Weekly Market Update 1/10/26: Record Highs, Small-Cap Leadership, and Inflation Tailwind

Weekly Market Update – January 10, 2026

The first full trading week of 2026 has officially wrapped up, and markets wasted no time extending their momentum.

The S&P 500 closed the week at fresh record highs, rising 1.60%, while the Dow advanced 2.32%. Leadership came from small caps, with the Russell 2000 surging 4.60% on the week. The Nasdaq participated as well, gaining 2.21%, though it has not yet reached new all-time highs.

This early year strength aligns closely with the outlook we outlined months ago.

Small Caps Take the Lead

Readers who have followed our weekly updates and our Q1 2026 outlook will recognize this move. We began discussing small cap exposure well before the new year, and the Russell 2000’s outperformance this past month is an early validation of that thesis.

Our bullish stance on Q1 remains intact, with particular strength expected in January and February. What makes this environment especially constructive is not just price action, but the underlying macro backdrop supporting it.

Why Inflation Is Decelerating

Our research continues to point toward lower inflation through Q1 and Q2 of 2026, driven by several key forces:

• Falling oil and natural gas prices

• Continued softness in real home prices

• Easing input costs across multiple sectors

At the same time, GDP growth is accelerating, creating a rare and favorable setup where inflation cools while economic activity improves.

Layer on top of that the Federal Reserve’s expected $500–$600 billion expansion of its balance sheet through Treasury bill purchases, and the tailwinds for risk assets become difficult to ignore.

Earnings Are Broadening Beyond Mega-Caps

Another important development is what’s happening beneath the surface of index performance.

Our forecasts show earnings acceleration in Q1 for both the Russell 2000 and the S&P 500. However, the composition of that growth is shifting.

The Magnificent Seven are expected to experience a deceleration in income growth, while the remaining 493 companies in the S&P 500 are forecasted to accelerate.

This rotation is already visible in real time. Capital has been flowing out of several mega cap names even as the S&P 500 continues to make new highs. That type of internal rotation is often a healthy signal for broader market participation.

Precious Metals and Industrial Demand

Beyond equities, several structural themes continue to develop.

Venezuela, often discussed only in the context of oil, ranks 26th globally in gold reserves, with an estimated $500 billion in unmined gold and limited mining infrastructure. U.S. firms are actively exploring opportunities to address this inefficiency, a dynamic that could benefit gold miners over time.

Silver remains another area of focus. On January 1st, China implemented new export licensing requirements for silver. Reduced supply combined with strong industrial demand helps explain silver’s explosive performance in 2025. Did you dip your toes into precious metals when we mentioned them last summer in our blog post inflation and retirement?

The AI trade also remains firmly in play, but what’s often overlooked is the massive industrial metals demand that comes with it. A single hyperscale data center can require roughly 50,000 tons of copper. With continued data-center buildouts globally, copper demand remains structurally supported.

Crypto: Correction Complete, Setup Improving

Cryptocurrencies experienced a meaningful correction in Q4 of 2025. Our work suggests that the bottoming process is complete.

With supportive macro conditions and a strong correlation to dollar trends, the stage is being set for a potential reacceleration of the crypto trade as 2026 unfolds.

Growth Is Abundant & Securing It Matters

Opportunities for growth are plentiful in this environment. However, growth alone is not the objective.

Securing gains, reallocating capital prudently, and building a reliable safety net remain critical especially as interest rate cuts are anticipated later in 2026. Locking in higher fixed rates now, before yields move lower, can materially impact long-term outcomes.

If you want to see what today’s guaranteed income options look like, you can explore them using our annuity calculator.

For those approaching retirement, understanding vulnerability matters just as much as returns. If you’re within five years of retirement, our sequence of returns risk calculator can help quantify how a market downturn early in retirement could impact your plan.

And if income reliability is a concern, our income gap calculator provides a clear picture of how much of your essential expenses are already covered and what may still need to be secured.