The U.S. stock market starts 2026 with a bang, indicating an 80% chance of rising throughout the year. Experts remind that next week's tariff decision may cause waves

The US stock market started strong in 2026, with the Dow Jones and S&P 500 reaching new closing highs on Friday. The S&P 500 ETF attracted $10 billion in just a few days, and small-cap stocks and "meme stocks" were also highly sought after. Amid the "bullish" sentiment in the US stock market, the "January Effect" has gained attention again, suggesting that a rise in January often indicates an 80% chance of a bullish year ahead. However, some analysts argue that the logic of the "January Effect" is overly simplistic, as large investors may manipulate the market in January to create the illusion of an "annual bull market" to unload at high prices. Meanwhile, with the US Supreme Court yet to rule on the legality of Trump's tariffs, investors need to remain cautious. Dow Jones Up 2.3% Russell 2000 Soars 4.6% All three major US stock indices recorded significant gains over the past week, with the Dow Jones rising 2.32%, the Nasdaq up 1.88%, and the S&P 500 increasing by 1.57%. Notably, the rise was primarily driven by sectors such as materials and industrials, which have lagged behind technology stocks in recent years. Wall Street's risk appetite has clearly increased. The Russell 2000 index, which reflects the performance of small-cap stocks, surged 4.6% this week, and the S&P 500 ETF (VOO) attracted $10 billion in just a few days at the start of the year, an astonishing pace for index funds. Additionally, "meme stock" ETFs also skyrocketed nearly 15%. Unemployment Rate Drops, Likely Avoiding Economic Recession This round of gains was driven by a series of positive factors, primarily the overall improvement in US economic data. Even though the non-farm payroll growth data released on Friday fell short of expectations, the unemployment rate slightly decreased to 4.4%, reinforcing the market's judgment that the US job market is in a "low hiring, low layoffs" balanced state, boosting confidence that the economy is likely to avoid a recession. At the same time, US service sector activity expanded at its fastest pace in over a year in December, and labor productivity rose at its fastest rate in two years, helping to control employment costs. Related article: US December Non-Farm Jobs Increased by 50,000, Below Expectations; Market Expects Rate Cuts to Pause in January Secondly, industry indicators are showing positive signals. Chip stock Microchip Technology (MCHP) raised its earnings outlook, expecting chip sales to exceed expectations, reflecting strong semiconductor demand. Additionally, US auto sales in December exceeded expectations, showing strong demand even as dealer inventories shrank and discounts offered by automakers decreased. On the other hand, President Trump introduced new housing market support policies, injecting new momentum into the already strong credit and real estate sectors. "Too Much Sugar Flowing into the Economy" Julie Biel, portfolio manager at Kayne Anderson Rudnick, bluntly stated that overly defensive strategies are indeed ineffective, saying, "There is too much sugar flowing into the economy." Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, noted that given the better economic data, especially with more industries and countries performing well globally, market expansion is reasonable, but he holds some skepticism towards stocks with low market capitalization rankings JonesTrading Chief Market Strategist Michael O'Rourke also believes that this optimism seems overly idealistic. He cited the example of Intel rising 10% and hitting a new high due to the CEO's meeting with the president, stating, "Stocks are rising 10% to 20% daily due to minor news developments or themes that have been ongoing for months." JP Morgan Asset Management Portfolio Manager Priya Misra, on the other hand, takes a cautious stance on economic recovery: "I don't think we can say the economy is 'accelerating again' because employment trends remain weak. However, a GDP growth of 2% to 3% this year and a stable unemployment rate should be welcomed by the market." The "January Effect" is Back in the Spotlight In fact, every January, the market experiences what is known as the "January Effect," where the market performance in January may predict the trend for the entire year. Statistical data shows that if the stock market rises in January, the likelihood of it rising for the entire year is as high as 80%. The formation of the "January Effect" has its objective reasons. After the tax settlements and window dressing of December, fund managers return to their posts and redeploy their funds. At the same time, retail investors often enter the market in January with a mindset of new year hopes, and these two market forces often drive the January rally. However, some experts point out that believing in the "January Effect" logic, which suggests that a rise in January guarantees a rise for the entire year, may be overly simplistic. If large investment institutions plan to offload stocks that year, they are more likely to create the illusion of a "year-long bull market" in January to entice ordinary investors to buy at high prices. Related article: The January Effect is All the Rage | Blue Blood Factory Attention on Next Wednesday's Tariff Ruling Throughout 2026, the market will still need to pay attention to the Federal Reserve's monetary policy direction. Morgan Stanley Wealth Management Chief Economic Strategist Ellen Zentner stated that the Federal Reserve is likely to maintain the status quo until data provides a clearer direction. Additionally, the U.S. Supreme Court's ruling on the legality of the Trump administration's tariff policy has not yet been announced, with the next key date being next Wednesday (14th), when the Supreme Court will have another opportunity to issue a legal opinion. If the court ultimately overturns the tariffs, the financial markets will experience significant volatility