From rates to AI: Insights from Jurrien Timmer - January 26, 2026

Japan’s policy shift and market reactions

Jurrien noted that Japan has become a notable outlier among major central banks, as it is currently the only one tightening monetary policy. At the same time, Japanese yields have risen sharply, creating the steepest yield curve in the developed world. Currency intervention around the yen has also re‑emerged, reflecting the pressures that can arise when long‑suppressed rates begin to adjust.

While Japan’s economy differs from others, Jurrien highlighted that its experience illustrates the broader challenges any highly indebted developed market may face when policy settings begin to shift.

U.S. bond market dynamics and fiscal discussions

Despite meaningful fiscal spending in recent years, Jurrien observed that U.S. Treasury yields remain below the levels that previously triggered concern, such as the 4.5%–5% range seen during the “bond vigilante” periods. He suggested that part of today’s calm may reflect market confidence in Treasury leadership and the possibility of coordinated approaches to debt management.

Jurrien also pointed to historical parallels, noting that during the 1940s, coordination between the Fed, Treasury and banks helped manage large debt loads. While he emphasized the uncertainty of future policy choices, he outlined how yield‑curve steepening and banking‑sector incentives could play a role in similar scenarios.

Earnings trends and a broadening market

Earnings season is showing its usual early‑cycle pattern, with roughly 80% of companies beating estimates by about 800 basis points. While the market had narrowed last fall, Jurrien highlighted that performance has since broadened, with about 70% of S&P 500 constituents above their 200‑day moving averages.

He added that the large technology names within the MAG7 have been stable, essentially treading water, which has allowed other sectors and stocks to participate more fully in the recent rally. This broader participation supports a healthier market structure, even as concentration remains a central topic.

Valuations, margins and what models show

Turning to valuations, Jurrien walked through several iterations of discounted cash‑flow (DCF) and regression‑based models. Current earnings forecasts assume 14% growth over the next few years, compared with a historical trend closer to 7%.

He explored how different assumptions in these models can imply varying degrees of valuation stretch, but also emphasized that today’s backdrop differs materially from the late‑1990s tech bubble. Credit spreads, margins and model readings appear more aligned with fair‑value ranges, even if markets remain priced for strong outcomes. These relationships continue to make margins and credit conditions key indicators to watch.

Geopolitics and the move toward a multipolar world

Jurrien discussed the broader geopolitical context, noting that global dynamics appear to be shifting toward multiple spheres of influence, including the U.S., China and Russia. This evolution has implications for how global capital flows may behave over time.

In the wake of discussions at Davos, he pointed to recent softness in the U.S. dollar and some volatility in yields, although bond markets have generally settled. These developments add to the ongoing conversation about how to interpret geopolitical change.

AI investment, infrastructure spending and market structure

The rapid expansion of AI‑related investment, particularly in data centers and computing infrastructure, was another key theme. Jurrien noted that while the technology is clearly transformative, questions remain about demand sustainability, customer monetization and how the downstream ecosystem will evolve.

He compared today’s environment to the early internet era: the technology proved to be world‑changing, but not every company at the forefront ultimately benefitted. With the MAG7 representing about 35% of the S&P 500, concentration remains an important consideration. A significant decline in these companies would likely affect the broader index, even if other areas of the market continue to perform well.

Conclusion: A week focused on the fundamentals