CWS Market Review – January 6, 2026

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I always look forward to the start of the new trading year. It’s a fresh start and all the YTD performance numbers are set back to zero. It’s a time to leave behind last year’s mistakes and look ahead to profits in the new year.

So far, the stock market seems to be in a very happy mood in 2026. The S&P 500 rallied on the first three trading days of the new year, and today the index set a new all-time record closing high of 6,945.82. Before today, the last closing high was set on Christmas Eve.

Not only did the market rally on the first three days of this year, but our Buy List outperformed the market on all three days as well.

The events in Venezuela haven’t been enough to rattle the markets. Indeed, one of our buy List stocks, SAIC, the defense contractor, got a nice lift on the news. It’s already up 8% for us this year. We also had new highs today from stocks like Heico and Thermo Fisher.

Historically, this has been a good time of year for the stock market. From December 20 to February 18, the S&P 500 has gained an average of 3.6%. That’s close to one-third of the market’s annual gain coming in less than one-sixth the time.

Another of our new stocks on the Buy List, Comfort Systems USA, is already up 10.8% this year. Not bad for three days, but we know not to celebrate too soon. The market can and will change its mind very quickly.

The market news has been fairly quiet recently, but that will soon change. Now that the government shutdown is over, we can get back to regular economic reports. This Friday, the government will release its jobs report for December, although the last few labor reports were not very encouraging.

The simple fact is that the labor market has been slowing down. The unemployment rate is currently at a four-year high, even though it’s still at a historically low level. The unemployment rate reached its low point nearly three years ago.

Earlier today, we got the ISM Manufacturing Index for December, and it showed that U.S. manufacturing fell to a 14-month low. The Index fell to 47.9 for December. That’s the lowest level since October 2024. Manufacturing now makes up 10% of the U.S. economy.

The other big news headed our way will be the start of the Q4 earnings season. As usual, many of the big banks will go first. JPMorgan Chase and the Bank of New York Mellon are set to report on Tuesday, January 13. JPM often sets the tone for the entire banking sector.

By the way, JPM’s CEO Jamie Dimon made a cool $770 million last year. That works out to 28 cents per share on a $330 stock. I’m not smart enough to tell you if that’s too high or too low, but the stock gained 34% last year. JPM’s annual profit will probably come in around $20 per share.

On Wednesday, we’ll get earnings reports from Bank of America, Citigroup, and Wells Fargo. The financial sector has been unusually strong lately, and I say that cautiously. Except for a few bursts, finance stocks haven’t been popular in several years. Since late October, the S&P 500 Financial ETF is up by more than 8% while the S&P 500 ETF is up less than 1%.

Our first batch of Buy List earnings reports probably won’t be until the third week of January. Companies often need a little more time to compile their Q4 reports. That’s why the Q4 earnings season tends to be more spread out compared with the other quarters.

Tomorrow, we’ll get an early look at the jobs report when ADP releases its private payrolls report. Wall Street expects a gain of 48,000. Also on Wednesday, we’ll get reports on job openings and factory orders. Job openings have fallen over the last three years, but the losses may have stabilized. We’ll know more soon.

On Thursday, we’ll get initial jobless claims plus reports on productivity and the trade deficit. The big jobs report is on Friday. Wall Street expects to see a gain of 73,000 jobs which is pretty good. Expectations are for the unemployment rate to fall by 0.1% to 4.5%.

I’m also paying close attention to average hourly earnings. Economists are looking for a gain of 0.3%. If that’s close to accurate, then it tells me that the government shutdown didn’t have the impact I feared it would have.

Inflation has also been calm. The next CPI report will be out on January 13. The January Federal Reserve meeting is still three weeks away, and it increasingly looks like the Fed is ready to hold off on lowering rates. Not only that, but the odds of a rate cut in March are looking iffy.

I want to share this chart with you because it might be the most frustrating chart about the recent market. The chart below shows the S&P 500 ETF (in black) against the S&P 500 Dividend Aristocrats ETF (in blue).

You can see that the overall market has soundly beaten the Dividend Aristocrats over the last three years. The market has more than tripled the Aristocrats. Actually, this chart understates the impact because the Dividend Aristocrats are inside the S&P 500.

The Dividend Aristocrats are companies that have raised their dividend every year for the last 25 years. Many have raised their dividend every year for 40 or 50 years.

I think of the Dividend Aristocrats as a good proxy for high quality companies. When I use the words “blue chip stocks,” this is what I mean. Many index makers have a “quality” factor for their indexes but I’m never exactly sure what metrics they use. With the Dividend Aristocrats, I have a good idea.

I find it alarming that high quality stocks have lagged the market by so much over the last three years. I certainly expect periods of underperformance, but this long stretch is very unusual.

This chart also shows us just how much the market has been influenced by a small number of lower quality stocks. The sad fact is that being safe and prudent has not been the most profitable strategy.

It’s not that conservative investors have lost money, but they’ve been left out of the biggest gains in a thriving bull market. I’m concerned that investors make take away the wrong lesson, but it’s hard to argue with success.

I’m not about to predict a resurgence of high-quality stocks, but these stocks can only lag the market for so long.

That’s all for now. The jobs report is due out Friday morning. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on January 6th, 2026 at 6:16 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.