MARKET COMMENTARY

U.S. financial markets ended the first full trading week of 2026 on a broadly positive note, with major equity benchmarks reaching all-time highs. Robust investor participation defied typical early-year caution. The overarching narrative was renewed confidence in a soft-landing scenario rather than a flight to safety, as evidenced by the rotation out of defensive mutual fund structures and into large-cap growth ETFs.

Here are the key takeaways from last week:

Stock Index Performance 

• The S&P 500 increased 1.57%.
• The Nasdaq 100 gained 2.22%.
• The Dow Jones Industrial Average led, rising 2.32%.

Economic Data & Market Drivers

• President Trump's military operation capturing Nicol•s Maduro dominated headlines. U.S. equities barely reacted, as investors judged the conflict to be geographically contained. Energy and credit markets tied to Venezuelan production saw more direct impact, while WTI crude stayed subdued in the mid-$50s as OPEC+ discipline and soft global demand offset supply concerns.
• December payrolls rose just 50,000, well below consensus and recent averages, while prior months were revised lower and unemployment edged down to 4.4% on falling participation. The shift from •hot• to •cooling• eases inflation pressure but raises growth concerns, complicating the Federal Reserve•s calculus as services activity remains firm.
• The ISM Services Purchasing Managers• Index (PMI) hit 54.4, its strongest 2025 reading, with business activity and new orders solidly expansionary. Yet the ISM Prices Index (an early warning system for inflation) stayed elevated. Additionally, consumer sentiment ticked higher but remains depressed, with inflation expectations sticky in the low-4% range • challenging Fed re-anchoring efforts towards its 2% target.
• The 2-year yield rose 6 basis points to 3.539%, snapping a four-week decline as markets tempered near-term easing bets. The 10-year closed at 4.170% amid competing forces: slower growth supporting duration versus geopolitical risk and policy uncertainty pushing yields higher.

The Week Ahead 

• Over the weekend, news broke of an investigation into Federal Reserve Chair Jerome Powell. Gold futures rose and stock market futures fell on the news. As always, we will be paying close attention to market developments.
• December's Consumer Price Index (CPI) on January 13th will test whether disinflation is durable after core inflation fell to 2.6% in November • its lowest since early 2021. The Producer Price Index (PPI) and retail sales on January 14th, followed by industrial production on January 16th, will confirm whether softer labor data are cooling demand. Fed speakers are expected to signal whether December's weak jobs report warrants earlier rate cuts or reinforces a •higher for longer• stance.
• Q4 earnings season begins with major banks testing whether market gains justify analyst expectations for 15% S&P 500 earnings growth in 2026. Bank commentary on credit quality and margins will reveal how higher rates are affecting the economy. Supportive CPI and earnings favor quality cyclicals; surprises could trigger volatility and rotation toward defensive sectors.

The first full week of 2026 confirmed an economy with slowing job gains and upbeat services activity, keeping the Fed data-dependent rather than poised for aggressive cuts. For investors, this argues for staying invested but balanced • emphasizing quality, maintaining diversification, and preparing for volatility as inflation data and earnings unfold.

As always, feel free to reach out to us anytime with questions.