The Major Markets kicked off 2026 with strong momentum, as the major domestic indices pushed to fresh highs. Small Caps led the way with a gain of four and half percent, followed by the Dow at half the amount. Small Cap Value was the best performer across the 9 style boxes as domestic leadership extended beyond the typical names in mega-cap tech.

Investors rotated aggressively into cyclical sectors. Consumer Discretionary, Materials and Industrials were the top performers, driven by strength in homebuilders, metals, defense, and refiners. Meanwhile, Utilities lagged as risk appetite improved.

Economic data supported the bullish tone. December payroll growth slowed modestly, but unemployment fell to 4.4%, reinforcing confidence in consumer spending and allowing the Fed to remain patient on rate cuts.

As it stands now, according to the CME Group’s FedWatch tool, the greater probability is for the Fed Funds rate to hold steady at the 350-375 rate until Q2 of 2026.

In Geopolitical news, headlines about possible regime changes in both Venezuela and Iran caused market participants to wonder what impact these events might have on Crude Oil prices. That said, WTI Crude Oil prices retested December’s lows last week which stood as the lowest prices seen since February of 2021. By the close of the week, the GSCI Crude Oil Index rose 3.2% for the week.

Despite heavy geopolitical headlines, markets stayed focused on growth. Overall, the week reflected rising confidence in the 2026 outlook, with improving breadth, cyclical leadership, and momentum firmly intact heading into earnings season.