When markets are climbing and everyone’s trading, it’s usually a good sign for big banks. On paper, that remained true last quarter: JPMorgan, Bank of America, Citigroup, and Wells Fargo collectively brought in $28.5 billion in profits in Q4 and $123.2 billion for the full year, a 5% increase from 2024.

But in our current trick mirror economy, it’s not that simple. Despite a roaring stock market and a push from Washington to deregulate financial products, many of Wall Street’s top dogs just stumbled after reporting quarterly earnings this week.

Banks have 99 problems

There wasn’t just one culprit, but a slew of unfortunate events that created a perfect storm for big banks.

The White House’s presence in the economy is inescapable these days, and President Trump’s interventionist policies were a huge discussion point during earnings calls—particularly his proposed 10% cap on credit card interest rates. Management at Wall Street firms took earnings calls as an opportunity to hammer the idea, noting that such a cap would hurt their bottom lines.

But beyond the broad policy environment, there were a slew of snafus. JPMorgan struggled with a slowdown in its investment banking business, while Wells Fargo had its worst day in six months after the bank reported disappointing profits, partially because of a stagnant housing market that hurt its mortgage lending business.

Meanwhile, Goldman Sachs reported its first revenue decline in nine quarters thanks to its Apple Card debacle, while Bank of America was burned by a very modern problem: Its highly touted AI assistant, Erica, failed to attract more users last quarter.

Other problems were more basic: Running a bank is just plain expensive. Citigroup reported a 13% quarterly profit decline in Q4 due to rising expenses as it continues its banking overhaul.

The silver lining: Despite the mixed bag of various setbacks, banks maintained that they did not see a downturn in consumer spending. That was particularly true for banks with wealthier customer bases, like Goldman Sachs and Morgan Stanley—both of which beat earnings expectations while their peers largely fell short, and both of which hit new 52-week highs today.

Overall, Wall Street remains bullish on 2026, predicting a return of dealmaking, IPOs, and a continued trading boom. For that reason, these bellwethers aren’t ringing any alarm bells about the economy quite yet.—LB

🟢 What’s up

• Beyond Meat rose 8.12% after launching its new protein drink, Beyond Immerse—though they totally should have just called it “Beyond Meat Juice.”
• Talen Energy climbed 11.8% on plans to buy three power plants for $3.5 billion, adding 2.6 gigawatts of natural-gas capacity.
• Penumbra jumped 11.87% after Boston Scientific agreed to acquire the healthcare company for $15 billion in cash and stock.
• Managed-care stocks rose after President Trump urged Congress to move forward with his healthcare framework, with Humana up 3.64%, Centene gaining 2.38%, Molina Healthcare rising 2.63%, and UnitedHealth Group climbing 1.19%.
• Nokia rose 3.85% after Morgan Stanley upgraded the stock, touting upside from AI and cloud-driven network demand.
• DraftKings advanced 3.32% after Wells Fargo upgraded the stock while downgrading rival Flutter Entertainment, citing strong short-term upside for DraftKings ahead of an expected solid fourth quarter.

What’s down

• Spotify fell 3.95% after announcing a $1 monthly price hike for its Premium plan starting in February.
• Vail Resorts slid 2.34% after reporting season-to-date skier visits down 20% compared with last year.
• Disc Medicine fell 7.84%, Sanofi dropped 0.88%, and Eli Lilly slid 3.76% after reports that the FDA is lengthening review times for drugs granted priority review vouchers.
• Reddit sank 9.36% after RBC analysts warned that the social media site’s advertising performance has failed to impress.
• Coinbase Global declined 6.48% after the Senate Banking Committee delayed its markup of the Clarity Act, following public opposition from CEO Brian Armstrong.

The first chip stock to report earnings this season just crushed expectations, raising investors’ hopes that the AI trade isn’t over yet.

