The stock market has a funny way of making everyone look like a genius until it doesn't. Right now, if you're looking at what is the s&p 500 doing, you’ll see an index that's basically flirting with the 7,000 mark like it’s a foregone conclusion. It's weirdly calm. We’re sitting here in mid-January 2026, and the S&P 500 has already climbed nearly 2% just in the first couple of weeks.
Honestly, it feels a bit like 2021 again, but with higher interest rates and a lot more talk about robots.
Most people expected a hangover after the gains we saw in 2024 and 2025. Instead, we’re getting a "Goldilocks" scenario where inflation is cooling—latest CPI data shows headline inflation at 2.7%—and the Federal Reserve is just kinda hanging out, neither hiking nor aggressively slashing. It’s a strange, stable environment that has pushed the index to record highs, hitting 6,977.32 on January 12 before taking a tiny breather.
What is the S&P 500 doing right now?
The big story isn't just that the number is going up. It’s how it’s going up. For the last two years, it was all about the "Magnificent Seven" and anything with "AI" in the pitch deck. But lately, the rally has started to broaden out. Small caps are actually catching a bid, with the Russell 2000 jumping 4.6% in the first week of the year.
You've got banks like Wells Fargo and Bank of America reporting earnings that are... okay. Not world-changing, but good enough to keep the floor from falling out. Interestingly, the market took a half-percent dip on January 14 because some of these bank reports were a bit "mixed," but the dip was bought almost instantly.
Why the 7,000 level matters
Psychologically, 7,000 is the big one. We’re currently hovering around 6,945. Market technicians like Lawrence G. McMillan are pointing out that while the index is hitting all-time highs, internal indicators like market breadth (the number of stocks actually participating in the rise) are looking much healthier than they did six months ago.
- Support Levels: 6,900 and 6,840.
- Upside Targets: Some analysts are screaming about 7,300 or even 8,000 by year-end.
- The VIX: It briefly spiked above 18 this week but settled back down. People aren't panicking yet.
The AI "Supercycle" vs. The Tariff Shadow
J.P. Morgan’s research team is currently betting on an "AI supercycle" that could drive earnings growth of 13-15% for the next two years. That’s a lot of optimistic math. They’re basically saying that the massive Capex spending we saw in 2025 is finally turning into actual efficiency and revenue in 2026.
But it’s not all sunshine.
There's this lingering "Liberation Day" tariff shock from last year that people haven't quite forgotten. While the market moved past it in the second half of 2025, Morgan Stanley’s Lisa Shalett is warning that things like 10% credit card interest rate caps (proposed by the Trump administration) and ongoing trade frictions could still gum up the works.
The "One Big Beautiful Bill"
You sort of have to mention the "One Big Beautiful Bill" (OBA) act. This legislation has been a massive tailwind for 2026, offering tax advantages and capital depreciation allowances that are fueling corporate spending. It’s basically a massive stimulant shot for the S&P 500, especially for industrial and materials sectors that usually play second fiddle to tech.
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Is this a bubble or a new floor?
If you ask Warren Buffett—or at least look at his recent moves—he’s being cautious. Cash piles are high. Valuations are, to put it mildly, "stretched." The S&P 500 P/E ratio is sitting around 27.8, which is historically quite expensive.
But here’s the counter-argument: if earnings actually grow by the 12-15% that firms like Goldman Sachs and UBS are projecting, those high prices might actually be justified. Goldman thinks the S&P will deliver a 12% total return this year. That’s slower than the 18% we saw in 2025, but hey, nobody’s going to complain about 12%.
- Bull Case: Earnings "catch up" to the prices. AI boosts productivity. The Fed cuts rates modestly.
- Bear Case: Sticky inflation stays at 3%. Tariffs increase costs for the "493" (the stocks that aren't big tech). A "K-shaped" recovery leaves the bottom half of consumers broke while the top half keeps buying Nvidia stock.
What you should actually do with this information
Waiting for a massive crash to enter the market hasn't worked for the last three years. If you've been sitting in cash, you've missed a massive run-up. However, blindly buying the top at 7,000 feels a bit risky too.
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The consensus among the "smart money" right now isn't to run away, but to diversify. The S&P 500 is extremely concentrated. If Apple or Nvidia has a bad week, the whole index feels it.
Actionable Steps for Your Portfolio
- Check your concentration. If 40% of your portfolio is in three tech stocks, 2026 might be the year that bites you back. Look at "Equal Weight" S&P 500 ETFs (like RSP) to capture the broadening rally.
- Watch the 6,900 support. If the index closes below this level for two consecutive days, the "breather" might be turning into a correction.
- Eyes on the VIX. If the volatility index spikes above 20 and stays there, the "buy the dip" mentality is officially broken.
- Rebalance into "Real Assets." Some strategists are warming up to commodities and real estate as a hedge against the 3% "sticky" inflation we're seeing.
The S&P 500 is doing exactly what it does best: climbing a wall of worry. Whether it can clear the 7,000 hurdle and stay there depends entirely on whether those AI promises start showing up as cold, hard cash on balance sheets this earnings season. Keep an eye on the revenue beats—if companies are hitting their numbers but missing on sales, the party might be winding down.
Monitor the upcoming January 22 reports from the tech sector; if revenue growth stays above 8% across the board, the 7,300 price target looks very realistic for the summer.