The momentum that closed out 2025 continues to carry forward, now supported by a healthier broadening beneath the market’s surface. As investors look ahead to CPI, Industrial Production, and the upcoming FOMC meeting, our focus remains on the longer arc of underlying trends rather than the noise of near-term headlines. Against this backdrop, Sowell’s TAP gauges remain balanced—and Sowell remains fully invested.
The first full week of 2026 was a study in the peculiar architecture of the American spirit: a blend of high-tech optimism and the quiet, grinding work of industrial recovery. While the rest of us were still trying to remember to write “2026” on our checks, the markets were busy carving out new records, seemingly unfazed by the geopolitical theater in Venezuela.
The major indices shrugged off a sluggish start to the year. The S&P 500 rose 1.58%, ending the week at a record close of 6,965.78. However, the real story wasn’t just the mountain’s height, but the breadth of the climbers. In a significant shift, the S&P 500 Equal-Weighted Index, along with Mid-cap and Small-cap stocks, outperformed the standard cap-weighted index. This suggests that the market’s internal health is improving, as the rally finally extends beyond the narrow penthouse of the “Magnificent Seven” to the more modest floors of the American economy.
The Nasdaq Composite added 1.9% to finish at 23,669.75. Despite some profit-taking in mega-cap tech, the PHLX Semiconductor Index (SOX) still notched a fresh all-time high, gaining 3.68%, driven by equipment manufacturers that are seeing the fruits of improved margins and pricing power.
The Rotation Trade
The week’s winners were found in the places where physical things meet digital dreams. We are witnessing a “rotation trade” in which the shiny objects of yesterday are being swapped for the brick-and-mortar of tomorrow.
The Outperformers: Industrials, Financials, Healthcare, and Materials were the primary beneficiaries of this shift. Materials, in particular, jumped by more than 5%.
The “Safe” Haven: Gold continued its quiet, glittering ascent, gaining 4% on the week as investors sought a hedge against the lingering “fever” of 4.2% inflation expectations.
Fixed Income: Treasury yields narrowed modestly as the market digested a flurry of economic data. The 10-year, 20-year, and 30-year yields settled at 4.18%, 4.76%, and 4.82%, respectively, reflecting a market finding its footing, regardless of whether the Fed pulls the trigger on a rate cut.
The “Low Hire, Low Fire” Paradox
The week was dominated by a data dump that felt like a psychological test for economists. We find ourselves in a state of equilibrium — a labor market that is cooling but not collapsing.
The Labor Market: Nonfarm Payrolls grew by a modest 50,000, missing the 70,000 estimates, while November’s gains were revised down to a meager +56K. Job openings (JOLTs) dropped to 7.14M, the lowest in over a year. Yet, Initial Jobless Claims remained subdued at 208K, and the unemployment rate actually ticked down to 4.4%. It is a “low hire, low fire” economy; firms aren’t expanding, but they are terrified of losing the talent they already have.
Manufacturing & Sentiment: The ISM Manufacturing Index came in soft at 47.9%, suggesting the sector is still searching for a spark. Conversely, the University of Michigan’s consumer sentiment gauge rose for the second straight month to 54, its highest level since September.
A Trade Miracle: In a staggering shift, the U.S. trade deficit plummeted 39% to $29.4 billion—the lowest gap since 2009. This massive shrinkage was driven by a surge in exports and a sharp decline in imports, a data point that surely bolstered the administration’s “America First” narrative.
The Road Ahead: The CPI Gauntlet
As we look to the coming week, the focus shifts to the Consumer Price Index (CPI) report. This will be the ultimate test for current market optimism. With the “Trump Tariffs” beginning to ripple through the supply chain, investors are watching to see whether the “low-grade fever” of inflation will turn into a full-blown flu.
If the CPI comes in hotter than the projected 0.3% month-over-month increase, it may challenge the newfound confidence in the broadening rally. The market is currently betting that we can have our cake (all-time highs) and eat it too (stable yields).
