US Markets Prepare for Their First Real Test of 2026

The First Critical Data of 2026 is Being Released Today

While investors brace for a challenging test facing the U.S. markets today, the year 2026 has started strong. The December employment report and the Supreme Court's decision regarding the legality of U.S. President Donald Trump's tariffs will play a significant role in this process.

Trump Administration's Tariff Moves

Despite the Trump administration's efforts to take control of Venezuelan oil, U.S. stocks and bonds began January on a calm note. However, Michael Arone, Chief Investment Strategist at State Street, cautioned investors by stating, "Everything feels a bit too quiet, a bit too calm."

Market Volatility Expected

Steve Sosnick, Chief Market Strategist at Interactive Brokers, noted that the pricing in the options market indicates potential sharp fluctuations of 0.9% in the S&P 500 Index. The VIX Index, known as Wall Street's fear gauge, rose to 15.5 even as the S&P 500 increased, signaling a warning for surprises in the market.

Critical Data and High Valuations

As investors await the employment report to be released today, there are concerns regarding the historical peaks reached by stocks. According to FactSet data, the S&P 500 is trading at 22 times the expected earnings of companies. Tom Essaye, Founder of Sevens Report Research, highlighted that high valuations could leave the market vulnerable to selling pressure.

Tariffs: Retail Sector Eyes Awaiting Turnaround

Another significant agenda in the markets centers around tariffs. If the tariffs are lifted, shares of retailers such as Walmart, Costco, and Dollar General will attract significant interest. Manish Singh from Crossbridge Capital Group noted that in this case, the stocks of these companies will be closely monitored. As of mid-December, revenue from tariffs had reached approximately $133 billion.

Critical Moment: Tariff Lifting and Dollar Decline

Singh stated that cancelling tariffs could lead to a sudden weakness in the U.S. dollar and affect the Federal Reserve's (Fed) decisions: "If the tariffs are lifted, the Fed will have no basis to avoid cutting interest rates," he said.

Shift in Investor Sentiment: From Savior of Capitalism

Hardika Singh, Economic Strategist at Fundstrat Global Advisors, predicted that if the Supreme Court leaves the tariffs as they are, stocks could rally. Singh summarized the situation's evolution: "Initially, tariffs were viewed as a factor that would bring capitalism to its end. Now, however, investors are praying for the permanence of these tariffs." This demonstrates how quickly market sentiment can change.