The year started with optimism: how macroeconomic data verify the Fed's confidence

The first full week of trading in 2026 began with a surge in risk appetite across financial markets. The synchronized rise of all major asset classes indicates a return of investor confidence. On Wall Street, there was a notable shift in sentiment—from caution to active accumulation of positions.

Stocks Show Confident Growth

The statistics for the first week of 2026 are impressive: the S&P 500 rose by 1.6%, while the Russell 2000 performed much more dynamically, increasing by 4.6%. This signals a shift of capital toward small-cap companies—a classic sign of aggressive risk-taking. The Vanguard S&P 500 ETF (VOO), designed for passive investors, attracted a massive $10 billion in just a few days. Such rapid inflows suggest that major players are determined to start the year with active portfolio rebalancing.

Economic Indicators Play a Central Role in Shaping the Trajectory

This week’s macroeconomic calendar is packed with data that will be critical for the Federal Reserve’s next moves. Tuesday will bring key figures: the annual and monthly changes in the US Consumer Price Index, including the core CPI—these numbers will significantly influence the hawkish stance within the Fed.

Wednesday will focus on retail sales developments—manufacturing activity indices in publishing and services will show how consumers are spending their money. However, special attention should be paid to the producer price index (PPI) for November, as producer costs often signal future price dynamics in the economy. The PPI is an early indicator of inflationary pressures that could, in a few months, pass through to consumers.

On Thursday, initial unemployment claims, surveys on manufacturing activity from the NY Fed and Philadelphia Fed, and monthly import price figures will be released. This “economic marathon” will prompt the central bank to reassess its strategy.

Uncertainty About the Federal Reserve’s Policy Direction

The key uncertainty lies in whether the Fed will cut interest rates in the near future. Bank of America Global Research recently issued a definitive statement—its analytical team now believes that rate cuts will not happen until the new Federal Reserve Chair officially takes office after Powell. This means a period of waiting and potential instability until new leadership is appointed.

Data released this week will test this hypothesis. If figures come in stronger than expected, it will reinforce the position of those advocating for holding rates steady. Federal officials, including Fed representatives, will be especially active in their public statements, trying to shape market expectations.

Geopolitical Factors Add to Uncertainty

Additionally, global news continues to influence risk sentiment. This week, US Secretary of State Pompeo plans to meet with officials from Denmark and Greenland—events that could have deeper geopolitical implications. Meanwhile, anti-government protests across Iran’s streets in Tehran signal regional instability.

These geopolitical dynamics impact the current market atmosphere—they can support risk appetite in the short term (if investors see the US as a safe haven) or trigger sell-offs if tensions escalate sharply. The producer price index and other economic indicators will have the greatest influence, but geopolitical events remain an unpredictable factor to monitor.