Daily Market Brief - Jan 15, 2026

Editor's Notes:

• Rotating Eastward: US stocks are expensive and subject to increasing policy uncertainties; naturally, investors are looking elsewhere. Asia markets already had a very strong 2025, and I expect the China consumption recovery play (e.g. Anta, Nongfu), China AI play, Asia healthcare innovation cycle, Japan revitalization, and AI supply chain, to drive steady appreciation this year. US will likely see better performance from smaller cap names in policy-driven sectors - defense, healthcare, service providers participating in AI build out.
• Solid Names in Quieter Corners: A few names we profiled over the last month as solid positive targets are showing up with good appreciation, despite them not in the AI / policy spotlight, e.g. Accenture, Hormel Foods.

Equity markets are experiencing significant shifts, including a sustained small-cap outperformance in the US alongside emerging regulatory risks, and Japan's Nikkei 225 reaching record highs due to structural governance changes and fiscal stimulus expectations. Hong Kong's healthcare and tech sectors are showing signs of a potential rebound. A critical divergence is observed between 'AI-infrastructure' plays, which remain robust, and 'AI-software' names, facing valuation compression and notable insider selling. This analysis highlights major stock movements, such as surges in Alibaba Health and Masimo, contrasting with declines in Unity Software and Rivian, and delves into key investor themes like the Alaska Air short thesis, the strategic implications of the Alphabet/Apple Gemini deal, opportunities in defense and strategic minerals, widespread software insider selling, and a significant technical breakthrough by Mitsubishi Electric in IGBTs.

Overall Themes, Market Sentiment & Debates

US: Small-Cap Renaissance and Regulatory Whiplash

The S&P 500 is showing signs of exhaustion as capital rotates into small caps (typified by AAON and interest-rate-sensitive names). This move is underpinned by a massive valuation gap and cooling inflation. However, regulatory risk is re-emerging as a primary volatility driver. The "Trump 10%" cap on credit card interest rates is being viewed by many as a "buying opportunity" for transaction processors like Visa and Mastercard, under the thesis that these firms are transaction-centric rather than credit-exposed. Simultaneously, the market has completely discounted the criminal probe into Fed Chair Powell, prioritizing rate-cut trajectory over administrative friction.

Japan: The "Takaichi Trade" and Structural Governance Shifts

The Nikkei 225 has reached record highs, fueled by bets on fiscal stimulus following a potential snap election (the "Takaichi trade"). Despite the Yen weakening to ~158.9, providing EPS tailwinds for exporters like Tokyo Electron and Advantest, the real alpha is structural. We are seeing a generational shift in Japanese C-suites; COVID-19 acted as a catalyst for removing "stubborn" legacy executives, empowering a younger cohort more amenable to shareholder-friendly capital allocation and M&A (e.g., the Toyota Industries tender offer leak).

Hong Kong: A Bottom in Healthcare and Tech?

The Hang Seng Index (+0.7%) is signaling a potential floor. The rally in Alibaba Health (+18.9%) and JD Health (+3.9%) suggests investors are looking past the "China Discount" toward absolute valuation lows. While Middle East uncertainty persists, the "bottoming out" of Chinese consumer staples—noted by Goldman Sachs regarding Nongfu Spring—indicates a shift from defensive to opportunistic positioning in HK.

Notable Big Stock Moves, Earnings and Development

Interesting Comments, Facts and Ideas

The Alaska Air ($ALK) Short Thesis: More Than a Glitch

Some are discussing an aggressive short thesis on Alaska Air based on systemic "loyalty theft" (tens of thousands of mileage accounts drained). Beyond the customer service disaster, the alpha lies in accounting anomalies: a $180M spike in loyalty liabilities and a $195M spike in receivables from Bank of America. If allegations of a corporate cover-up to avoid regulatory scrutiny hold water, the liability reset could be a significant downside catalyst.

The Alphabet/Apple Gemini Deal: Defensive vs. Strategic

While retail views the Apple-Google partnership as a win for Alphabet (briefly hitting $4T market cap), bears see it as Apple admitting defeat in the AI arms race. For Google, this is a massive distribution win that shifts the narrative from "disrupted by ChatGPT" to "dominant LLM provider" (Gemini). However, META is being viewed as a potential "Capital Cycle Trap" due to its massive capex, which may alter its stock profile from a cash-flow cow to a high-burn utility with high geopolitical risk.

Defense & Strategic Minerals: The Hegseth Factor

Bullish sentiment in Red Cat ($RCAT) is tied directly to the new Secretary of Defense's "drone dominance" mandate, which favors domestic US manufacturers. This thematic extends to rare earths: US Antimony ($UAMY) and USA Rare Earth ($USAR) are positioned as vertical integration plays for defense-grade materials as US law pivots toward non-Chinese sourcing. The Metals Company ($TMC) is the ultimate binary play here, with speculation that the US might bypass UN authority for "national security" seabed mining.

Insider Selling in Software: The Great Exit?

A disturbing trend of C-suite selling is emerging across high-multiple software. Atlassian ($TEAM), DocuSign ($DOCU), and Twilio ($TWLO) have all seen massive exits by founders or Directors. When coupled with AppLovin’s 7.6% drop on valuation concerns, it suggests the "AI software" trade is reaching an exhaustion point, even as the "AI infrastructure" trade (e.g., Advantest, Tokyo Electron) remains robust.

Technical Discovery: Mitsubishi Electric

A quiet but significant breakthrough was announced by Mitsubishi Electric regarding hydrogen's behavior in silicon. This isn't just academic; it has the potential to drastically reduce power loss in IGBTs (insulated gate bipolar transistors), which are critical for EV efficiency and industrial power. This reinforces the "Value Addition" theme currently sweeping Japanese industrials.

Happy Alpha Hunt! - Distilla

Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.