Markets head into the new week with policy and liquidity risks outweighing traditional macro data. Yen volatility has re-emerged as a key global driver, with renewed instability in Japan tightening liquidity and pressuring risk assets. Crypto has moved first once again, with Bitcoin down sharply on the week — a familiar signal that funding conditions are deteriorating beneath the surface.

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Government Funding Gridlock Adds Pressure
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Washington is adding a domestic layer of uncertainty. While most government funding bills have broad bipartisan support, disagreements over Homeland Security funding have stalled progress. Monday’s scheduled Senate vote was canceled, compressing the timeline ahead of the January 30 deadline. Betting markets are now pricing a 79% probability of a government shutdown, raising headline risk even if the ultimate economic impact proves limited.

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Geopolitical Stabilization from Greenland Deal
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President Trump announced that the U.S. has reached a preliminary framework agreement with Greenland, dialing back earlier tensions and easing some trade-related uncertainty tied to Arctic access and strategic resources. While details remain sparse, the announcement helped stabilize sentiment at the margin.

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Sector Rotation Reveals Defensive Bias
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Equity performance reflected a defensive and selective rotation rather than broad risk-on behavior:
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• Leaders: Consumer Staples and Utilities led as investors leaned toward earnings stability. Industrials and Materials advanced on defense, infrastructure, and critical-minerals exposure. Energy also gained amid geopolitical undercurrents.
• Laggards: Technology participation was muted. Consumer Discretionary lagged. Financials underperformed following earnings disappointments.

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Interpretation:

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This isn’t panic — it’s positioning. Investors are showing clear signs of caution as multiple macro stress points converge, opting to lean into resilient sectors and inflation beneficiaries while avoiding beta-heavy risk exposure.