Comments based on information available as of 8:45am CT on 1/9/2026
Growth: Ending With a Thud 
The nonfarm payroll number was less than thrilling. A gain of 50,000 is better than a loss, but we do know that these numbers will likely be revised lower. In 2024, payrolls increased more than 2 million and then throttled back to half a million in 2025–and that’s before we get the final revisions, which could mean no growth in 2025. Looking ahead, the labor market may have gotten a little traction towards the tail-end of the year, so hopefully 2026 is the year when the labor market makes a turn towards renewed growth, but right now it’s tentative.
Inflation: Starting With a Bang
With an upper limit as to how high tariffs are likely to go and with indicators that productivity is picking up, that should create a create a conducive environment for inflation to slow. Lower inflation doesn’t mean lower prices, but at least the pace of price increase can slow. With wages still growing faster than inflation, the issue of “affordability” won’t go away, but it might feel less acute.
Policy: Flip the Script
Since COVID, the economy has been hit by more supply shocks than demand shocks. Supply chain disruptions mean growth gets hit and prices rise. It creates a dilemma for the Fed as to how to respond when the shocks move them further away from both of their goals of full employment and stable prices. The next couple of years could look like the exact opposite with productivity growing. That makes it easier to hit their goals of growth and low inflation. The stars could be aligning so the Fed doesn’t feel like it’s being pulled in opposite directions.
Looking Ahead: Cautious Beats Reckless
The much-discussed Santa Claus rally—the tendency for stocks to rise during the last five trading days of the year and the first two of the next—failed to materialize again. Santa, it seems, has been a no-show for a few years now, with the last true rally back in 2021. Perhaps it’s fitting since retailers start advertising Christmas earlier every year, investors may have been opening their market gifts well before the holiday even arrived. While Santa disappointed, the January effect appears to be in full force. Stocks often start the year on a positive note, and early momentum suggests investors are willing to lean into risk. That optimism isn’t coming out of thin air. Fiscal stimulus remains in the pipeline, and while the Fed may not be cutting aggressively, policy still looks supportive. A central bank on pause—without a strong bias toward renewed tightening—creates some breathing room for markets. A key question hanging over 2026 is whether much of this “good news on the horizon” was already priced into asset values during the strong rally of 2025. If so, returns may depend less on solid fundamentals alone and more on whether reality manages to exceed already-optimistic expectations. It is cliched to be “cautiously optimistic,” but it beats being reckless.
