Happy New Year. If you're reading this on January 1, 2026, take a breath—there's nothing you can do about your portfolio today. The New York Stock Exchange and Nasdaq are closed in observance of New Year's Day, giving investors a brief respite after a volatile but ultimately rewarding 2025.
Trading resumes at the normal opening bell on Friday, January 2, at 9:30 AM Eastern Time, with pre-market sessions beginning at 4:00 AM for early movers. Here's what you need to know heading into the first trading day of the new year.
2025 in the Rearview Mirror
The S&P 500 rose 16.4% in 2025, marking a third consecutive year of double-digit gains—a feat so rare it has only happened six times since the 1940s. Combined with gains of 24% in 2023 and 23% in 2024, the index has rallied nearly 80% over three years, the strongest three-year streak since 2019-2021.
The tech-heavy Nasdaq climbed 19% for the year, while the Dow Jones Industrial Average gained 13%. All three major indexes hit record highs at various points during 2025, powered by resilient corporate earnings, Federal Reserve rate cuts, and continued enthusiasm for artificial intelligence.
But the year didn't end on a triumphant note. Stocks stumbled into the close, with all three major indexes falling four consecutive days to end December. Whether that's a warning sign or simply profit-taking ahead of the holiday will become clearer in the days ahead.
Wall Street's Outlook: Unanimously Bullish
In a development that's either reassuring or concerning depending on your perspective, not a single major Wall Street strategist is predicting a decline for 2026. According to Bloomberg data, the average S&P 500 target for year-end 2026 implies about a 9% gain, with the most bullish forecasts from Oppenheimer calling for the index to reach 8,100—roughly 18% upside.
The consensus target of 7,555 reflects expectations for continued corporate earnings growth. Analysts project S&P 500 companies will boost earnings by 15.5% in 2026, up from an estimated 13.2% in 2025. The U.S. economy is expected to grow at a healthy 2.6%, according to Goldman Sachs.
Key Themes to Watch in Early 2026
The January Effect: Historically, stocks—particularly small-caps—tend to outperform in January as tax-related selling ends and fresh capital flows into markets. The Russell 2000 could see renewed interest if this pattern holds.
AI Spending Continuation: The hyperscaler spending boom shows no signs of slowing, with capital expenditure from Amazon, Google, Microsoft, Meta, and Oracle projected to exceed $600 billion in 2026. Companies tied to the AI infrastructure buildout remain in focus.
Fed Policy Path: The January FOMC meeting on January 27-28 will provide fresh guidance on interest rate expectations. With inflation still above 2% but trending down, the market is pricing in about two rate cuts for the full year.
Leadership Transition: Fed Chair Jerome Powell's term expires in May 2026. The uncertainty around his successor and the potential policy implications could create volatility as the transition approaches.
The Risks Nobody Wants to Talk About
With Wall Street uniformly bullish, contrarian investors are asking: what could go wrong?
- AI Disappointment: LPL Financial's chief equity strategist has called this "the No. 1 risk" for 2026. If companies can't demonstrate clear returns on their massive AI investments, the stocks that led the 2023-2025 rally could become laggards.
- Valuation Concerns: The S&P 500 trades at roughly 30 times trailing earnings—50% above the long-term average. Elevated valuations leave little room for error.
- Geopolitical Flashpoints: From trade tensions to regional conflicts, the global backdrop remains unsettled.
- Policy Uncertainty: With a new administration implementing policy changes on tariffs, immigration, and regulation, corporate planning is more difficult than usual.
Your First Trading Day Checklist
Before markets open Friday, consider:
- Review your allocations: After a strong multi-year run, are you comfortable with your equity exposure?
- Set calendar reminders: Key dates include the December jobs report (January 10), CPI release (January 13), and FOMC meeting (January 27-28).
- Check your 2026 contribution limits: 401(k) limits rose to $24,500, and IRA limits are now $7,500. Start early to maximize tax-advantaged growth.
- Avoid knee-jerk reactions: Post-holiday trading can be volatile with lower volumes. Make decisions based on fundamentals, not noise.
The Bottom Line
As markets reopen for 2026, investors face a familiar mix of opportunity and uncertainty. The foundation appears solid—corporate earnings are growing, the economy is expanding, and interest rates are stable. But with valuations stretched and consensus expectations uniformly positive, the margin for disappointment is slim.
Use the holiday pause to step back and assess your financial goals for the year. When the opening bell rings Friday morning, you'll be ready to navigate whatever 2026 brings.
