The 'risky trinity' is the most underappreciated market threat right now. These are the stock moves to make.

By Barbara Kollmeyer

Leuthold warns that three hot market themes increasingly converging

The Leuthold Group sees increasingly entangled themes of bitcoin, AI and private credit as a big risk for investors.

Coming into 2026, investors have been somewhat spoiled.

The S&P 500 SPX last year pulled off a rare "three-peat" of 15%-plus returns in three straight years, noted The Leuthold Group in its Green Book research publication for January. The first was in 1995-1997, while the second in 2019 -2021, plus the most recent one, means two such events for investors in the past seven years, the investment management firm said.

What usually follows those periods is higher volatility warns Leuthold. In our call of the day they flag an even bigger "risky trinity" worry as they see three major market themes becoming increasingly intertwined.

"You're going to have big corrections, even crashes in multiple interconnected asset classes, because they're just exposed to the same underlying risk," Chun Wang, senior analyst and co-portfolio manager for the Leuthold Global Fund, Leuthold Core Investment Fund, and the Leuthold Select Industries Fund, told MarketWatch in an interview on Tuesday.

Chun said the "biggest underappreciated risk in the market" right now is the "unprecedented convergence" of three long-running and winning themes for investors: AI, bitcoin and private credit.

Worries around AI data-center buildouts are a known factor, while second part of that trinity is private credit, which has been funding data-centers and other AI projects, in place of banks. "The growing exposure tightly links private credit performance to the AI infrastructure cycle," Leuthold notes.

The third part is bitcoin, which has become "increasingly entangled" with AI and private credit. That's as bitcoin mining firms in the past two years have repurposed big-scale data centers to host AI workloads, Leuthold said.

To fund this, many miners have borrowed from private credit markets, with bitcoin their most liquid collateral. That means a sharp fall in prices of the crypto could create credit events and force miners to sell more to shore up liquidity, potentially creating a downward spiral, said Leuthold.

"The diversification benefit among AI, bitcoin and private credit is just not what people think at this point," Chun said.

So what to do? The portfolio manager said Leuthold has "dramatically" cut its exposure to information technology and communications in the last six months, to a nearly 20% underweight.

He said they see better diversifiers within financials and healthcare - their two biggest sector overweights.

The financial services sector was jarred earlier this week after President Donald Trump called for a 10%, one-year cap on credit card interest rates. Chun, said they favor big diversified banks like JPMorgan (JPM) and investment banks like Morgan Stanley (MS), both key holdings.

They're avoiding regional banks, lower-quality banks and consumer finance, such as credit-card issuers. "Regional banks are more exposed to the troubles within the private-credit sector and also credit-card companies are more exposed to the lower lack of the K-shaped economy," he said.

And why the big banks? "Macro wise, we have this powerful mix of both fiscal and monetary policy aligned to serve the midterm election," he said. As well, they expect a steepening in the yield curve - a widening gap between long and short-term rates - this year, as "critically very favorable" for both commercial and investment banks.

A steepening yield curve often translates into an increase in what banks earn from lending as they borrow short and lend long.

Within healthcare, Chun said they are overweight biotech and pharmaceuticals. One of the worst-performing sectors around, they started "nibbling" on healthcare late last year and their position is now nearly 10% overweight, he said. They see much of the bad news and policy headwinds now priced into those stocks.

Chun said they've had an overweight position on precious metals and gold miners for a year and a half - a top contributor to portfolio performance - and they're sticking to it. "For the longer term, I still think there's a lot of room on the upside for this sector and especially with the dollar debasement and sovereign credit issues."

He said they shifted into electronic manufacturing services and construction engineering, small parts of the overall AI data center buildout early in 2024, with companies such as Jabil (JBL) and TE Connectivity (TEL.) They rotated into that segment after exiting semiconductor equipment holders in late 2024, said Chun.

Read: How investors can protect their portfolios as the stock market's 'fear gauge' rises

The markets

U.S. stocks DJIA SPX are in the green, led by tech COMP. Oil prices (CL00) are down over 3%, the first fall in six sessions, with silver (SI00) sharply lower after President Donald Trump implied he'd hold off on attacking Iran.

   Key asset performance                                                Last       5d      1m     YTD    1y 
   S&P 500                                                              6926.6     0.08%   3.05%  1.18%  16.42% 
   Nasdaq Composite                                                     23,471.75  -0.48%  3.43%  0.99%  20.30% 
   10-year Treasury                                                     4.142      -3.40   1.70   -3.00  -47.50 
   Gold                                                                 4613.6     3.28%   5.54%  6.50%  69.46% 
   Oil                                                                  59.72      5.89%   5.25%  4.02%  -24.56% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

BlackRock's (BLK) assets under management jumped to a record $14 trillion at the end of 2025, and shares are rising. Goldman Sachs (GS) earnings topped forecasts, but shares are flat after revenue disappointed. Morgan Stanley (MS) profit and revenue also beat expectations, and the stock is up.

Taiwan Semiconductor Manufacturing (TSM) broke a big revenue milestone and lifted guidance on revenue and AI capex. The stock is up and driving other chip-equipment makers like ASML (ASML) higher.

Shares of Penumbra (PEN) are up 14% after Boston Scientific (BSX) announced a $14.5 billion deal for the medical device maker.

Weekly jobless claims dropped to 198,000 in the week through Jan. 10, from 207,000 a week prior. Fed Gov. Michael Barr will speak at 9:15 a.m., followed by Richmond Fed Pres. Tom Barkin at 12:40 p.m. and Kansas City Fed Pres. Jeff Schmid at 1:30 p.m.

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The chart

Source: SMM, Bloomberg, Goldman Sachs Global Investment Research

Sharing this chart, Goldman Sachs commodities analysts say fundamentals don't justifying the 23% price rally for copper to above $13,000 per tonne since November. Inventory outside the U.S. is "not critically tight and is rising," say a team led by Eoin Dinsmore. They see continued high prices the first quarter due to uncertainty over a U.S. refined copper tariff. "However, we hold to the view that the bulk of the copper price rally has already occurred, and the copper price is increasingly vulnerable to a correction. We forecast the LME copper price to decline to $11,000 by December 2026."

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   INFY    Infosys 
   TSM     Taiwan Semiconductor Manufacturing 
   NVDA    Nvidia 
   TSLA    Tesla 
   GME     GameStop 
   AMD     Advanced Micro Devices 
   PLTR    Palantir 
   MU      Micron 
   AAPL    Apple 
   INTC    Intel 

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01-15-26 0939ET