Investors began 2026 with a measure of optimism, as all major market averages finished the first week of the year in positive territory.
Market Performance – Week in Review
- Dow Jones Industrial Average: +2.32%
- S&P 500: +1.69%
- Nasdaq Composite: +2.01%
- Russell 2000: +4.72%
- Foreign Stocks: +1.80%
- Emerging Markets: +1.52%
Bond yields moved lower during the week, with the 10‑year U.S. Treasury ending at 4.167%.
Markets were supported by expectations that S&P 500 earnings could grow by approximately 15% in 2026, providing a constructive backdrop as the new year gets underway.
Q4 2025 Earnings Season Kicks Off
This week marks the start of fourth quarter 2025 earnings season, with several high‑profile companies reporting, including:
- JPMorgan
- Bank of America
- Wells Fargo
- Citigroup
- Goldman Sachs
- Morgan Stanley
- Taiwan Semiconductor
- Delta Air Lines
As always, forward-looking guidance will matter just as much as reported results, particularly around margins, labor costs, and demand trends.
Recent Economic Data Signals Slowing Employment Growth
In economic news, December payrolls increased by 50,000 jobs, net of downward revisions to the prior two months. The unemployment rate declined slightly to 4.4% from 4.5%.
Employment growth slowed meaningfully in 2025:
- Total jobs added in 2025: 584,000
- Average monthly job growth: ~49,000
- 2024 average monthly job growth: ~168,000
This slowdown may have been exacerbated by April 2025 tariff announcements, along with growing corporate scrutiny around whether AI can replace certain categories of labor. Both dynamics remain important trends to monitor as we move through 2026.
Key Policy and Political Developments to Watch
Last Friday, markets were watching for potential Supreme Court commentary on the legality of tariffs. However, it was announced that no ruling will be issued at this time. Any eventual decision—either way—could have meaningful market implications.
President Trump also floated several proposals that drew investor attention:
- Credit card interest rates: A proposal to cap rates at 10% for one year. While consumer‑friendly, such a move could pressure credit card issuer revenues and potentially restrict access to credit for higher‑risk borrowers.
- Mortgage market support: A call for Fannie Mae and Freddie Mac to purchase $200 billion of mortgage‑backed securities to help lower mortgage rates. While lower rates could improve affordability, without increased housing supply this may further elevate home prices—an important concern.
- Restrictions on corporate homeownership: A ban on corporations and institutional investors from purchasing single-family homes. Supporters argue this could ease competition for individual buyers and first-time homeowners. Critics caution that such restrictions could reduce rental housing supply and disrupt housing market liquidity.
Additionally, the Department of Justice announced Sunday that federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell. The investigation is tied to testimony that Powell gave to a Senate committee about renovations to Federal Reserve buildings, and whether he misled Congress about the scope and cost of the project. Powell responded promptly Sunday evening by publishing a short speech in which he called the probe “unprecedented” and stating that he believes the investigation stems from the Fed’s refusal to cut interest rates despite public pressure from the President.
This is a critical development to monitor closely, as it directly tests the Federal Reserve’s independence and introduces additional uncertainty for the markets.
This Week Ahead: Inflation Data in Focus
Markets will be closely watching key inflation reports in the days ahead, as Consumer Price Index (CPI) and Producer Price Index (PPI) data are released.
- CPI will provide insight into inflation at the consumer level, including food, energy, housing, and services. Investors will be paying particular attention to core inflation, which excludes food and energy, as it remains a key input for Federal Reserve policy decisions.
- PPI measures inflation pressures at the wholesale level and can offer early signals about future consumer price trends. Persistent producer-level inflation can eventually work its way into consumer prices, impacting margins and interest-rate expectations.
With inflation trends central to the outlook for interest rates, bond yields, and equity valuations, these reports could influence short-term market sentiment—especially if results surprise meaningfully in either direction.
Wall Street Expectations for 2026
Wall Street consensus currently projects the S&P 500 to gain approximately 9.6% in 2026.
According to Barron’s, since 2015 the S&P 500 has delivered:
- One year near consensus‑like returns (2016: +9.5%)
- Two modestly negative years (2015: +0.7%, 2018: –6.2%)
- One sharply negative year (2022: –19%)
Historically, mid‑term election years have been challenging, averaging roughly 4.5% returns, with positive outcomes just over half the time.
So what will 2026 bring? As always, time will tell.
Bottom Line & Closing Thoughts
For now, investors are hoping for a constructive mix of:
- Rising corporate profits
- Bond yields that remain range‑bound
- Fewer unexpected shocks along the way
While optimism is present, disciplined portfolio management and long‑term planning remain essential—particularly in an environment shaped by policy uncertainty, slower employment growth, and evolving market leadership.
— Paul Levin, CFP®, ChFC®, RICP®, TPCP®
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All market data sourced from The Wall Street Journal, January 9, 2026.