Taiwan Semiconductor Manufacturing Company is the world’s largest chipmaker, and it kept the crown securely on its head thanks to a fantastic fourth quarter. Highlights include:

• Revenue rose 20%, breaking above NT$1 trillion ($33 billion) for the first time ever
• Management boosted revenue guidance for the current quarter by 38% year over year
• Profits popped 35%, crushing analyst expectations and marking its eighth straight quarter of profit growth in a row

The stock rose 4.49% today, but it wasn’t just TSMC shareholders reaping the rewards: The strong quarter sparked a rally throughout the AI trade, with memory storage stocks like Sandisk and Western Digital rising 5.53% and 3.3%, respectively. ASML, which builds the machines that build semiconductors, jumped 5.37% after TSMC promised to boost its capital expenditure budget from $40 billion last year to as much as $56 billion in 2026.

TSMC is the leadoff batter of chip stocks, and it just hit a home run. That’s a good sign for the AI trade, but keep in mind that we’re still in the first inning of the earnings season.—MR

Markets zigged, investors hedged, and BlackRock made bank.

The firm’s assets under management rose to a record $14 trillion after attracting $342 billion of client inflows in the fourth quarter, pushing total inflows for the year to $698 billion. The quarter blew past expectations, fueled by strong demand for long-term strategies, particularly ETFs. The stock jumped 5.93% today.

At the same time, the world’s largest asset manager is quietly remaking itself beyond public markets: BlackRock has spent roughly $28 billion on acquisitions over the past few years—including Global Infrastructure Partners, HPS Investment Partners, and Preqin—positioning itself as a major force in private credit and infrastructure.

Big flows, bigger faultlines

While that sounds all well and good, private credit is one of what the Leuthold Group dubbed the “risky trinity”, alongside AI and bitcoin—three themes that are seeing "unprecedented convergence” after years of rapid growth.

AI is pulling all three trends together. Data center buildouts are absorbing vast amounts of capital, increasingly financed by private credit as banks pull back. Moody’s estimates at least $3 trillion will be invested in data-center projects over the next five years, with a growing share coming from private lenders.

Bitcoin completes the triangle: Mining firms have repurposed data centers for AI workloads and financed the pivot with—you guessed it—private credit, often using bitcoin as collateral. A sharp drop in crypto prices could trigger forced selling and credit stress, amplifying volatility across the entire “risky trinity.”

So…now what?

Leuthold isn’t waiting around to find out.

The firm has “dramatically” reduced exposure to information technology and communications to a nearly 20% underweight, rotating instead into financials and healthcare, now its largest overweights—a decidedly unsexy pivot, by design.

Within financials, Chun Wang, co-portfolio manager at Leuthold, favors big banks like JPMorgan and Morgan Stanley, citing a supportive macro mix and an expected steepening yield curve that would benefit both commercial and investment banks.

“Regional banks are more exposed to the troubles within the private-credit sector and also credit-card companies are more exposed to the lower lack of the K-shaped economy,” Chun told MarketWatch.

BlackRock has become a force to be reckoned with in private credit, but private credit is one leg of an increasingly wobbly stool supporting the data center buildout, which in turn is supporting the entire market. If the “risky trinity” proves to be too risky, “boring” investments might be your best bet after all.—SY

• Here’s how Saks’ disastrous acquisition of Neiman Marcus led to its bankruptcy.
• US officials confirmed the seizure of a sixth oil tanker off the coast of Venezuela.
• 1.4 million fewer people enrolled in ACA plans due to spiking premiums and the expiration of tax credits.
• Related: President Trump revealed his new proposal for revamping the US healthcare system, dubbed “The Great Healthcare Plan.”
• Netflix struck a deal with Sony to stream the Hollywood giant’s films after they run in theaters.
• Here’s why software stocks are feeling the pain right now. Hint: All roads lead back to AI.
• Taiwan agreed to invest $250 billion into US chipmaking production capacity as part of a new trade deal.
• Amazon is looking to secure its data center supply lines by inking a contract with the first new source of copper in the US in over a decade.

• Economic reports to watch: Industrial production and capacity utilization for December, and the home builder confidence index
• Earnings on deck: PNC, Regions Financial Services, State Street, and M&T Bank
• Fed speakers: Boston Fed President Susan Collins, Richmond Fed President Tom Barkin, Fed Vice Chair for Bank Supervision Michelle Bowman, Federal Reserve Vice Chair Philip Jefferson