It's been a good year so far, even though only two trading days have gone by in 2026. The S&P 500, DJIA, and Nasdaq all rose today despite the crisis in Venezuela over the weekend. The DJIA hit a record high. We've often observed that geopolitical crises create buying opportunities. This time, stock market investors chose to emphasize the positive effects of this crisis rather than its possible unintended negative consequences. Apparently, they aren't at all concerned about how the Chinese and Russians will respond to President Donald Trump's declaration that the Monroe Doctrine is back in force in the Western Hemisphere. What if China declares a Xi Doctrine and Russia reiterates the Putin Doctrine?
Gold investors accentuated these possible negative consequences, sending the price of gold up to a one-week high (chart).
The price of oil rose slightly today. The stock prices of the major US oil companies rose sharply on expectations that they would profit from the opportunity to develop Venezuela's vast oil reserves. That makes sense, but we still expect that a global glut of oil will push crude prices lower (chart).
Then again, overweighting the S&P 500 Energy sector is admittedly an enticing contrarian bet. It's easy to overweight the sector since it accounts for only 2.7% of the market capitalization of the S&P 500 (chart). But it also accounts for only 3.9% of the forward earnings of the S&P 500.
Energy is leading the S&P 500 sectors race so far in 2026 with a 4.8% gain (chart). Two of our overweighted sectors, Financials (up 2.4% ytd) and Industrials (1.9%), rank second and third, respectively.
Emerging markets also have started the year with very solid gains indeed (chart).
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