Markets started 2026 on a positive note, with major equity indices extending their 2025 gains as leadership shifted to smaller companies and cyclical sectors. The bond market was quiet and produced modest gains as Treasury yields inched lower, and corporate bonds outperformed as credit spreads remained tight. The tone across financial markets was risk-on but hedged, with bitcoin and gold trading higher alongside equities. Economic data reinforced the picture of a two-speed economy, with divergent goods and services activity alongside softer labor conditions. The dominant market narrative centers on a soft landing, where the economy slows but avoids a recession, and the growth potential of the AI industry. Looking ahead, the main questions are whether stock market leadership will continue to broaden and how much further the Fed will cut interest rates.
Key Takeaways
1. Economic Data Shows Manufacturing Remains Sluggish as Services Activity Expands
This week’s economic data reinforced the divide between the goods and services sectors. The ISM Manufacturing Survey remained below 50, signaling a 10th consecutive month of contraction and highlighting the sluggish state of the manufacturing industry. In contrast, the ISM Services Survey rose from the prior month, indicating the services sector continues to expand. Why it matters: The data support the view of a two-speed economy, with goods and manufacturing lagging while services-driven growth remains strong.
2. Labor Market Continues to Grow Despite Conditions Softening
This week’s labor data point to continued, gradual softening. ADP’s payrolls report showed the U.S. added +41,000 jobs in December, up from November’s -29,000. Despite the rebound, the data represent a continuation of the slowdown in 2025, with job growth still well below levels from 2023 and 2024. Meanwhile, the number of job openings fell from 7.45 million to 7.15 million, among the lowest since early 2021. Why it matters: The labor market is gradually rebalancing, with fewer openings but continued job growth. Economists continue to characterize labor conditions as “low-hire, low-fire.”
3. Market Leadership Broadens to Start the Year
Last week’s stock market gains masked a rotation and shift in leadership. The S&P 500 and Nasdaq both gained, but their returns were overshadowed. Small-cap stocks led the advance, with the Russell 2000 surging and setting a new high. Leadership broadened across style exposures, as Large-Cap Value and S&P 500 Equal Weight both gained. In contrast, large-cap growth finished the week flat, as the technology sector finished with a modest gain. Market breadth improved alongside the rotation. The share of S&P 500 stocks trading above their 50-day moving averages, a key measure of technical strength and participation, increased from 55% to 60%. Why it matters: Market gains over the past two years were driven by a narrow group of mega-cap stocks. Last week’s rotation signals improving breadth and more balanced leadership entering 2026.
4. Investor Risk Appetite Remains Risk-On But Cautious
There was demand for hedges this week, even as stocks and bonds traded higher. Gold is up nearly +3% year-to-date and trading higher with equities, despite stocks setting new highs to start the year. Similarly, the VIX remains in the mid-teens but has drifted higher since the beginning of the year. Why it matters: Market price action signals robust risk appetite, but demand for hedges shows investors remain cautious.
5. Oil Market Impacted by Geopolitics and Oversupply Concerns
Geopolitical developments in Venezuela shaped oil and energy trading this week. Oil traded higher early in the week but reversed lower later as talk of Venezuelan oil raised oversupply concerns. Inventory data added pressure on oil prices as gasoline inventories increased. Why it matters: Oil trades near five-year lows despite elevated geopolitical risk, highlighting persistent oversupply concerns. Lower oil prices help ease inflation pressures and could continue to support consumer spending and potentially lower interest rates.
Weekly Commentary
2026 Opens with Momentum and Cautious Optimism
Stuart Katz
Markets started 2026 on a positive note, with major equity indices extending their 2025 gains as leadership shifted to smaller companies and cyclical sectors. The bond market was quiet and produced modest gains as Treasury yields inched lower, and corporate bonds outperformed as credit spreads remained tight. The tone across financial markets was risk-on but hedged, with bitcoin and gold trading higher alongside equities. Economic data reinforced the picture of a two-speed economy, with divergent goods and services activity alongside softer labor conditions. The dominant market narrative centers on a soft landing, where the economy slows but avoids a recession, and the growth potential of the AI industry. Looking ahead, the main questions are whether stock market leadership will continue to broaden and how much further the Fed will cut interest rates.
Key Takeaways
1. Economic Data Shows Manufacturing Remains Sluggish as Services Activity Expands
This week’s economic data reinforced the divide between the goods and services sectors. The ISM Manufacturing Survey remained below 50, signaling a 10th consecutive month of contraction and highlighting the sluggish state of the manufacturing industry. In contrast, the ISM Services Survey rose from the prior month, indicating the services sector continues to expand. Why it matters: The data support the view of a two-speed economy, with goods and manufacturing lagging while services-driven growth remains strong.
2. Labor Market Continues to Grow Despite Conditions Softening
This week’s labor data point to continued, gradual softening. ADP’s payrolls report showed the U.S. added +41,000 jobs in December, up from November’s -29,000. Despite the rebound, the data represent a continuation of the slowdown in 2025, with job growth still well below levels from 2023 and 2024. Meanwhile, the number of job openings fell from 7.45 million to 7.15 million, among the lowest since early 2021. Why it matters: The labor market is gradually rebalancing, with fewer openings but continued job growth. Economists continue to characterize labor conditions as “low-hire, low-fire.”
3. Market Leadership Broadens to Start the Year
Last week’s stock market gains masked a rotation and shift in leadership. The S&P 500 and Nasdaq both gained, but their returns were overshadowed. Small-cap stocks led the advance, with the Russell 2000 surging and setting a new high. Leadership broadened across style exposures, as Large-Cap Value and S&P 500 Equal Weight both gained. In contrast, large-cap growth finished the week flat, as the technology sector finished with a modest gain. Market breadth improved alongside the rotation. The share of S&P 500 stocks trading above their 50-day moving averages, a key measure of technical strength and participation, increased from 55% to 60%. Why it matters: Market gains over the past two years were driven by a narrow group of mega-cap stocks. Last week’s rotation signals improving breadth and more balanced leadership entering 2026.
4. Investor Risk Appetite Remains Risk-On But Cautious
There was demand for hedges this week, even as stocks and bonds traded higher. Gold is up nearly +3% year-to-date and trading higher with equities, despite stocks setting new highs to start the year. Similarly, the VIX remains in the mid-teens but has drifted higher since the beginning of the year. Why it matters: Market price action signals robust risk appetite, but demand for hedges shows investors remain cautious.
5. Oil Market Impacted by Geopolitics and Oversupply Concerns
Geopolitical developments in Venezuela shaped oil and energy trading this week. Oil traded higher early in the week but reversed lower later as talk of Venezuelan oil raised oversupply concerns. Inventory data added pressure on oil prices as gasoline inventories increased. Why it matters: Oil trades near five-year lows despite elevated geopolitical risk, highlighting persistent oversupply concerns. Lower oil prices help ease inflation pressures and could continue to support consumer spending and potentially lower interest rates.
Diverging Economic Signals, Strengthening Markets
Disclosures
Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was carefully compiled from sources believed to be reliable, but Robertson Stephens cannot guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are only available to qualified investors and are not suitable for all investors. Alternative investments include risks such as illiquidity, long time horizons, reduced transparency, and significant loss of principal. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2026 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere. A2897
Disclosure and Source
Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was carefully compiled from sources believed to be reliable, but Robertson Stephens cannot guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are only available to qualified investors and are not suitable for all investors. Alternative investments include risks such as illiquidity, long time horizons, reduced transparency, and significant loss of principal. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2026 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere. A2897
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