Weekly Market Commentary -  Jan 5, 2026

Week In Review

In a holiday-shortened week characterized by light trading volumes and sparse economic data, a

bearish tone emerged in the equity markets as the minutes of the Fed’s December FOMC meeting indicated a significant split among voting members concerning the future path of interest rates. The competing risks of a cooling labor market and persistent inflation drove active disagreement and signal potentially fewer rate cuts in 2026 than markets anticipate, even with the appointment of a dovish Fed chief. Monetary policy uncertainty generated a risk-off market sentiment and weakening momentum, with tax-loss harvesting and a continued trimming of risk exposure from the predominant AI-related

technology stocks that contributed to negative price swings in the major U.S. equity indices. Investors may have received a lump of coal for the holiday season, with the S&P 500 slumping -1.1% for the week, but the index still posted an impressive 17.88% total return for 2025 and a double-digit gain for the third consecutive year. 3 Over the last 100 years, the S&P 500 has delivered gains of 15% or more for three straight years only eight times. 4

This Week

The financial markets have economic and geopolitical news to consider. Highlights include updates for

the ISM Manufacturing Index, the ISM Services PMI, the Michigan Consumer Sentiment Index and the perennial U.S. employment report. Analysts forecast an increase of 54,000 in nonfarm payrolls and the unemployment rate is projected to rise to 4.7%.5 U.S. military action in Venezuela may trigger a flight to safe-haven assets.

Portfolio Themes

Although the Fed's approach is cautious and data-dependent, further rate cuts are plausible in 2026.

Short-term bonds provide a “cushion” if rates increase and larger gains amid a Fed cutting period. Simplicity offers actively managed bond portfolios that give the potential for income generation and enhanced returns relative to cash if interest rates decline.

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Data: Unless otherwise noted, data for charts, graphs, and tables is sourced from YCharts. Portfolio Themes idea sourced from Capital Group.

1Style box returns use various Russell indices tied to specific areas of the market cap (vertical) and style (horizontal) spectrums. Indices are not typically available for direct investment, are unmanaged, and do not incur fees or expenses.

2 Index Statistics: P/E Ratio – Displays the forecasted P/E ratio of the representative index ETF. Yield - Dividend-per-share divided by current share price. Table statistics are updated weekly. MSCI indices represent broad global and international equity markets. Indices are represented by iShares ETF proxies (IVW, IVV, IVE, ACWI, and ACWX).

3 YCharts. 4 The Motley Fool. 5 MarketWatch. Past performance does not guarantee future results.

Weekly commentary and investment advisory services are provided by Simplicity Wealth, LLC a SEC Registered Investment Adviser. Registration does not imply a certain level of skill or training. The information provided is for informational purposes only and does not constitute any form of advice or recommendation. The information contained within has been obtained from various sources and is believed to be accurate at the time of publication.