Market Flash: Venezuela Takeovers, Soaring Stocks, and COLA 2026 Adjustments

*Written as of 01/06/2025, 12:45 ET

The past week saw major turbulence in the markets as well as the geopolitical chess match (way) south of the border. There’s a lot to unpack, so let's get to it.

Global Markets: Stocks Higher, Volatility Low

This week, global equity markets hovered near record levels, while volatility remained close to historic lows.

Investors continued to price in slower inflation and gradual economic cooling rather than immediate recession risk. Market participation was broad, and there were no major sector-driven selloffs. Periods like this often coincide with rising valuations and relatively calm trading conditions.

Venezuela: Big Moves, Narrow Impact

Developments in Venezuela continued to ripple through the country’s defaulted bonds, which have surged on speculation around potential debt restructuring talks that began late last year. The same could be said of the Caracas Stock Exchange, which saw a 73% uptick as of the writing of this piece.

The rally remained concentrated in Venezuelan assets. Broader emerging-market bonds, U.S. equities, and global stock indexes showed little reaction, except in oil and other natural resource sectors.

Federal Reserve: Policy Steady After December Cut

The Federal Reserve reiterated its most recent policy stance this week, following December’s rate cut that brought the benchmark range to 3.5%–3.75%.

Officials emphasized that future moves will remain data-dependent as inflation continues to cool and economic growth moderates. Markets interpreted the messaging as confirmation that the easing cycle is likely to be gradual rather than aggressive.

Inflation and Benefits: 2026 COLA Set

Social Security has announced a 2.8% cost-of-living adjustment for 2026, reflecting easing inflation compared to recent years.

The smaller adjustment marks a shift away from the unusually large increases seen during peak inflation and points to a more normalized price environment heading into 2026.

Bonds and Income: Yields Remain Elevated

The 10-year U.S. Treasury yield remained around 4.2% this week.

After falling from late-2025 highs, yields have stabilized at levels well above those seen for much of the past decade. This has restored the income-generating role of bonds within diversified portfolios.

Retirement Sustainability: Withdrawal Rates Improve

Morningstar’s latest retirement income research estimates a 3.9% starting withdrawal rate for a 30-year retirement under its baseline assumptions, compared to roughly 3.3% in recent years.

Higher bond yields and improved income assumptions are the primary drivers behind the increase, reducing pressure on equities to fund retirement spending.

Annuities: Rates Still Historically High

Some multi-year guaranteed annuities continue to offer rates above 7%, reflecting still-elevated interest rates.

Insurers have begun trimming offers in some cases, but payouts remain well above levels available during the prior low-rate era.