Market Minute: January 2nd, 2026 - Welfare Scandals, and the Markets’ Geopolitical Balancing Act
As New Year’s celebrations give way to Dry January, we start 2026 with a variety of interesting themes. When I penned my first Market Minute after the inception of Innovative Asset Advisors Group, I told readers that our commentary on politics would occur only insofar as it impacts capital markets. Several current events are firmly in the camp of both political and economic news.
Welfare Scandals, Safety Nets, and Federal Spending
The first item is the welfare scandal in Minnesota, and the initial trials tied to welfare scams in Mississippi’s latest crackdown, which begins this week. These scandals are both expensive and audacious and get to the heart of the now-trite reviews to uncover “waste, fraud, and abuse.” As a first-world nation, we owe it to our citizens to help those who truly need help. Our social safety net has expanded, and according to a Federal Safety Net analysis, in FY 2024, welfare programs accounted for 16% of federal outlays—approximately $1.05 trillion. What is more interesting is that there are over 80 programs funded by the federal government and administered by the states. No chance for slippage here!
There appears to be both opportunity and momentum to review these programs to ensure that the people who truly need help receive it, while also creating an opportunity to trim fraudulent spending that could have a profound impact on the federal budget, debt, and deficits. More to come.
A Quiet Morning, a Big Headline
The second item I wanted to discuss is the capture of Nicolas Maduro. My wife has an ability to sleep that I envy, so Saturday morning I crept down to my home office to read The Wall Street Journal and clean up my email inbox. Of course, the first thing I saw was the Maduro news, and that quickly truncated my email review so I could flip through various channels to catch both the news and the opinions surrounding the arrest. I will leave the partisan nitpicking to true political types. My immediate thought was the impact on the economy.
Venezuela, Oil, and the Reality of Capital Risk
While the President was touting the capture and the vast oil reserves, I was thinking about the true economic impact. When I was at the Knights, we were reviewing a private placement for an oil field equipment supplier, and they specifically cited that they used only their oldest equipment in Venezuela because the government could nationalize everything at any moment. Next level, this means that the Venezuelan oil industry is likely more starved for capital than any of us can imagine, and I do not see American oil companies rushing in unless they know how they are going to be paid for money once taken from them, and also to recoup any current investment that may make. This whole scenario is further exacerbated by the fact that oil is trading for less than $58.
Market Snapshot and Global Reactions
This morning (1/5/26), Dow and S&P futures are essentially flat, and the Nasdaq is pointing to an open of about +0.6%—though not based on Venezuelan issues.
Russia, Iran, and China have all denounced the Maduro arrest for a variety of reasons. Russia had an ally close to the U.S.; Iran is concerned the U.S. might pursue regime change there; and China has been the recipient of the majority of Venezuela’s oil exports.
What It Means for Markets and Portfolios
We believe markets will remain cautious as investors try to decipher how geopolitics may weigh on asset prices. After three straight years of strong U.S. equity performance, it may not take much to create short-term concern and volatility. We will be watching all of this closely and will share more in the coming days and weeks.
As always, we are here to discuss portfolio positioning and help you think through long-term financial planning and portfolio structure.
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