Weekly Recap:

by Michael Reinking, CFA & Eric Criscuolo

Published on 1/09/26

The first full week of trading is in the books and markets are off to a positive start. At the start of the year we often see some violent rotational activity and volatility under the surface as trading desks are once again fully staffed, investors start to put money to work and tax loss selling gives way to the “Dogs of the Dow Theory”.

Similar to the last couple of years two of the big questions coming into 2026 were whether markets could continue to move higher after the strong performance of the last couple of years and whether the broadening of the rally which began in Q4 would have staying power. It’s still early days but thus far the answer is a resounding yes. Most major US indices hit new all-time highs this week with both the S&P 500 and Dow Jones Industrial Average closing within 1% of major round number milestones (7k and 50k, respectively). However, small and mid-cap indices were the stars of the show already up ~5% YTD. 

We’ll dive a bit deeper into some of this week’s action in a moment. Before that, we reviewed the last 55 years of returns to understand how the nearly 80% gain in the S&P 500 over the last three years stacked up, and if there were any lessons regarding performance following such significant returns. Since 1970, trailing three-year gains have exceeded 50% only eight times. A little over half of those occurred during the 1990’s with the most recent instance interestingly in 2021. The data suggests that such strong performance does not necessarily preclude future gains and in fact suggests there could be more in store. Excluding the build-up and subsequent burst of the dot-com bubble which positively skews the data, the average return over the next three years is close to 30%, which underscores the importance of adhering to a long-term investment strategy. 

The known catalysts for this week were the labor market and the CES Conference, but the administration wasted no time dropping some bombshells. We’ll discuss the Venezuela situation in a little more detail below, but markets have largely taken the news in stride. There was some volatility in oil markets throughout the week, but they have ultimately resolved to the upside amidst the growing geopolitical uncertainty on multiple fronts including Ukraine, Iran, the UAE/Saudi Arabia. Let's see what happens with Greenland next week. President Trump met with executives from the energy sector today to discuss investment in Venezuela. Within the sector oil majors, refiners and oil services companies have moved higher this week while the E&P performance was more mixed with natural gas exposed companies underperforming.  

The White House has also been active on the home front as well (pun intended, you'll see). Keeping with the national defense theme President Trump lashed out at defense contractors calling for pay package restrictions and the end of shareholder return programs as he wants more investment from the industry (something he’s also argued for from the energy sector previously). The sector initially got hit but just hours later he called for a 50% increase in the defense budget, which caused the sector to do an about face.

President Trump is also starting to lay out a strategy for addressing housing affordability (there's the pun), calling for the ban of institutional ownership of single-family homes and directing the GSE’s to buy $200B of mortgage-backed securities. More details of his strategy are expected to be laid out at Davos later this month. The headlines have weighed on private equity and other companies that hold that inventory while the homebuilders and mortgage REITs have moved sharply higher in the back half of the week.

At a high level this week’s economic data would fall in the better than feared bucket, continuing to point to a resilient economic backdrop largely in line with the prevailing narrative. The news flow from corporates was somewhat quiet ahead of the start of earnings season next week. CES helped fill some of that void. Nvidia CEO Jansen Huang delivered his presentation, unveiling the company’s successor to the Blackwell AI chip, Vera Rubin. The product is already in full production and will be available in the second half of this year. He once again put a lot of focus on “Physical AI”- robotics and autonomous vehicles. Microchip positively pre-announced for the second time highlighting an improvement in its analog chip markets. Memory stocks have also moved sharply higher amidst price increases and a positive update from Samsung overseas. This has helped the ICE Semiconductor index get off to another hot start already up nearly 10% YTD on the heels of a 40% gain last year. Despite the strength in some of the chip sector info tech has been underperforming. Servers, hardware and equipment stocks have been under pressure as has software.

The AI infrastructure spending announcements continue. xAI announced plans to spend $20B to build a data center in Mississippi. This morning, Meta announced nuclear power deals with Vistra, OKLO and TerraPower to secure power for its data centers. Coming into today IPPs had been under pressure weighing on the Utility sector which is the only sector in the red to start the year. Those stocks have moved sharply higher today and the headlines have helped to breathe life back into the popular nuclear trade.

Materials was a standout sector up >5% with broad based strength in miners, chemicals and packaging though steel stocks moved lower. Consumer discretionary was the best performing sector, helped by the housing related stocks and Amazon. Travel related stocks were generally positive though casinos were under pressure. The sector is being helped by the expectations for large tax returns which could help consumer spending. There was some hope that the Supreme Court would rule on tariffs today but that did not come to fruition. Financials and healthcare were both up ~1.5%. These sectors will be in focus next week with corporate updates from the JPM Healthcare and ICR conferences and the start of earnings season. 