"Since 2010, nearly half of all community banks disappeared. The unintended consequence of “Too big to fail” was “Too small to succeed.”
—Treasury Secretary Scott Bessent, Economic Club of Minnesota, Jan 8th, 2026
Ringing in 2026: Notes From the Death Star Era
From Gregory Lai
There are years when markets behave like a chapter. Then there are years when they behave like a franchise.
2025 was the latter — a sequel none of us asked for, but all of us watched, popcorn in one hand, VIX at 11 in the other. NVIDIA played the Death Star again, casting its trillion-dollar shadow across the market while the rest of the semiconductor galaxy orbited nervously, praying Blackwell margins held. Oracle resurfaced as Doc Brown in a lab coat of cloud credits and LLM partnerships. Crypto went full Ohtani — hitting towering home runs one inning and striking out the universe the next.
And the only certainty — as the Toronto Blue Jays found out — is that the Evil Empire always finds a way to win. Out here, we call them the Dodgers.
The rest of us tried to operate in the cockpit between concentration and opportunity, between AI optimism and tariff anxiety, between the Fed’s final capitulation and a consumer who refused to break.
If 2024 was the setup and 2025 the confrontation, then 2026 feels like the year the plot comes together — the moment the DeLorean hits 88 mph and the lightning bolt finds the clock tower.
This is my attempt to capture that moment — and the resolutions I’m carrying into a year where everything feels both wildly overextended and strangely full of potential.
The Market at All-Time Highs (and the View From the Nosebleeds)
Markets feel like Dodger Stadium in October: every seat full, every fan convinced this is the year, every pitch holding the possibility of heartbreak or history.
All-time highs used to be a warning sign. Now they’re a lifestyle brand.
The Mag-7 — or whatever the marketing team is calling them this quarter — continued to run the table, levitating the cap-weighted S&P while equal-weight stood backstage like the understudy waiting for its scene. The twin indices told a simple story: one America is growing on narrative; the other, on earnings.
AI became the new globalization — faster, colder, and with better PR.
Tariffs, of all things, somehow worked. Like a batter crowding the plate, Trump used them as a bargaining chip — wild, chaotic, loud — and yet they forced pitchers (and partners) to reconsider the strike zone. “Liberation Day” panic gave way to the same thing markets always find: adaptation.
Meanwhile, earnings held. Consumers spent. Oil stayed low. Corporate America kept churning out cash flow as if it were still the pre-streaming era.
You couldn’t script it. Which is precisely how you know it’s real.
And for those of us who are more optimistic, transformation may be the final future analysis.
The Paradox of Now
This year forced me to sit with a strange truth:
We are living through both the most concentrated and the most dynamic market in modern history.
How can the Death Star dominate so overwhelmingly while semiconductors sprout everywhere like post-rain mushrooms?
How can crypto scream “risk-on” while the Fed quietly admits it overshot and tiptoes toward easing?
How can tariffs supposedly threaten global trade while EM earnings beat expectations?
How can consumers keep spending while everyone insists they’re broke?
The answer is the paradox that runs through every era of technological change:
Confidence and fragility grow from the same soil.
And as Doc Brown reminded us: “The future isn’t written yet. So make it a good one.”
The Personal Turn (What I Actually Learned This Year)
A year like this does something to you. You learn that attention allocation beats asset allocation. You learn that the process is the point, even when it feels out of sync with the headlines. You learn to keep the Affinity Score humbly humming in the background, reminding you that factors still matter even when narratives scream louder. And you learn that life, like markets, gives you a handful of innings to make the right adjustments — maybe 18 innings!?
So heading into 2026, I’m writing resolutions that aren’t about predictions, but posture. Not forecasts — framing. Here they are.
What I’m Carrying Into 2026 (Resolutions for the Death Star Era)
1. Respect the concentration, but don’t worship it.
The Death Star is real — but so is the Rebel Alliance.
Diversification is a form of humility.
Trim winners — very hard for me, too.
2. Follow the rotation, not the commentary.
Value and global are whispering. When the noise is loudest, whispers matter. Go where they aren’t — even when the crowd says I’m early, or asks “why?”
