Stocks pushed higher in the first full week of 2026, but market leadership is looking very different than what investors have been used to. Small-caps and cyclicals were clear winners as headlines around Venezuela, energy policy and the uncertainty surrounding the Supreme Court’s tariff ruling are keeping investors a bit more cautious.
Tip of the Week
As market leadership shifts to kick off 2026, remember the importance of diversification. A well-rounded portfolio includes exposure across multiple styles, sectors, and markets, not just a heavy allocation to tech. Bonds help provide income and manage risk when markets turn volatile. Also consider holding spare cash in a high yield savings account to take advantage of buying opportunities.
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Market Moves
Weekly Market Snapshot:
- S&P 500: +1.6% – U.S. stocks delivered solid gains as breadth improved and despite the dark overhang of geopolitics, the jobs market, and tariffs.
- Nasdaq 100: +2.2% – this index managed to outperform the broader large-cap market even though tech and the magnificent 7 stocks were collectively a performance drag.
- Russell 2000: +4.8% – a big resurgence in cyclical and value stocks helped small-caps, which are overweight in both of these areas of the market.
- VIX: 14.5 – despite plenty of catalysts that could have rattled investors, the markets largely remained calm and orderly, which helped contribute to gains for equities.
- Gold: +4.1% – gold continues its volatile run of the past few weeks; rising geopolitical risks improved the demand for safe havens.
- 10-Year Treasury Yield: 4.17% – long-term yields have remained in a very tight range over the past month.
Drivers:
After a quiet holiday period, the markets now have a lot to think about. Another weaker-than-expected jobs report wasn’t entirely surprising given recent trends. Investors were largely willing to shrug off events in Venezuela and the Supreme Court’s eventual ruling on the Trump tariffs. While they didn’t necessarily cause investors to head for the exits, they were heavily responsible for the big rotation we saw within equities this past week.
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Economic Highlights
A couple of the notable themes that stood out this week:
The Jobs Market Remains Weak But Stable
The December non-farm payroll report showed more stagnation in the labor market. The 50,000 jobs added number missed expectations of 60,000, but negative revisions to both October and November figures made the report look worse.1 From May-December, the U.S. economy has added a scant 93,000 jobs.
The unemployment rate actually dipped lower to 4.4%. This helps confirm the notion that while job hiring has slowed to a crawl, firings have also slowed creating a balance that’s helping the labor market stay afloat for now.
Source: U.S. Bureau of Labor Statistics
The slowdown in the jobs market has coincided with President Trump’s “Liberation Day” tariffs. We’ve heard plenty of anecdotal evidence from importers that they’re putting hiring on hold until they better understand the financial impact of higher import costs. With seven months of data now in the books following that day, we see that the effect is being felt economy-wide.
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Markets Don’t Get An Answer On Tariffs; Still A Wild Card
The Supreme Court was expected to give a ruling on the legality of the Trump tariffs on Friday, but instead decided to punt.2 This has become a key agenda item for Trump, although legal experts continue to question the legality of the tariffs and whether the president has overreached his authority.
From a pure market perspective, it could be a bullish sign if the court rules against Trump. American importers who have been paying the tariffs would likely see immediate financial relief, although it seems unlikely that tariff refunds would be issued. The removal of the tariff uncertainty could lead to companies opening up job hiring again and create a catalyst for economic expansion later this year.
Following Liberation Day, the average tariff rate has climbed to 80-year highs.
Source: Tax Foundation
Venezuela Unrest Pushes Oil To 7-Week High
The events surrounding Venezuela and its president have resulted in oil market volatility more than stock market volatility. The country isn’t even a top 10 oil-exporting nation, but the mere appearance of a disruption and the potential for more widespread impacts has spiked oil prices.
Brent crude oil prices touched a high of $63.91 on Friday, a level not seen since just before Thanksgiving.3 Geopolitical oil price shocks tend to be short-term in nature and often retrace their steps once the dust-up cools off. Whether this turns out to be one of those events remains to be seen.
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Consumer Sentiment Improves Slightly
The University of Michigan Consumer Sentiment survey reading for January came in slightly higher than December’s and reached its highest point since September.4 It’s a positive development, but not one that’s likely to be a needle mover since this number is still well below 2023 and 2024 levels.
The Week Ahead
A few themes to watch next week:
In Summary
Markets have kicked off 2026 in a positive way, but where the gains are coming from looks much different than before. This coming week should mark a return to more fundamental catalysts, including earnings and inflation. The economy doesn’t appear to be in a strong position overall, but it continues to hang on in key areas. That alone may be enough to keep stock prices moving higher.
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