts. Trump announced his inclination to have former board member Wosh succeed the soon-to-be-retiring Powell as Chair. This news immediately caused waves on Wall Street, but the subsequent policy signals poured cold water on the market. Trump emphasized that the new Chair should heed his advice on interest rates and expressed hope that U.S. rates would fall below 1% within a year. While this stance was briefly welcomed, it also exposed potential threats to the Fed’s independence, prompting a reassessment of inflation prospects.

Sharp Fluctuations in Treasury Yields Reflect Market Expectations Shift

The U.S. long-term bond market is the first to react. The 30-year Treasury yield rose to 4.84%, hitting a new high since September, with a weekly increase of 5 basis points; the 2-year Treasury yield fell to 3.52%, creating a new yield curve pattern. Behind this divergence lies the market’s conflicting expectations: optimism for rate cuts in the short term, but concerns over persistent high inflation in the long term.

Chicago Fed President Goolsbee and Kansas Fed President Smith both stated that inflation risks remain their main reasons for opposing rate cuts, contrasting sharply with Trump’s aggressive rate cut vision. Strategist Edward Harrison pointed out that the Federal policymakers’ vigilance over inflation sets the stage for downside risks in U.S. debt trends.

Risk Sentiment Cools, Global Stock Markets Drop

Market sentiment shift is immediately reflected in the stock markets. U.S. stocks declined across the board, with the Nasdaq Composite falling the most, dropping below 1.69%; the S&P 500 declined 1.07%; the Dow Jones was relatively resilient, down 0.51%. European markets were also affected: Germany’s DAX 30 fell 0.45%, France’s CAC 40 declined 0.21%, and the UK’s FTSE 100 dropped 0.56%.

The most severe declines were in tech stocks. Semiconductor leader Broadcom plunged over 11% after hours, despite beating Q4 earnings estimates—net profit up 97% YoY to $8.5 billion, revenue up 28% to $18 billion, and AI chip sales reaching $11.07 billion—yet the company’s optimistic outlook for Q1 (AI chip sales expected to double to $8.2 billion) failed to halt the decline. This reflects market concerns over the large capital expenditures of AI-related companies and the uncertain returns, further fueling doubts about high-valuation tech stocks.

Commodities and Forex Show Divergent Trends

Gold performed relatively resiliently, rising 0.47% to $4299.2 per ounce, but failed to break higher and faced downward pressure after a rally. WTI crude oil fell 0.67% to $57.5 per barrel, continuing its weakness. The dollar index edged up 0.06% to 98.39; USD/JPY rose 0.17%, while EUR/USD remained flat.

Cryptocurrency Markets Adjust in Tandem

Cryptocurrency markets also did not remain unaffected. Bitcoin dipped slightly by 0.05% in 24 hours, currently at $90,215, but real-time data shows it has adjusted to $92.66K, with a 24-hour decline of 0.99%. Ethereum fell 0.09% in 24 hours, at $3,112, with real-time prices rising to $3.25K, and a 24-hour gain turning positive at 2.21%. The volatility in crypto markets highlights an increasing correlation with traditional markets.

Hong Kong night session futures closed at 25,735 points, down 242 points from yesterday’s close of 25,976; China index futures closed at 8,998, down 81 points from yesterday’s close.

Corporate Earnings and Debt Risks Surface

Besides Broadcom, Oracle also became a focus this week. The company’s bond prices continued to decline, with losses on $18 billion of senior bonds purchased in September expanding to $1.35 billion. Its 2035 maturity bonds with a 5.2% coupon saw CDS spreads widen to 1.71 percentage points, yields rise to 5.9%, surpassing the average junk bond yield of 5.69%. This phenomenon stems from market concerns over Oracle’s massive AI data center investments and doubts about the progress of its OpenAI partnership.

Investment Outlook and Policy Expectations

Despite the short-term cooling of market sentiment, Goldman Sachs remains optimistic. The bank reaffirmed its year-end target for the S&P 500 at 7,600 points, about 10% above current levels, expecting earnings per share to grow 12% next year and another 10% in 2027, with AI productivity gains contributing 0.4 and 1.5 percentage points respectively.

Another notable event is Elon Musk’s SpaceX potentially going public in mid to late next year, with an estimated valuation of around $1.5 trillion. According to Bloomberg Wealth Index, Musk owns about 42% of SpaceX, and after listing, he could become the world’s first trillionaire.

On the geopolitical front, signs of thawing US-Russia relations have emerged. The US announced the lifting of sanctions on Belarusian potash fertilizer, and Lukashenko pardoned 123 prisoners, including Nobel Peace Prize laureate Bialiatski in 2022. Meanwhile, the US Treasury sanctioned six Venezuelan oil tankers, including one flagged under Hong Kong, the TAMIA.

The global financial markets are at a crossroads. Uncertainty over Fed personnel changes and policy direction, re-pricing of tech stocks, doubts over AI investment returns, and complex geopolitical developments collectively shape the market’s main themes in early 2026. Investors should closely monitor upcoming official data releases, including China’s November retail sales and industrial output, Eurozone’s October industrial production, and US NY Fed manufacturing index.