Your Capital Markets Snapshot: Early-Year Market Trends Take Shape

The start of 2026 was marked by significant geopolitical, economic, and policy events. U.S. military action in Venezuela and the capture of its leader raised questions about long-term oil supply and global precedents. U.S. labor-market data showed a continued slowdown, with December job gains below expectations and downward revisions to prior months, but the unemployment rate remained steady at 4.4%. Bond market prices suggest expectations for the Federal Reserve to proceed cautiously in 2026, with potential for one or two rate cuts during the year, as inflation remains above target but is not showing signs of reaccelerating. The Supreme Court is poised to rule on the legality of recent tariffs in the coming weeks, but any market impact could be limited due to alternative tariff mechanisms available to the administration and the relatively small scale of potential refunds relative to US GDP. Equity markets rallied, with the S&P 500 and Dow hitting record highs and small cap stocks outperforming, reflecting broadening market participation beyond mega-cap tech. Overall, markets remain focused on earnings growth and economic resilience, there is potential for short-term volatility around the upcoming inflation and Q4 earnings reports.