Weekly Economic Update: January 6th, 2025

S&P 500 fails to reach 7,000 but still has above average year!

The market petered out in the final week of 2025, and we failed to reach the 7,000 level on the S&P 500.¹ Thanks to a shorter week due to the new year holiday, thin volumes, plus traders and portfolio managers interested in locking in gains rather making new records, the markets were muted to finish out the year.

Don’t let a soft week get you down. Markets were up for a third straight year as they notched double-digit gains again. The S&P ended the year at 6,845.50, +16.39%, while the Dow managed to gain almost 13% at 48,063.29, even though it was held back by its lighter exposure to tech stocks.² (For some perspective, the Dow closed at 18,592 on March 23, 2020, at the start of the coronavirus shutdown.) The Nasdaq, which was buoyed all year on AI enthusiasm, rose 20.36% for the year and closed out 2025 at 23,242.³

None of this guarantees 2026 will be an easy year. A lot of things will come into play — some good, some bad. Some are avoidable, like a looming government shutdown (more in the next section) or a bitter midterm election cycle. Some things will be geopolitical, such as the events in Venezuela over the first weekend of 2026.⁴

The outlook for the year is mixed. Some are saying 2026 will be a “golden age” for our economy and the stock market will roar once more. Others are saying things will be miserable. As always, current events will alter expectations. We may have our ups and downs and probably end up somewhere in the middle. Everyone might walk away learning nothing and believing they were right all along. We are optimistic about markets and believe the markets will advance next year, with the S&P 500 hitting 7,700 by year end. But we’re also pragmatic and realize having a plan with defined goals is always better than a hope-and-pray approach. Now is the perfect time to evaluate your plan to make sure it is in line with your goals no matter what the coming year has in store.

The next thing down the road

One of the first hurdles we’ll face early in the year is of our own making. After the 43-day government shutdown in the fourth quarter of 2025, we are once more on the verge of yet another shutdown.⁵

After failing to address the issues that led to the government’s closure just three months ago, Congress is once again rolling full steam ahead towards another one. They did put some effort toward addressing Obamacare subsidies, and there were some efforts at reforming the health care system, but no results.

Democrats think the subsidies are a winning issue, and a shutdown will win the news cycle and detract from President Donald Trump’s agenda. The more mayhem that can be created ahead of an election, the worse it typically is for incumbents, because when people are grumpy, it’s natural to blame the people in charge.

We get the politics but grow weary of the games. No one is arguing that the health care system isn’t broken. What’s frustrating is that no one seems willing to give an inch ideologically to solve the problem. Ideological solutions seldom end well for the general population.

So, what happens when there’s a shutdown? The market may likely falter, and that’s never a good thing, especially in January. Historically speaking, when the S&P 500 has a positive January, the stock market tends to finish the year positive and averages much higher gains for the full year compared to years with a negative January. This phenomenon is known as the “January effect” and makes sense, considering it’s better to start out ahead than in a hole.⁶

The other important factor is that another shutdown could tank consumer confidence. The government is already viewed with disfavor by the public, and the only thing worse than poorly functioning disfavor by the public is a nonfunctioning government. Maybe “no more government shutdowns” wasn’t on the list of New Year’s resolutions for Congress?

Coming this week

• This week will be the first full trading week as the markets resume regular hours after the holiday season. We won’t be exerting ourselves too much early in the week, as the only data will be ISM manufacturing and auto sales on Monday and some Federal Reserve speakers on Tuesday.
• Things will pick up on Wednesday with the newest ADP employment report, Job Openings & Labor Turnover Summary for November, factory orders, MBA mortgage applications and more Fed speakers.
• On Thursday, we’ll get weekly unemployment, which may be a little weird given the holidays. We’ll also see productivity, consumer credit and the U.S. trade deficit.
• We’ll cap off the week with the Bureau of Labor Statistics (BLS) employment situation for December. Currently, the unemployment rate is at 4.6% and there were 64,000 jobs created in November.⁷ Friday will also feature hourly wage growth, housing starts, a few more Fed speakers and the University of Michigan consumer sentiment reading.

Sources:

¹ Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Jan. 5, 2026.

² Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed Jan. 5, 2026.

³ Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed Jan. 5, 2026.

⁴ Reuters. Jan. 3, 2026. “Trump says U.S. will run Venezuela after U.S. captures Maduro.” https://www.reuters.com/world/americas/loud-noises-heard-venezuela-capital-southern-area-without-electricity-2026-01-03/. Accessed Jan. 5, 2026.

⁵ Cheyenne Haslett, Jordain Carney and Alex Gangitano. Politico. Jan. 3, 2026. “A month out, no one looking to repeat October’s historic shutdown.” https://www.politico.com/news/2026/01/03/trump-shutdown-january-00700940. Accessed Jan. 5, 2026.

⁶ James Chen. Investopedia. Dec. 20, 2024. “January Effect: What It Is in the Stock Market, Possible Causes.” https://www.investopedia.com/terms/j/januaryeffect.asp. Accessed Jan. 5, 2026.

⁷ Bureau of Labor Statistics. Dec. 16, 2025. “The Employment Situation — November 2025.” https://www.bls.gov/news.release/pdf/empsit.pdf. Accessed Jan. 5, 2026.

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