Dear clients and friends,

 At Perseus Wealth, we believe that understanding the market is crucial to informed investment decisions and that these are the critical topics of conversation that deserve attention this month. We value your insights and would be delighted to participate in further discussions if you have any questions or require additional details.

What’s Happening: U.S. equity markets kicked off 2026 on a strong note, with both the S&P 500 and Dow Jones Industrial Average reaching multiple record highs during the first two weeks of the year. A notable market rotation emerged, with the S&P 500's equal-weighted counterpart rising more than the cap-weighted index as traders looked beyond technology shares to other sectors, including materials, industrials, and financials. Small-cap stocks have been a standout this year, with the Russell 2000 outperforming the S&P 500 for ten consecutive sessions, the longest such streak since 1990. Early fourth-quarter earnings added to the positive momentum, though mixed reactions in financials suggest investors are weighing guidance and earnings quality, not just headline beats. Despite stretched valuations (the S&P 500 is trading at about 26 times earnings), investor sentiment held up on expectations of continued earnings growth and potential Fed rate cuts later this year.

Economic data continues to paint a more muted picture. The labor market ended 2025 on an extremely  soft note: the employment report showed December nonfarm payrolls rose just 50,000 (and the previous two months were adjusted downward - all reports well below forecasts), while the unemployment rate edged down to 4.4%¹. Full-year job growth for 2025 totaled only 584,000, the weakest annual gain outside of a recession since 2003[1]. On the inflation front, the headline December Consumer Price Index rose 0.3% month-over-month and 2.7% year-over-year, in line with expectations[2]. Housing costs remained the largest contributor to inflation, though used-vehicle prices declined, helping temper the core reading at 2.6% y/y, compared to the Fed’s normal guideline PCE, expected to be between 2.8%- 3.0% when published for December. Although consumer sentiment rose slightly in early January, it remains historically subdued as households continue to adjust to elevated prices[3], increasing geopolitical tensions, threats against the Fed Chairman and potential new rounds of additional tariffs.

Geopolitical developments also moved markets: the lack of any progress on the war in Ukraine, ongoing Middle East tensions and U.S.–Venezuela frictions fueled safe-haven asset demand, helping gold and silver hit new records. More recently, of course, concern has centered on the increasingly rancorous debate over the fate of Greenland, with European leaders presenting an unusually united front against the U.S. administration’s demand to take control of the Danish territory, jeopardizing trade relations and potentially even the future of NATO itself. As earnings season progresses, investors will be looking for confirmation that corporate profits can continue to support current valuations amid policy and macro uncertainty.

The Bottom Line: The opening weeks of 2026 demonstrated (again) the resilience of U.S. equity markets, created multiple fresh records despite an uneven economic backdrop. While the labor market has clearly cooled to levels generally only seen in recessionary periods, noting once more that 2025 marked the weakest year for job creation in over a decade, the improving inflation picture and solid corporate earnings provide reasons for cautious optimism. Investors will be watching closely for clarity on Fed policy, with rates expected to remain unchanged at the late January meeting.

Best always,

Sean and John

The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and may not be invested directly. The economic forecasts outlined in this material may not develop as predicted, and there can be no guarantee that any strategy will be successful.

[1] Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm

[2] Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm

[3] University of Michigan, https://www.sca.isr.umich.edu/