By Rick Schwerd | January 9, 2026
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for our next update on January 23.
Labor Market Stabilizing
The labor market appears to be stabilizing as we enter 2026. The previous couple of labor market reports were difficult to analyze due to Federal Government DOGE job cuts, as well as distributions related to the government shutdown. The unemployment rate declined to 4.4 percent, down from a multi-year high of 4.5 percent in November. The economy added 50,000 jobs during the month, slightly less than the 56,000 added in the previous month.
The number of job openings has also fallen into a range of approximately 7 to 7.5 million during the past year, roughly in line with pre-pandemic levels. Average hourly earnings increased 3.6 percent year-over-year. This is a healthy level, as wage growth continues to outpace inflation while not running so hot that it could contribute to higher inflation. Markets initially reacted positively to the labor report.
Equity Markets Finish Another Strong Year
Although no significant Santa Claus rally materialized to end 2025, equities held on to notch a third consecutive year of strong gains. The value-oriented Dow Jones Industrial Average was 13 percent higher in 2025, while the tech-heavy NASDAQ led U.S. markets with a 20 percent total return. The broad market S&P 500 increased more than 17 percent in 2025, following greater than 25 percent returns in 2023 and 2024.
The S&P 500 has returned more than 17 percent for seven of the last nine years, including 2025. The only exceptions during that period were 2018, which posted a 4.4 percent loss, and 2022, when inflation pressures led to an 18 percent decline. Since 1926, the S&P 500 has returned more than 10 percent annually on average. Equities are off to a solid start to begin the year, albeit with a small sample size.
Bonds Also Had a Good Year
The benchmark Bloomberg U.S. Aggregate Bond Index had its best year since 2020, returning 7.3 percent, as interest rates dropped across the yield curve. The benchmark 10-year U.S. Treasury yield dropped from 4.57 percent to 4.15 percent during the course of the year, while the 2-year U.S. Treasury fell from 4.24 percent to 3.47 percent. There is an inverse relationship between bond yields and bond prices, so when yields fall the price of bonds increase.
Looking Ahead
With the typically slow holiday season ending, we are about to enter a period with significantly more news flow. Next week marks the unofficial start to earnings season as major banks release fourth-quarter results. We expect a good earnings season overall as estimates have been trending higher.
On the economic front, we receive a number of important releases next week. December Consumer Price Index (CPI) and Producer Price Index (PPI) data come out Tuesday and Wednesday, respectively. These data points are more important than usual as they market the first “clean” results for these indexes since prior to the government shutdown. The November inflation data was positive but may have been skewed by incomplete reporting due to the shutdown. Also, next week we get the December Retail Sales data, which will give us a better read on the holiday season.
As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Arrow Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships.