CWS Market Review – January 20, 2026

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Markets Drop on Greenland News

The stock market opened sharply lower this morning due to rising tensions over Greenland. (Well, there’s a sentence I never saw myself typing.)

The stock market was not pleased over this weekend’s news. The Dow lost 870 points today and the S&P 500 dropped a little over 2%. The Nasdaq fell by 2.4%. The S&P 500 also fell below its 50-day moving average. This was the worst day for the index since October.

A lot of folks just seem baffled by President Trump’s actions. French President Emmanuel Macron emailed President Trump saying, “I do not understand what you are doing on Greenland.” He’s not alone.

As usual, I’ll steer clear of any political angles – that’s not my specialty. I do know markets and markets do not like uncertainty, but that’s what we’re getting over Greenland.

My hunch is to ignore this as typical Trumpian bluster, but I can’t be positive. Some folks are taking this very seriously. Denmark has moved troops to Greenland. There appears to be a desire to deescalate tensions.

President Trump has threatened new tariffs on several European countries that aren’t siding with him over Greenland. This could impact $100 billion worth of U.S. exports. Countries such as Denmark, Norway, Sweden, France, Germany, the U.K., the Netherlands and Finland will be hit with 10% tariffs on February 1. Those will rise to 25% in June.

The “Sell America” trade dominated world markets on Tuesday. Before there’s warfare on the battlefields, there’s often warfare in the markets. On Tuesday, the dollar plunged, Treasuries fell, yields spiked and gold rallied. In fact, gold and silver hit record highs. In less than 18 months, gold has doubled.

On Tuesday, the euro gained 0.7% against the dollar and gold was on pace for its best day since October. The bulls came in and tried to turn things around, but that effort flopped by noon.

What’s interesting about today’s market is that it largely continued the trend that’s been in place for several weeks. By that, I mean that Value outperformed Growth (meaning it fell by less). Low Vol beat High Beta. The Russell 2000 beat the large-cap indexes and the equal-weighted indexes held up very well.

I’m happy to report that our Buy List continues to do very well this year. On Tuesday, the Buy List outperformed the S&P 500 for the 11th time in 12 trading sessions. Rollins (ROL) was up a bit today and it reached a new 52-week high as did Casey’s (CASY) and Mueller (MLI). Comfort Systems USA (FIX) just became our first 20% winner this year.

So far, this earnings season is going mostly well for Wall Street but there have been some prominent disappointments. 3M (MMM) beat earnings by three cents but the stock got knocked for a 5% loss.

Fastenal (FAST) said its Q4 revenues were below Wall Street’s estimate. The problem is that higher tariffs inflated prices and cut demand. Fastenal is a good example of a cyclical stock. The company sells construction supplies such as fasteners, nuts, ⁠screws and bolts.

Bank stocks were nervous on Tuesday as the market was waiting on the decision by the Trump administration to impose a 10% cap on credit card interest rates. U.S. Bancorp (USB) rallied a bit after an encouraging earnings report.

For much of last year, I talked about how riskier stocks strongly outperformed more conservative investments. That gap between high-risk and low-risk performance grew exceedingly wide by late last year. So far, that trend has reversed itself and low-risk stocks are finally leading the market.

The reversal seems to have started in late October. Since then, defensive stocks have prospered. Here’s a look at the Consumer Staples (red), Healthcare (blue) and the S&P 500 (green) over the last several weeks:

It’s not much yet but this is a major departure from what we saw last year. These are typically the kinds of stocks people buy when they’re nervous about the state of the economy.

On Thursday, the government will release its first estimate for Q4 GDP growth. It could be a strong number. Traders are very optimistic. The traders at Polymarket expect growth of more than 3.5%. For 2026, traders see a 78% chance that GDP growth surpasses 2.5%.

The Federal Reserve meets again next week, and I think we can completely rule out any changes to interest rates. The Fed’s pause may not last long. Traders still see two more rate cuts coming this year. If the employment news continues to be sluggish, then we’ll certainly see the Fed come to the market’s rescue, no matter who the Fed Chair is.

Stock Focus Guidewire Software (GWRE)

One of the stocks I strongly considered for this year’s Buy List was Guidewire Software (GWRE). Even though I didn’t chose Guidewire for inclusion on our Buy List, I thought it’s worth taking a closer look.

Guidewire is a leading provider of cloud-based software solutions specifically designed for the property and casualty (P&C) insurance industry (e.g., auto, home, commercial, and other non-life insurance).

The company helps insurance carriers modernize their operations, engage customers digitally, and grow more efficiently. Their platform is used by over 570 insurers in more than 40 countries. Guidewire is the go-to platform for many P&C insurers looking to replace outdated legacy systems with modern, flexible technology. The company is based San Mateo, CA.

Guidewire had several co-founders but the most prominent is Marcus Ryu. He served as the CEO for several years and led Guidewire through its IPO in 2012.

Guidewire’s AI analytics features are deeply integrated into its P&C insurance platform (primarily through Guidewire Analytics and Guidewire Cloud), enabling insurers to embed predictive and generative AI insights directly into core workflows like underwriting, claims, pricing, and operations.

What I like about Guidewire Software is that it has a strong moat, particularly in the property and casualty (P&C) insurance software market. This is because Guidewire has “high switching costs.”

This refers to the expense that a customer faces when trying to switch from one product to another. These costs make it difficult for customers to change, even if a competitor offers a better or cheaper alternative.

High switching costs help companies retain customers, reduce churn, maintain pricing power, and deter new competitors from easily gaining market share. This is important because companies with high switching costs can often charge higher prices without losing many customers.

Guidewire is a very profitable outfit. In December, Guidewire reported fiscal Q1 earnings of 66 cents per share. That’s up from 43 cents per share one year ago. It also beat Wall Street’s consensus of 61 cents per share.

Wall Street expects Guidewire to make $2.95 per share this year and $3.86 per share in 2027.

One problem with Guidewire is that it’s overpriced. Very overpriced. That fact probably explains why the stock has not done well recently. Since October, it’s been in a nosedive. At one point, GWRE got to $272.60 in October. It touched a new 52-week low today of $154.96. That’s still 40 times next year’s earnings estimate.

I expect Guidewire to trade at a premium, but I’d prefer to see a much smaller premium. Another concern I have is that Guidewire relies too heavily on a small number of customers. Still, if business remains good and the shares become a good deal less expensive, then I think Guidewire would be an attractive investment.

That’s all for now. Expect earnings news to dominate the market this week. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on January 20th, 2026 at 5:20 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.