We didn’t have to wait very long for our first surprise in 2026 as the escalating US pressure on Venezuelan President Maduro reached its crescendo over the weekend when US forces captured and extracted him to the US to face criminal indictment charges on narco terrorism. As has been the case in recent years, markets largely took the event in stride. The country produces about 1ml b/d, ~1% of global output and that has fallen significantly over the past decade.

However, it sits on massive reserves, ~300bl barrels, 7% of world supply, exceeding Saudi Arabia. Most of that is “sour” with a high sulfur content, which can be handled by US Gulf Coast refineries. The infrastructure has been badly mismanaged, and President Trump has vowed that US companies will spend billions to fix it. Rystad Energy estimates it would take $54B over the next 15 years just  to keep the country’s production flat. Going beyond 1.4mbpd would require at least an additional ~$10B/year. Chevron is the last remaining US oil major in the country and oil executives met with President Trump on Friday to discuss rebuilding the country’s capabilities.

After some confusing initial reports on Wednesday, details were clarified of President Trump’s social posts about plans for Venezuela oil (FACT SHEET). Venezuela will turn over 30-50 million barrels of sanctioned oil to the US, to be sold at market prices, with proceeds kept in the US until the Venezuelan government is deemed stable and secure. To put that in perspective that's the equivalent of about 3 days of US production. Proceeds will be disbursed back to Venezuela at the discretion of the US government. This will be an ongoing process, with more traches to come.  

Global Markets - Broad gains to begin the year

Commodities & Crypto - Global events put commodities front and center; Crude gains, metals rip again

SCOTUS kept the world holding its breath when a ruling on the tariff case didn't materialize. That decision is now expected on Wednesday, January 14. That made labor market data the headline for macro this week (beyond the obvious military operations) as we begin to get back to a more normal cadence. Things are still affected in numerous ways from the shutdown and holidays but is beginning to normalize. The data in totality continue to show a low hire / low fire labor market. The muted but OK updates came with a sharp increase in productivity, which is a trend that should be closely followed. Strong growth in productivity would allow the economy to grow with a middling labor market and provide room for continued corporate margin growth.

The monthly payroll data on Friday was the most anticipated, but it didn’t have too much impact on the markets. Nonfarm payrolls rose 50k in December, a bit below last month and below expectations but not enough to drive greater concern about deteriorating conditions. ~52bp of cuts are priced in for 2026, down from 58bp a week ago. The probability of the Fed holding rates in March rose from 58% to 71%.

But it certainly wasn’t a robust print either. While the unemployment rate ticked lower (4.4% vs. 4.5% prior) that came with a slightly lower participation rate. The underlying data, however, paints a less sanguine picture. Health care and social assistance, leisure and hospitality drove the increase (+86k). Goods-producing jobs declined 21k (construction/manufacturing -19k). Retail trade fell 25k. JOLTS job openings fell to ~7.15ml from a downwardly revised ~7.45ml in November. The ratio of job vacancies to unemployed workers fell to 0.9. There was an uptick in quits but separations remained low. Challenger job cuts declined from 71k to 35k. Weekly jobless claims ticked up to a modest 208k. Last week’s noteworthy low print included Christmas. Continuing claims moved higher to ~1.91ml from ~1.86ml last week. The ADP employment report was a modest positive. Private employment rose 41k in December, rebounding from November’s 29k decline. Gains were seen in all sizes of business and notably small businesses saw a gain of 9k after losing 120k last month. Large businesses added a modest 2k compared to last month’s 39k increase. Manufacturing jobs declined 5k while Education and Health rose 39k and leisure/hospitality added 24k.

December’s ISM Manufacturing PMI declined from last month (47.9 vs 48.2) and missed estimates (48.3). New Orders improved slightly (though remained in contraction), as did employment. Prices were unchanged. Respondent commentary continued to be rather depressing.  

 ISM services came in better than expected increasing to 54.4 versus estimates of 52.2. New orders/export orders both increased while the employment component moved into  expansion for the first time in the last seven months.

Preliminary Q3 productivity came in well ahead of estimates at 4.9% while unit labor costs fell 1.9%, with last quarter’s reading revised down from 1% to -2.9%. These figures tend to be very volatile but are positive nonetheless. The trade deficit came in at about half the estimate, hitting the lowest level since 2009. 

The treasury curve flattened with the front end higher and the long end lower. The front ticked up most of the week with the biggest move Friday. Rate cut expectations repriced modestly, labor data was OK and Atlanta Fed President Bostic focused on elevated inflation in a speech. While he’s retiring soon the short-end still moved higher around his comments. Global yields bull-flattened but Japan was an exception as long yields continued to move higher.

Next week will be busy with the start of earnings season, a couple of high profile conferences and some impactful economic data including CPI. Geopolitics will remain a focal point. The decision on tariffs and the next Fed Chair could happen imminently. Next week is also options expiration. Enjoy the football! Have a great weekend!

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