Happy New Year and welcome to trading in 2026, which feels a lot like it did last year. Equities pulled back on the final trading day of 2025 but it was another very solid year for markets. The S&P 500 ended the year up 16.4%, the third consecutive year of >15% gains. After the policy driven volatility around the end of Q1 equity markets quickly snapped back and continued to grind higher through the back half of the year.

The AI trade was the primary driver of gains yet again but it did broaden out shifting beyond just chips to companies levered to the data center and energy infrastructure buildout. There were growing concerns about the level of capex spending which seemed to hit a tipping point in Q4 amidst increasing circular partnership/financing announcements and as companies started to tap debt markets.

Inflation stabilized and the feared impact of tariffs never fully materialized but inflation remained stubbornly above the Fed's target. Treasury yields moved lower throughout the year with the Federal Reserve resuming its easing cycle after an extended period on the sideline as there were signs of weakness in the labor market. President Trump is expected to announce a replacement for Fed Chair Powell imminently who will take over a Committee that is divided related to the path of policy going forward.