The first week of trading in 2026 marks a significant return to form for economic data, following the disruptions caused by last year’s government shutdown. As we transition into a new fiscal year, much of the focus is on employment figures, particularly as the December employment report is anticipated to reveal a slowdown in hiring. As investors brace for key economic indicators, we explore the insights shared by Michael Reinking, Senior Market Strategist at the New York Stock Exchange, regarding market momentum and the projected economic landscape for 2026.
Reinking noted that the momentum seen at the close of 2025 carried over into the new trading year. An analysis of the three-year trailing returns indicates a striking performance, with only a few historical years surpassing the nearly 80% gains recorded over the past three years. Notably, these periods include 2021 and the years between 1997-1999.
While the one-year returns following such significant gains tend to vary, averaging around 5%, the long-term outlook remains strong. As we analyze earnings growth expectations and economic policy impacts, an optimistic momentum has developed around the S&P 500 as we embark on 2026.
Reinking emphasized the critical nature of the upcoming employment report, highlighting its significance for shaping Federal Reserve policy. Current expectations lean towards a slight uptick in hiring compared to the previous report, which had shown disappointing results. This data is not merely a measurement of job growth; it stands as a key indicator of economic health that could determine future actions taken by the Federal Reserve.
The investor community appears to be closely monitoring the likelihood of a rate cut. Presently, expectations for a change in January hover around a slim 16%, suggesting that while the market anticipates stability in rates, any meaningful shifts in policy could await the end of the first quarter.
This week’s CES conference in Las Vegas has also garnered attention, fueled by announcements from major players in the semiconductor space, such as AMD, Nvidia, and Intel. After a remarkable rise of approximately 40% in semiconductor stocks last year, the sector has kicked off 2026 with over a 5% increase in just two trading sessions. Reinking highlighted the event’s overarching focus on AI technologies and autonomous robotics, which are set to revolutionize numerous sectors.
A notable sign of strength in the industry is Microchip Technology’s recent guidance increase, suggesting heightened demand beyond mere consumer electronics. Such developments point to a robust industrial appetite for semiconductor technology, which may further stabilize the economic landscape.
As we consider the midterm election year dynamics, Reinking provided insights into potential scenarios for 2026. His base case predicts generally positive market conditions, fueled by anticipated mid-double-digit earnings growth. Furthermore, government policies implemented in 2025 may begin to manifest beneficial effects on the economy, driving an uptick in investment across key sectors.
However, Reinking cautioned that midterm election years traditionally exhibit lower average returns. With historical data revealing a mere 1% average return in such years, there exists a level of caution surrounding market expectations. The potential for increased volatility persists, stemming from market positioning nearing stretched levels.
As 2026 unfolds, a blend of optimism and caution characterizes the sentiments within financial markets. With pivotal economic data on the horizon, particularly concerning employment, the outcomes will influence both market trajectories and Federal Reserve policies. The developments in technology and investment landscapes underscore the dynamic nature of today’s economy, marked by a harnessing of innovation and strategic foresight in navigating the challenges of a midterm election period.