It is Sunday, January 18, 2026, and if you’ve glanced at your portfolio lately, you’re probably feeling that weird mix of "Is this real?" and "When does the floor drop out?" The markets are closed today, but the air is thick with anticipation for the week ahead. Honestly, the vibe is just different right now. We aren't in the 2024 hype cycle anymore, and we've moved past the 2025 "Magnificent Seven" obsession.
What’s going on with the stock market today is a subtle, grinding shift that most people are missing because they're looking for big, flashy headlines.
The S&P 500 recently touched a record high of 6,977.32 just a few days ago, on January 12. It’s hovering right near that 7,000 milestone. Everyone is talking about it. Some analysts, like those at Oppenheimer, are even shouting about 8,100 by year-end. But then Friday happened. The market took a tiny breather—down less than 0.1% for the S&P—and Treasury yields spiked to a four-month high of 4.23%.
Why does a 0.1% drop matter? Usually, it wouldn't. But when you're at the top of a mountain, even a loose pebble makes you jump.
The Tug-of-War Between Trump, Powell, and Your Wallet
The biggest thing shaking the ground right now isn't actually a stock. It's the Federal Reserve. We are in this bizarre "lame duck" period for Jerome Powell. His term as Chair ends in May, and President Trump has been dropping hints that he might move away from Kevin Hassett as the replacement.
Markets hate uncertainty.
When Trump suggested he might not pick Hassett—who is widely seen as a "dove" who would slash rates aggressively—bond traders freaked out. That’s why yields jumped on Friday. If you’re wondering why your tech stocks or your REITs feel a bit shaky today, that’s your answer. High yields make "future" growth look more expensive.
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What's actually happening on the ground:
- Inflation is cooling: The latest CPI report shows headline inflation at 2.7%. That’s the lowest in five years.
- The "Goldilocks" Economy: Growth is steady at about 2%, which is just enough to keep us out of a recession (for now) but not so fast that it forces the Fed to hike rates again.
- Tax Refund Boost: Here’s something nobody is talking about: a massive $100 billion to $150 billion in extra tax refunds is about to hit American bank accounts. This is due to retroactive cuts from last year's tax bill. That’s a lot of "found money" that could flow straight into the consumer economy.
The "Silicon Supercycle" is Real (and Nvidia is the King)
You can't talk about what's going on with the stock market today without mentioning the chip makers. It’s becoming a "winner-takes-all" dynamic.
Nvidia just launched its "Rubin" architecture, and the demand is basically unhinged. They’re looking at $213 billion in revenue for the fiscal year. To put that in perspective, they’re capturing over a third of the entire global data center spend. If Nvidia sneezes, the whole S&P 500 catches a cold.
But there's a split happening.
While the "hardware" guys like Taiwan Semiconductor (TSMC), Micron, and AMD are soaring, the software companies are getting crushed. Stocks like Palantir and Workday have been struggling lately. Why? Because investors are terrified that "AI-native" startups are going to disrupt the old software giants before they can adapt.
It’s a chasm. On one side, you have the guys building the shovels (chips), and they are getting rich. On the other side, you have the guys who used to sell the maps (software), and people aren't sure if those maps still work.
The Rotation Nobody Expected
For the last two years, it was all about Big Tech. If you didn't own the "Mag 7," you were losing. But in the first few weeks of 2026, something shifted.
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Small caps are finally waking up.
The Russell 2000 surged 4.6% in the first week of January. That’s massive. It signals that investors are finally feeling brave enough to look at the "rest" of the market—the regional banks, the manufacturers, the mid-sized retailers. PNC Financial just hit a four-year high because dealmaking and advisory fees are picking up again.
This is actually healthy. A market that only goes up because of five stocks is a fragile market. A market where the "little guys" are also winning is much more sustainable.
What to Watch This Week (The Davos Factor)
Tomorrow starts a big week. Everyone who is anyone in finance is heading to Davos for the World Economic Forum.
Keep an ear out for President Trump’s speech there. Any mention of new tariffs—specifically the threatened 25% tariff on Indian exports or secondary sanctions on Russian oil—could send energy prices through the roof.
We also have the U.S. PCE (Personal Consumption Expenditures) data coming out. This is the Fed's favorite way to measure inflation. If that number comes in even slightly higher than expected, expect those Treasury yields to keep climbing and stocks to take a hit.
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Actionable Steps for Your Portfolio
So, what do you actually do with this info? Don't just sit there.
First, check your tech concentration. If 40% of your portfolio is just Nvidia and Microsoft, you're not "diversified," you're just gambling on one sector. Consider looking at the "laggards." Small-cap value and international equities (especially in Japan and Emerging Markets) are looking cheaper than they have in years.
Second, don't ignore the bond market. If the 10-year Treasury yield stays above 4.2%, it’s going to keep a lid on how high the S&P 500 can go. You might want to lock in some of these higher yields in high-yield savings or short-term CDs while you can.
Lastly, watch the labor market. We’ve been seeing average monthly job growth of only 17,000 lately. Historically, that would mean a recession. But in 2026, with reduced immigration, this might be the "new normal." Don't panic just because the job numbers look "small" compared to 2022.
The market is in a "prove it" phase. The earnings are there, the growth is there, but the political uncertainty is high. Stay nimble, keep some cash on the sidelines for the dips, and remember that even in a bull market, it’s okay to take a little profit when everyone else is shouting "To the moon!"