Stocks trended lower last week amid signs of year-end profit-taking and some sour investor sentiment over the Fed meeting minutes. The Standard & Poor’s 500 Index fell 1.03 percent, while the Nasdaq Composite Index lost 1.52 percent. The Dow Jones Industrial Average slid 0.67 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, ticked up 0.31 percent.1,2 Santa Rally, InterruptedStocks opened lower to start the shortened holiday week with tech shares under pressure. Markets then moved sideways, but came under pressure after minutes from the December Federal Reserve meeting were released. Investors digested the details, which showed members remained divided.3,4 Stocks recovered some ground on the first trading day of 2026. The tech sector was mixed, with AI chip stocks pushing higher, while other areas of technology, especially software companies, declined. Overall, the S&P 500 and Dow Industrials logged gains to kick off the new year, which helped pair losses from earlier in the week.5,6 It remains to be seen whether the “Santa Claus rally”, which ends Monday, January 5, will materialize. The Santa period is the last five trading days of December through the first two trading days of the new year. AI Bubble or Blast Off? Not all long-term investment cycles are bubbles: Early industrial revolution (1760s-1830s), U.S. mass transit electrification cycle (1880s-1920s), U.S. inter-state highway system (1960s-1990s), personal computer (1980s-1990s), mobile infrastructure (1990s-2010s), etc. While bubble concerns are valid, this AI movement has not yet reached levels that are similar to other bubble bursts such as the dot-com bubble. However, there will be consequences from AI advances. We remain in a no hire/no fire labor market where layoffs are not active or accelerating, but at the same time, companies are not hiring much, so getting a job is more difficult with AI competition. If we do see layoffs start to accelerate, they can rise quickly and that would be a serious negative economic signal which we are monitoring very closely. Gold finished out the year near historical record highs driven by safe-haven and central bank buying, expectations of future U.S. interest rate cuts, a softer US dollar, geopolitical uncertainty and I expect the trend to continue as global debt continues to balloon. Silver was the rock star in 2025 with speculation that the party will continue. The jury is out for the price of black gold (oil) with countless millions of Venezuela citizens around the globe celebrating the capture and removal of Nicolas Maduro. Potential lower future oil prices would be deflationary and a tailwind for economic growth. We are watching developments very closely. Expect international oil company stocks to rocket higher in price on the news, especially Chevron which is the only US oil company with oil operations currently in Venezuela. Q4 2025 marked a pause in crypto's momentum, as markets digested earlier gains and recalibrated expectations for the year ahead. After a strong Q3, crypto asset returns turned negative across all six Crypto Sectors in Q4, as measured by the FTSE/Grayscale Crypto Sectors family of indexes. Bitcoin spent the final week 0f 2025 broadly in a range as it hovered near the $88,000 to $90,000 and consolidation, benefitting from renewed post-holiday flows and reduced volatility. A highly volatile 2025 saw major swings for Bitcoin which ultimately closed the year lower. Beginning the new year, Ethereum traded near $3,000 as markets pointed to it gaining momentum, supported by technical strength and renewed interest in altcoins. Both Bitcoin and Ethereum are starting the week on an upswing as of Sunday evening. Partner with a Certified Financial Fiduciary at Castle Financial - Call us at 732-888-4994 to schedule a complimentary 30 minute consultation and second opinion if you are not already a valued client of Castle Financial. |
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Source: YCharts.com, January 3, 2026. Weekly performance is measured from Friday, December 26, to Friday, January 2. TR = total return for the index, which includes any dividends as well as any other cash distributions during the period. Treasury note yield is expressed in basis points. |
Focus on the FedThere was little economic data last week, leaving investors to focus mostly on the minutes from the Fed’s December meeting. The minutes, released Tuesday, revealed a divided Federal Open Market Committee regarding short-term interest rates. The news unsettled investors a bit, which led to some selling pressure.7 A divided Fed has been a persistent theme during the second half of 2025, and investors will closely watch in 2026 to see whether the Fed’s outlook may change with the appointment of a new Fed Chair. This Week: Key Economic DataMonday: Institute of Supply Management (ISM) Manufacturing Index. Auto Sales. Tuesday: Richmond Fed President Tom Barkin speaks. Purchasing Managers Index (PMI)—Services. Wednesday: ADP Employment Report. Job Openings* (Nov). Factory Orders* (Oct). Institute of Supply Management (ISM) Services Index. Fed Vice Chair for Supervision Michelle Bowman speaks. Thursday: Weekly Jobless Claims. Trade Deficit* (Oct). Productivity* (Q3). Consumer Credit (Nov). Friday: Employment Report. Housing Starts* (Oct). Consumer Sentiment. * indicates publication of a report delayed by the government shutdown in October and November Source: Investors Business Daily - Econoday economic calendar; January 2, 2026. The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to provide accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts are also subject to revision. This Week: Companies Reporting EarningsNo major companies are reporting earnings this week. Source: Zacks, January 2, 2026. Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule their earnings reports without notice. |
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"We may encounter many defeats but we must not be defeated." – Maya Angelou |
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Recordkeeping Tips for Small Business OwnersAs a small business owner, your recordkeeping is of utmost importance. These records show your income, expenses, business transactions, and much more. You can choose any record-keeping system you prefer if you and the IRS have the necessary information. As a business owner, you will need to keep track of supporting documents such as:
Keeping your records well-organized will save you time, effort, and money. This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional. Tip adapted from IRS.gov8 |
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Take Time for TeaAre you seeking a warm and cozy escape? Look no further than a cup of tea. Chamomile tea even has some potential health benefits! Here are just a few:
Make time for tea! Tip adapted from Medical News Today9 |
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What starts with P and ends with E and has thousands of letters in it? Last Week's Riddle: When I lose my jacket, I become larger and louder – but I also weigh a little less. What am I? Answer: Popcorn. |
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Tiger's Nest Monastery (Taktsang Palphug Monastery) Paro, Bhutan |
Footnotes And Sources1 .WSJ.com, January 2, 2026 |
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
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