How markets enter the new year could set the tone for the rest of 2026. Investors return to their trading desks next week after the holiday season, feeling optimistic about the new year but with some trepidation about what lies ahead. The S&P 500 is expected to post another double-digit gain in 2026, according to a CNBC strategist survey, but there are concerns that stocks could spend much of this year in a range. After a massive artificial intelligence-driven rally over the past three years, investors are hopeful that corporate profit growth can keep up with valuations. The early stages could give investors a hint at what the rest of the year will hold. Invented in 1972 by Yale Hirsch, who popularized the old Wall Street adage, “As January moves forward, so does the year,” and boasts an impressive 84% accuracy rate. In fact, it rose again in 2025, with the S&P 500 index up 2.7% in January. Then, after three straight months of declines, the market-wide index made a strong recovery, ending the year up more than 16%. .SPX 1Y Mountain The S&P 500’s opening price over the past 12 months has been volatile. On Friday, the first trading day of the new year, stocks rose and fell, but the S&P 500 ultimately closed higher. Santa Claus (a seasonal increase that typically occurs during the last five business days of one year and the first two business days of the next year) was not shown. The first five days were a tough start. And even in the coming week, there are big hurdles for the stock market to overcome, including developments at major technology conferences and the latest employment figures. Just this week, Savita Subramanian, a strategist at Bank of America, said the S&P 500 index has “never been more expensive” when reviewing a number of indicators she uses. “Risks to the index will mount in 2026,” he added. Nevertheless, many investors argue that the backdrop for stock prices will continue to be favorable in 2026. The economic stimulus provided by the One Big Beautiful Bill Act, the prospect of lower interest rates from a more dovish incoming Federal Reserve Chairman, and the real economy benefits from artificial intelligence are the key pillars that maintain the bullish outlook. “As usual, we expect volatility,” said Nancy Tengler, investment director at Laffer Tengler Investments. “But given the early days of AI trading, I think this bull market will continue for some time.”Economic Outlook December non-farm payrolls numbers are expected to be released within the next week. The U.S. economy is expected to add 65,000 jobs, according to FactSet consensus estimates. This was a slight increase from 64,000 the month before. The unemployment rate is expected to fall slightly from 4.6% to 4.5%. Wall Street was able to weather the weakness in the labor market, with the U.S. economy still expected to expand by more than 2% next year. However, if the outlook for the job market changes significantly, such as when the unemployment rate rises above 5%, it could have a negative impact on stock prices. “This would be a very clear financial warning sign,” the recent Sevens report said. “At that point, the market becomes highly vulnerable to AI disappointment, because if AI disappointment is coupled with growth concerns, few (if any) sectors will hold out.” It could also impact the interest rate outlook, a key component of the bull market. According to the CME FedWatch Tool, federal funds futures pricing last indicated the possibility of two quarter-point cuts in 2026. Jensen Huang Takes the Stage Nvidia CEO Jensen Huang will also set the tone for the new year with an appearance at CES 2026, the global tech show showcasing the future of AI, robotics and wearables, from January 6th to 9th. Investors are hoping for more practical applications of AI in 2026 that could help justify big corporate spending. That’s a bigger concern for startups that are leveraging the bond market to expand, in contrast to tech giants like Alphabet, which is leveraging vast amounts of capital to improve its AI capabilities. Mr. Hwang will need to strike a confident tone with investors who will be more discerning in 2026 and will focus more on underlying fundamentals to select positions. “The market is now sorting out winners and losers and recognizing that not everyone can win, not everyone can succeed,” Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, told CNBC’s “Money Movers” on Wednesday. “And I think that’s going to be a story for 2026.” Week Ahead Calendar All Time (ET). CES 2026 will be held January 6-9 Monday, January 5, Tuesday, January 5, Tuesday, January 6, Wednesday, January 7 8:30 a.m. U.S. International Trade in Goods and Services (November) Revenues: Constellation Brands Thursday, January 8 8:30 a.m. Productivity and Costs (Third Quarter) Friday, January 9 8:30 a.m. December Employment Report 8:30 a.m. Number of housing starts (September, October) 8:30 a.m. Construction permits (September, October) 8:30 a.m. New home sales (September, October)
