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Good Morning & Happy New Year!
We hope you enjoyed the holidays and the start of 2026. Before we get into the news, a quick note. We have new small cap stock alerts coming soon, so keep an eye on your inbox.
Now let’s look at what happened in the market this past week and reflect on the year that just ended.
Market Recap
Markets were quiet during the final week of the year as holiday schedules kept trading volumes light. Major indexes moved in a narrow range and largely held on to gains made earlier in December.
With little new economic data released, investors focused on interest rates and the outlook for the year ahead. Inflation trends remain pointed in the right direction, which has helped keep expectations in place for a more flexible Federal Reserve policy path.
Consumer data released late in the year suggested spending remained steady through the holidays. While shoppers were more selective, overall demand held up, supporting confidence as the calendar turned.
Small cap stocks ended the year on a constructive note. The Russell 2000 remained near recent highs, signaling that interest in smaller companies stayed firm as investors looked ahead to improving financial conditions.
Overall, the market finished the year in a calm and orderly way, with investors taking time to assess positioning for the new year rather than making aggressive moves.
Looking Back at 2025
The past year was one of adjustment. Markets spent much of 2025 balancing higher interest rates with easing inflation and changing growth expectations.
Large technology companies continued to play a major role, but investors also became more selective. Companies with clear fundamentals, strong execution, and realistic growth plans stood out.
For small caps, 2025 marked a rebuilding phase. As rate pressure eased later in the year, attention slowly began shifting back toward underfollowed companies with room to grow.
Themes to Watch in 2026
Interest rates remain the most important theme heading into 2026. If inflation continues to cool and borrowing conditions improve, the environment could become more supportive for smaller companies.
Another key theme is rotation. After years of leadership from the largest stocks, investors may continue to explore opportunities beyond the biggest names, especially where valuations remain attractive.
Volatility is also likely to remain part of the market. While short term moves can be uncomfortable, they often create opportunity for investors focused on specific setups rather than broad market swings.
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See you soon!
SmallCapStocks Team
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