The Coward's Recovery

We just watched Jerome Powell hand over the keys to his office. That's the story nobody wants to tell about Friday.

The S&P 500 closed at 6,858.47 on January 2nd, up a measly 0.19%. The Dow scraped by with 0.66%. The Nasdaq fell 0.03%. These are not numbers that inspire confidence. They are not numbers that suggest a market that believes in itself. They are the numbers of a casino where the house has already counted its chips and is now just going through the motions.

But here's what actually mattered: gold and silver, building on their best year since 1979, climbed again at the open. The White House delayed a 107% tariff on Italian pasta—yes, actually pasta—and furniture stocks (RH, Wayfair, AMWD) bounced on the news. Micron jumped 8% on chatter about memory demand. ASML surged past $1,400 on analyst upgrades about EUV and TSMC. The AI infrastructure complex, the one sector that's genuinely working, kept itself alive through sheer force of will.

And Powell, who fought like hell to keep the Fed independent, who said no to Trump seventeen different ways, who maintained that tariffs were inflationary and growth-destroying and that the central bank had a mandate to stability—Powell's term ends in May. His successor will almost certainly be someone who cuts rates aggressively. The market knows this. The market is pricing this in. The market is already building the scaffolding for the narrative that comes next.

The Long Game of Capitulation

Let me be direct: what we're watching is not a recovery. It's not even a correction with conviction. It's the orderly dissolution of the last shreds of institutional resistance to chaos.

Trump's tariffs cost the average American household $1,200 in 2025. They'll cost $1,400 in 2026. Manufacturing has contracted for nine consecutive months. Unemployment is at a four-year high. Consumer sentiment hit its lowest annual average since 1960—not since the Great Recession, not since the last crisis—since they started measuring it in 1960. And yet.

And yet the stock market rose for the third consecutive year with double-digit gains. This is not because earnings improved. This is not because growth accelerated. Goldman Sachs projects 2.6% GDP growth for 2026, up from previous estimates of 2%. That is not a recovery. That is hope that things won't get worse. Bank of America thinks the S&P will rise 3.7% from where it ended 2025. Less than half the rate of historical average returns. They're calling this success.

The tariff thing is important here. Not because tariffs are good or bad—that's a political argument I'm not going to have. It's important because of what happens when a president can simply override decades of trade policy orthodoxy without economic suicide following immediately. The market's reflex was to plunge. Then it adapted. Then it moved on. The system, which we've been told is fragile and precision-engineered and locked into certain patterns, simply absorbed the shock and kept moving.

That's actually terrifying if you think about it.

The Fed's Elegant Exit

Powell has 147 days left as chair. He knows it. Everyone knows it. The market knows it more than anyone.

The divisions that cracked the Fed open in 2025 aren't going away in 2026. Beth Hammack of Cleveland and Lorie Logan of Dallas—both voting members this year—want rates held tight because they think inflation could get sticky. Chris Waller and Michelle Bowman wanted cuts last year as insurance for the labor market. Stephen Miran, Trump's appointee, thinks the Fed is "overestimating portfolio advisory fee inflation" and wants bigger cuts. On December's vote, Goolsbee and Schmid dissented for holding. Miran dissented for cutting 50 basis points. This isn't a central bank. This is a committee in open civil war, dressed in suits.

Powell navigated this with the dexterity of a man who knows he's negotiating his exit. Three rate cuts in 2025—25 basis points each in September, November, and December—kept everyone just satisfied enough. Not the hawks, not the doves, but satisfied enough that the institution didn't crack completely in public. Inflation peaked at 3% in January and had settled to 2.6% by year-end. The labor market was cooling but not crashing. Powell could say he was data-dependent. He was. He was also protecting his legacy by not being the chair when rates went negative or the economy entered what looks increasingly like stagflation theater.

The new chair—almost certainly someone who favors looser policy—will face a mess. If they cut aggressively, they risk inflation creeping back. If they hold, they're bucking both political pressure and market expectations. If inflation does prove sticky (which it might—tariffs don't care about the Fed's messaging), they'll be blamed for not acting. If it doesn't, they'll be credited for wisdom they didn't possess.

This is how power transfers in modern America: not with a bang, but with carefully orchestrated ambiguity and the understanding that the next person gets to inherit the wreckage.

What Buffett Saw That We're Still Missing

Warren Buffett handed over the CEO keys to Greg Abel last week. In his interview, Buffett said Berkshire Hathaway has a better chance of being around in 100 years than any company he can think of. That's not investment commentary. That's an admission that the current structure of capitalism is so fractured that only the most diversified, most defensive, most patient wealth survives it.

Buffett spent 60 years proving that you can beat the market by being smarter, more patient, and more willing to sit in cash than everyone else. The fact that he's now passing it to someone else and emphasizing institutional permanence rather than performance is him saying: the old game is ending. Something else is starting. I'm done playing, and I'm not sure Greg knows the rules of what comes next either.

Look at what people with real capital are actually doing. Insider buying has picked up. Elliott Hill bought 16,400 Nike shares. Tim Cook dropped $3 million into Nike. Board members at DoorDash are spending nine-figure sums buying stock. This is not the action of people who think the market is overvalued. This is the action of people who think they understand where consolidation, M&A, and control will be valuable. And they're betting their money accordingly.

This isn't retail exuberance. This isn't even institutional FOMO. This is money that knows things.

The Silence Is the Story

The one number that should terrify you is this: light trading volume around the holidays and new year is normal. But 11.17 billion shares traded on Wednesday, down from a 20-session average of 15.8 billion. The market moved on almost no conviction. The rally was propped up by semiconductors (Micron, AMD, SanDisk all ripping) and data center names (Vertiv up 8% on Barclays upgrade to overweight). The Magnificent Seven stumbled. Tech crashed. The Russell 2000 added 1.1%—small caps are finally getting a pulse.

This is rotation by death. Not by opportunity. Death.

The market's first trading day revealed the structure underneath: AI infrastructure gets bought because the narrative is unshakeable. Small caps get bought because they've been crushed so badly there's nowhere else to go. Gold and silver keep climbing because somewhere, deep in the institutional psyche, people are hedging. Not for a crash. For duration. For inflation. For the possibility that the next few years don't look like the last three.

And the White House is delaying pasta tariffs. Because even authoritarian trade policy has an expiration date on what it can absorb without causing a visible political cost.

We're not in a bull market. We're in the intermission between one era and another. The Fed is exiting. Trump is entering his second administration with tariffs and rate-cut demands. The economic data says growth is slowing. The earnings data hasn't caught up to stock prices in years. Valuations are at dot-com peak levels.

And yet, Friday's market closed with a shrug.

That shrug is the most honest thing the market has said all year.