The new year is off to a brisk start, and January has already delivered signs that 2026 may diverge meaningfully from last year’s narrow, tech‑driven rally. Value stocks are leading the way so far, while policy developments from the Trump Administration continue to shape economic headlines. Although it’s still early, we’re closely watching a clear shift in market dynamics to begin to take hold.
Rotation to Value Emerges
In the opening weeks of January, value stocks have outpaced their growth counterparts, a reversal from last year’s pattern of mega-cap tech dominance. This rotation, while still early, offers a hint that the market rally may be starting to broaden. It's a welcome shift in a market where just ten companies make up nearly 40% of the S&P 500’s total weight, the most concentrated the index has ever been.
While AI continues to capture large attention, market reactions such as the muted response to Nvidia’s CES appearance suggest that investors are growing more selective about which tech is worth buying. AI isn’t going away, but the market appears to be looking for more than just hype and buzzwords this time around.
Four straight years of stock market gains
History tells us that three consecutive years of positive returns for the S&P 500 are impressive, while four are rare. But rare doesn’t mean impossible. In fact, while only a few such streaks have occurred in the past century, they’ve typically ended in single-digit positive years rather than dramatic pullbacks.
With most major banks forecasting a positive year, none are brave enough to predict a negative one; consensus expectations lean toward mid-to-high single-digit returns in 2026. If AI continues to support earnings and previously underperforming sectors pick up steam, we may just see another up year, a statistical outlier or not.
Sector Rotation: Welcome to the Broader Market
Energy, healthcare, and industrials have all outpaced tech so far this year, helping the rally expand beyond the same handful of names that drove 2023’s returns. As the Dow Jones Transportation Index pushes to new highs, it signals broad-based optimism and economic resilience.
Industrial stocks, particularly those tied to infrastructure and equipment, are showing strong technical setups. From Caterpillar to Eaton, many names in this space are quietly leading the charge. When transportation stocks are rising, it’s generally a good signal of the direction of the economy.
Politics, the Fed, and the New Era of Intervention
January also brought headlines that went beyond economics. Political influence on markets is nothing new, but recent policy moves from proposals to cap credit card rates to increased scrutiny on private equity in housing are signaling a more interventionist approach from the Trump Administration.
A criminal probe targeting Fed leadership, for example, has sparked concern not just about governance, but about the independence of the central bank. Though Treasury yields have remained surprisingly flat, this evolving backdrop warrants close watching, especially with just months left in the current administration’s term.
Contribution Limits for 2026
In our chart of the month, we highlight the updated retirement plan contribution limits for 2026. Whether it’s 401(k), IRA, or other retirement vehicles, these increased limits give investors more flexibility to save, invest, and grow their portfolios. And with equity allocations in retirement accounts still heavily weighted toward index funds, these regular contributions remain a powerful source of demand in today’s market.
To help you stay organized and confident throughout the year, click to view our updated 2026 Financial Planning + Tax Calendar. This resource highlights the most important tax deadlines, contribution limits, and planning checkpoints that can impact your financial picture.
As we head into February, the year is already shaping up to be more complex and potentially more rewarding than the last. A broadening market rally, renewed interest in underloved sectors, and early signs of consumer resilience all add up to a cautiously optimistic outlook. Still, political uncertainty and ongoing economic shifts will keep us on our toes.
Despite all the risks and uncertainty, the team at Carnegie Investment Counsel remains focused on the fundamentals: building diversified portfolios, making informed decisions, and consistent long-term value creation.
This commentary is for informational purposes only and includes general economic and market conditions. Forward-looking statements cannot be guaranteed. Past performance is not a guarantee of future results. Data and other market and economic information referenced is from sources believed to be reliable and opinions are subject to change. All investments involve risks, including the loss of principal.
Carnegie Investment Counsel (“Carnegie”) is a registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. For a more detailed discussion about Carnegie’s investment advisory services and fees, please view our Form ADV and Form CRS by visiting: https://adviserinfo.sec.gov/firm/summary/150488.
You may also visit our website at: https://www.carnegieinvest.com.