• The first week of 2026 has been eventful. We are monitoring geopolitical shifts in Venezuela, the December labor-market data, and the U.S. Supreme Court decision on tariffs.
  
  Overall, while these events may generate headlines, in our view, their outcomes may have limited impact on the economy or markets in the near term. We believe the Fed remains on track to cut rates one to two times in 2026.
  
  
• The first week of 2026 has been eventful from economic, policy, and geopolitical perspectives. In this short period, we have seen U.S. military action in Venezuela, digested fresh labor-market data, and are awaiting a Supreme Court decision on U.S. tariff policy.
  
  Venezuela actions may have long-term implications for oil prices
  
  Over the January 3 weekend, the U.S. military executed a mission to capture Venezuelan leader Nicolás Maduro and his wife Cilia Flores. They were flown to New York and charged with narco-terrorism conspiracy and other crimes. The U.S. administration has indicated it would run Venezuela until a safe and judicious transition of power occurs. In addition, the U.S. plans to rebuild Venezuelan oil infrastructure with support from major U.S. energy companies.
  
  From a macroeconomic perspective, Venezuela is a small player: its economy is less than 1% of global GDP and less than 1% of U.S. and global trade. It holds about 17% of global oil reserves but delivers just 1% of global production due to failing infrastructure. Assuming tensions remain contained, near-term systemic risk to the global economy is likely limited.
  
  However, monitor the precedent this sets globally, especially as the U.S. plans to retain power until a government transition. This could be a longer-term tail risk, particularly as economies like China and Russia contemplate next steps.
  
  There may also be oil price implications if the U.S. and energy companies succeed in rebuilding infrastructure. Revitalization will likely take time and investment—estimates call for 10 years and over $100 billion—raising questions about whether energy companies welcome additional supply.
  
  Oil prices are currently near multiyear lows, with global markets facing oversupply. Trends like electric vehicle adoption in China also reduce demand for traditional oil.
  
  Over time, added Venezuelan supply could exert downward pressure on prices, forcing oil companies to operate below break-even—not favorable for shareholders or profitability. In the near term, prices could rise marginally from potential supply disruption, but the longer-term picture may involve more supply and lower prices, assuming energy companies stay onboard.
  
  

  

• The first week of the new year also brought new labor market data, including the first relatively clean U.S. nonfarm jobs report since the government shutdown. Overall, the U.S. labor market seems to paint the same sluggish picture we saw for much of last year. December's jobs growth came in at 50,000, below estimates of 70,000. Notably, the prior two months' figures were revised lower by 76,000, bringing the three-month average to -22,333 in monthly job gains. More broadly, the 2025 average monthly job gains were just 49,000, well below the 2024 average of 168,000.
  
  

  

  While we are seeing a clear slowdown in job growth in the U.S., the silver lining is that the unemployment rate remains steady at 4.4% in December, versus forecasts of 4.5%. The U.S. labor force has seen marginal growth in 2025, despite headwinds from immigration reform and aging demographics. However, the number of unemployed has also risen, though labor force growth has kept the unemployment rate contained at 4.4%. Historically, the longer-term average U.S. unemployment rate is close to 5.5%.

  

  What are the implications for Federal Reserve policy? While the December jobs report was mixed, with lower job gains but a better-than-expected unemployment rate, we believe the overall takeaway for the Fed remains the same as last year: the U.S. job market is cooling, and caution is warranted. This month's report likely does not justify more or accelerated rate cuts, but in our view, the Fed remains on pace for one to two more cuts in 2026.
  
  Investors will also watch the inflation data released on January 13. Expectations are for headline and core CPI inflation to come in at 2.7% year-over-year for December. While this remains above the Fed's 2.0% target, inflation has shown no signs of reacceleration despite tariffs and stronger economic growth. In our view, this backdrop should improve further as the year progresses, giving the Fed more comfort for additional interest-rate cuts.
  
  
• While investors did not receive a Supreme Court decision on tariffs last week, one may be imminent in the weeks ahead. At the heart of the case is whether the president and U.S. administration have the authority to impose tariffs as expansively as they have under the IEEPA (International Emergency Economic Powers Act).
  
  What are the implications if the court deems the tariffs illegal? In our view, if the Supreme Court strikes down the tariffs under IEEPA, the implications for markets and investors may be limited for several reasons.
  
  First, the administration has alternative methods to implement tariffs, including statutes like Section 232 (national security) and Section 301 (unfair trade practices). However, these are more procedurally complex and could take time to implement.
  
  Second, while there has been speculation that the U.S. may have to issue refunds to impacted companies—upwards of $150 billion—there is no clear mechanism for doing so. This process may take time, become mired in the courts, and the administration could potentially reimplement tariffs in the interim.
  
  Third, even if refunds are issued, the roughly $150 billion is negligible relative to the $38 trillion U.S. federal debt and the roughly $30 trillion U.S. GDP in 2025. While additional money in the system may create some inflationary pressure, it could also bolster economic activity and support ongoing GDP and earnings growth.
  
  

  

• Overall, while the first few days of 2026 have been eventful—from a geopolitical, economic data, and policy perspective—we think the good news is that markets remain focused on key drivers. U.S. earnings growth has been revised higher for 2026 to about 14.7% year-over-year, driven by a broad set of sectors. Economic growth continues to deliver, with fourth-quarter U.S. GDP forecast at around 5.1% by the Atlanta Fed GDPNow model, well above trend rates of around 2.0%*. As a result, the S&P 500 is up about 1.9% in 2026 thus far, while the U.S. 10-year Treasury yield offers around 4.15%.
  
  In our view, given where we are in this cycle, the case for equity diversification is compelling in 2026. We favor U.S. large-cap stocks exposed to the AI theme, alongside U.S. mid-cap stocks, which are more weighted toward cyclical sectors and have catch-up potential, especially as the Federal Reserve potentially lowers rates. We also recommend global exposure, for example in emerging-market equities, which can perform well when the Fed cuts rates and offer access to a global technology theme.
• Final Words: Market indicates neutral.
  
  

  

  Below is last week sector performance report.
  
  Weekly Sector Performance for Jan 5-9, 2026:
  
  $XLE Energy: 2.23%, RSI: 59.55
  $XLK Technology: 1.28%, RSI: 54.00
  $XLC Communication: 0.86%, RSI: 58.93
  $XLY Consumer Discretionary: 5.12%, RSI: 64.81
  $XLP Consumer Staples: 2.01%, RSI: 58.35
  $XLF Financial: 1.46%, RSI: 59.50
  $XLV Health Care: 1.16%, RSI: 58.11
  $XLI Industrials: 2.50%, RSI: 63.82
  $XLB Materials: 4.64%, RSI: 71.81
  $XLRE Real Estate: 0.30%, RSI: 47.93
  $XLU Utilities: -1.55%, RSI: 44.44
  
  

  

If you are looking for investment opportunities, you can take a look at our Hidden Gems section, and if you want to see our past performance, visit our Past Performance section. If you are looking for safe and low cost Exchange Traded funds(ETFs), check out our ETF recommendations.

Currrent Shiller PE (see below) is showing overbought conditions as index is far above mean/media and our AryaFin engine is indicating caution. Have a good weekend.

The Buffett Indicator (aka, Buffett Index, or Buffett Ratio) is the ratio of the total United States stock market to GDP.