3. Treat semiconductors like the new steel.
They are infrastructure. Every cycle, every sector, every strategy now flows through silicon. Invest in the infrastructure of tomorrow — not the nostalgia or FOMO of yesterday.
4. Track crypto as a risk-on barometer, not a religion.
It’s the pulse of confidence — not the cure for it. Watch it; don’t own it — and definitely don’t chase it.
5. Let tariffs be tactics, not ideology.
Trump proved they can work as leverage. Don’t confuse negotiating tools with economic destiny. Focus on the horizon, not the headline.
6. Anchor decisions in earnings, not emotions.
The consumer is undefeated until proven otherwise. Corporate balance sheets don’t lie. Fundamentals matter — even when narratives scream louder.
7. Remember that AI is globalization’s sequel.
It cuts costs, moves work, and shifts power. Know the plot before you buy the poster. Look downstream — where the shovels are sold.
8. Watch the Fed’s psychology more than its dot plot.
Capitulation is a mindset, not a meeting. The pivot began long before the press conference.
9. Keep discipline even at all-time highs.
Euphoria is not a strategy. But neither is fear. Phone a friend — your advisor.
10. And always: process is the point.
The scoreboard changes. The swing doesn’t. Stick to the plan — the financial one and the personal one.
Closing: The Lightning Bolt and the Clock Tower
Looking into 2026, I feel the same sensation I get watching Ohtani step into a 3-1 fastball in the 10th inning of that now-legendary Game 7: anything could happen, but something will.
We’re living at the intersection of innovation and imbalance, optimism and overconfidence — the Death Star and the DeLorean — just like the Dodgers lived between destiny and chaos on their way to back-to-back titles.
And if this year taught me anything, it’s that the future doesn’t rhyme — but sometimes it does repeat.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
January 12-16, 2026
A Golden Globe Performance – Broadening Horizon
The first full week of 2026 was a study in the peculiar architecture of the American spirit: a blend of high-tech optimism and the quiet, grinding work of industrial recovery. While the rest of us were still trying to remember to write “2026” on our checks, the markets were busy carving out new records, seemingly unfazed by the geopolitical theater in Venezuela.
The major indices shrugged off a sluggish start to the year. The S&P 500 rose 1.58%, ending the week at a record close of 6,965.78. However, the real story wasn’t just the mountain’s height, but the breadth of the climbers. In a significant shift, the S&P 500 Equal-Weighted Index, along with Mid-cap and Small-cap stocks, outperformed the standard cap-weighted index. This suggests that the market’s internal health is improving, as the rally finally extends beyond the narrow penthouse of the “Magnificent Seven” to the more modest floors of the American economy.
The Nasdaq Composite added 1.9% to finish at 23,669.75. Despite some profit-taking in mega-cap tech, the PHLX Semiconductor Index (SOX) still notched a fresh all-time high, gaining 3.68%, driven by equipment manufacturers that are seeing the fruits of improved margins and pricing power.
The Rotation Trade
The week’s winners were found in the places where physical things meet digital dreams. We are witnessing a “rotation trade” in which the shiny objects of yesterday are being swapped for the brick-and-mortar of tomorrow.
The “Low Hire, Low Fire” Paradox
The week was dominated by a data dump that felt like a psychological test for economists. We find ourselves in a state of equilibrium — a labor market that is cooling but not collapsing.
The Road Ahead: The CPI Gauntlet
As we look to the coming week, the focus shifts to the Consumer Price Index (CPI) report. This will be the ultimate test for current market optimism. With the “Trump Tariffs” beginning to ripple through the supply chain, investors are watching to see whether the “low-grade fever” of inflation will turn into a full-blown flu.
If the CPI comes in hotter than the projected 0.3% month-over-month increase, it may challenge the newfound confidence in the broadening rally. The market is currently betting that we can have our cake (all-time highs) and eat it too (stable yields).
Ringing in 2026: Notes From the Death Star Era
From Gregory Lai
There are years when markets behave like a chapter. Then there are years when they behave like a franchise.
2025 was the latter — a sequel none of us asked for, but all of us watched, popcorn in one hand, VIX at 11 in the other. NVIDIA played the Death Star again, casting its trillion-dollar shadow across the market while the rest of the semiconductor galaxy orbited nervously, praying Blackwell margins held. Oracle resurfaced as Doc Brown in a lab coat of cloud credits and LLM partnerships. Crypto went full Ohtani — hitting towering home runs one inning and striking out the universe the next.
And the only certainty — as the Toronto Blue Jays found out — is that the Evil Empire always finds a way to win. Out here, we call them the Dodgers.
The rest of us tried to operate in the cockpit between concentration and opportunity, between AI optimism and tariff anxiety, between the Fed’s final capitulation and a consumer who refused to break.
If 2024 was the setup and 2025 the confrontation, then 2026 feels like the year the plot comes together — the moment the DeLorean hits 88 mph and the lightning bolt finds the clock tower.
This is my attempt to capture that moment — and the resolutions I’m carrying into a year where everything feels both wildly overextended and strangely full of potential.
The Market at All-Time Highs (and the View From the Nosebleeds)
Markets feel like Dodger Stadium in October: every seat full, every fan convinced this is the year, every pitch holding the possibility of heartbreak or history.
All-time highs used to be a warning sign. Now they’re a lifestyle brand.
The Mag-7 — or whatever the marketing team is calling them this quarter — continued to run the table, levitating the cap-weighted S&P while equal-weight stood backstage like the understudy waiting for its scene. The twin indices told a simple story: one America is growing on narrative; the other, on earnings.
AI became the new globalization — faster, colder, and with better PR.
Tariffs, of all things, somehow worked. Like a batter crowding the plate, Trump used them as a bargaining chip — wild, chaotic, loud — and yet they forced pitchers (and partners) to reconsider the strike zone. “Liberation Day” panic gave way to the same thing markets always find: adaptation.
Meanwhile, earnings held. Consumers spent. Oil stayed low. Corporate America kept churning out cash flow as if it were still the pre-streaming era.
You couldn’t script it. Which is precisely how you know it’s real.
And for those of us who are more optimistic, transformation may be the final future analysis.
The Paradox of Now
This year forced me to sit with a strange truth:
We are living through both the most concentrated and the most dynamic market in modern history.
The answer is the paradox that runs through every era of technological change:
Confidence and fragility grow from the same soil.
And as Doc Brown reminded us: “The future isn’t written yet. So make it a good one.”
The Personal Turn (What I Actually Learned This Year)
A year like this does something to you. You learn that attention allocation beats asset allocation. You learn that the process is the point, even when it feels out of sync with the headlines. You learn to keep the Affinity Score humbly humming in the background, reminding you that factors still matter even when narratives scream louder. And you learn that life, like markets, gives you a handful of innings to make the right adjustments — maybe 18 innings!?
What I’m Carrying Into 2026 (Resolutions for the Death Star Era)
1. Respect the concentration, but don’t worship it.
Diversification is a form of humility.
Trim winners — very hard for me, too.
2. Follow the rotation, not the commentary.
Go where they aren’t — even when the crowd says I’m early, or asks “why?”
3. Treat semiconductors like the new steel.
Invest in the infrastructure of tomorrow — not the nostalgia or FOMO of yesterday.
4. Track crypto as a risk-on barometer, not a religion.
5. Let tariffs be tactics, not ideology.
Focus on the horizon, not the headline.
6. Anchor decisions in earnings, not emotions.
Fundamentals matter — even when narratives scream louder.
7. Remember that AI is globalization’s sequel.
Look downstream — where the shovels are sold.
8. Watch the Fed’s psychology more than its dot plot.
9. Keep discipline even at all-time highs.
Phone a friend — your advisor.
10. And always: process is the point.
Stick to the plan — the financial one and the personal one.
Closing: The Lightning Bolt and the Clock Tower
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.