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We start the first trading day of the new year — Happy New Year, everybody! — in optimistic territory, following a modest December overall, which saw the Santa Claus Rally peter out and the tech-heavy Nasdaq close in the red for the month. Currently, we’re +139 points of the Dow (+0.29%), +35 on the S&P 500 (+0.51%), +235 on the Nasdaq (+0.93%) and +13 points on the small-cap Russell 2000 (+0.53%).
When we look back on another successful trading year in 2025, it’s important to consider where we came from: a week into April, after massive tariffs had been slapped onto almost every country that counted itself as a U.S. trading partner (and even a few that don’t). Thus, instead of the already impressive +20% growth on the Nasdaq for the third-straight year, even more impressive are the +39% gains on the Nasdaq from April tariff lows, +33% on the Russell 2000, +32% on the S&P 500 and +24% on the Dow.
What Are the Chances for a “January Effect”?
When investors talk about a “January Effect,” they refer to an accumulation of strategies dovetailing into higher market growth to start a new year. Tax-loss harvesting from the previous year and other rebalancing initiatives are often a big part of this, along with year-end bonuses being reinvested into the market and a general positive outlook toward possibilities in the new year.
There are potential headwinds in the coming year, too, most of which are not unfamiliar to traders in 2025. Tariffs, employment insecurity and a spike in healthcare costs for many Americans are all pending challenges for the U.S. consumer to continue carrying their large percentage of economic advancement through 2026. We also see another potential federal government shutdown on the near-term horizon, as U.S. Congress reconvenes beginning next week.
Already, some tariffs for the new year are being rolled back until this time next year, including on furniture, cabinets, vanities — even Italian pasta. Clearly, the White House has begun to understand that the “affordability” issue is a big one, not only here in the U.S. but abroad, as well. Will it be enough to help generate a fourth-straight stock market of double-digit gains? Time will tell.
What to Expect from the Market Going Forward
We’re still seeing investors on the ski slopes or sipping piña coladas on a beach somewhere today. A more normal volume of trading begins Monday, which will start the first full trading week of 2026. If there is a “January Effect” in the markets this year, it likely first shows up next week.
It’s also Jobs Week next week. Automatic Data Processing (ADP - Free Report) private-sector payrolls for December and a new Job Openings and Labor Turnover Survey (JOLTS) for November come out on Wednesday morning, Weekly Jobless Claims moves back to Thursday, and the Employment Situation reports from the U.S. Bureau of Labor Statistics (BLS). We follow a weak month for jobs, with hires per month falling and an Unemployment Rate the highest we’ve seen since September of 2021.
For today, we’ll see the final S&P U.S. Manufacturing report for December. This is expected to remain somewhat comfortably over the 50-level demarcation point between growth and loss: 51.7 expected, a tick down from 51.8 in the prior read. However, the prior level was already the lowest print we’d seen since mid-summer, and the fourth month lower in the past five months.
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Labor Market Data in Focus
We start the first trading day of the new year — Happy New Year, everybody! — in optimistic territory, following a modest December overall, which saw the Santa Claus Rally peter out and the tech-heavy Nasdaq close in the red for the month. Currently, we’re +139 points of the Dow (+0.29%), +35 on the S&P 500 (+0.51%), +235 on the Nasdaq (+0.93%) and +13 points on the small-cap Russell 2000 (+0.53%).
When we look back on another successful trading year in 2025, it’s important to consider where we came from: a week into April, after massive tariffs had been slapped onto almost every country that counted itself as a U.S. trading partner (and even a few that don’t). Thus, instead of the already impressive +20% growth on the Nasdaq for the third-straight year, even more impressive are the +39% gains on the Nasdaq from April tariff lows, +33% on the Russell 2000, +32% on the S&P 500 and +24% on the Dow.
What Are the Chances for a “January Effect”?
When investors talk about a “January Effect,” they refer to an accumulation of strategies dovetailing into higher market growth to start a new year. Tax-loss harvesting from the previous year and other rebalancing initiatives are often a big part of this, along with year-end bonuses being reinvested into the market and a general positive outlook toward possibilities in the new year.
There are potential headwinds in the coming year, too, most of which are not unfamiliar to traders in 2025. Tariffs, employment insecurity and a spike in healthcare costs for many Americans are all pending challenges for the U.S. consumer to continue carrying their large percentage of economic advancement through 2026. We also see another potential federal government shutdown on the near-term horizon, as U.S. Congress reconvenes beginning next week.
Already, some tariffs for the new year are being rolled back until this time next year, including on furniture, cabinets, vanities — even Italian pasta. Clearly, the White House has begun to understand that the “affordability” issue is a big one, not only here in the U.S. but abroad, as well. Will it be enough to help generate a fourth-straight stock market of double-digit gains? Time will tell.
What to Expect from the Market Going Forward
We’re still seeing investors on the ski slopes or sipping piña coladas on a beach somewhere today. A more normal volume of trading begins Monday, which will start the first full trading week of 2026. If there is a “January Effect” in the markets this year, it likely first shows up next week.
It’s also Jobs Week next week. Automatic Data Processing (ADP - Free Report) private-sector payrolls for December and a new Job Openings and Labor Turnover Survey (JOLTS) for November come out on Wednesday morning, Weekly Jobless Claims moves back to Thursday, and the Employment Situation reports from the U.S. Bureau of Labor Statistics (BLS). We follow a weak month for jobs, with hires per month falling and an Unemployment Rate the highest we’ve seen since September of 2021.
For today, we’ll see the final S&P U.S. Manufacturing report for December. This is expected to remain somewhat comfortably over the 50-level demarcation point between growth and loss: 51.7 expected, a tick down from 51.8 in the prior read. However, the prior level was already the lowest print we’d seen since mid-summer, and the fourth month lower in the past five months.