It is Saturday, January 17, 2026. If you’re checking your 401(k) today, you’re likely seeing a sea of green, but honestly, the vibe on Wall Street is a little more "cautious optimism" than "blind euphoria." The S&P 500 just closed out the first full trading week of January at roughly 6,940.
That is up about 1.4% since the ball dropped on New Year’s Eve.
But here is the thing: the index is basically doing a high-wire act. We are sitting within striking distance of the psychological 7,000 level. It's a number that felt like science fiction a couple of years ago. Yet, as we stand here today, the market feels a bit heavy. On Friday, the index actually slipped a tiny bit—less than 0.1%—mostly because Treasury yields decided to go on a run.
💡 You might also like: Should a resume only be one page: The Real Truth Recruiters Won't Tell You
The 10-year Treasury yield hit 4.23% this week, a four-month high. When bonds pay that much, stocks start to look a little less like the only game in town.
The Reality of What's the S&P 500 Doing Right Now
Most people think the market is just one giant blob that moves together. It’s not. Right now, the S&P 500 is essentially two different markets living in the same house.
On one side, you have the "AI Infrastructure" play. Companies like Nvidia and Broadcom are still the cool kids at the table. On Friday, Nvidia rose 0.5% and Broadcom jumped 1.2%, keeping the entire index from falling into a ditch. They are the reason the index is up 16% over the last 12 months.
On the other side, you’ve got the software companies and "traditional" tech. While the chips are flying, software names like Palantir and Workday were actually some of the worst performers this week. Investors are starting to worry that everyone spent so much money on the hardware (the chips) that they might not have much left for the software. Or worse, that AI might actually disrupt these software companies before they can figure out how to charge for it.
It's a K-Shaped World
We’ve been talking about the "K-shaped" economy for a while, but in early 2026, it’s finally hitting the stock market's balance sheets.
Wealthier households are still spending, buoyed by the fact that the S&P 500 has notched 42 all-time highs since the start of 2025. When your brokerage account looks good, you buy the expensive steak. But for the "bottom half" of the K, things are tougher. Tariffs and "sticky" inflation—which is hovering around 3% instead of the Fed’s 2% goal—are squeezing the average shopper.
You can see this in the sector performance:
- Communication Services (think Google and Meta) are crushing it, up over 30% in the last year.
- Consumer Staples (the stuff you actually need, like soap and cereal) are barely up 3.7%.
Basically, people are paying for their data plans and AI subscriptions, but they're switching to generic brand peanut butter to make it work.
The "Trump Effect" and the One Big Beautiful Bill
You can't talk about the market right now without mentioning the White House. We are officially one year into Donald Trump’s return to office. Historically, the first year of a presidency sees a median return of about 9%. The S&P 500 has laughed at that, returning 16% since Jan 20, 2025.
A huge driver of this has been the "One Big Beautiful Bill Act" (OBBBA). It’s essentially a massive cocktail of tax cuts and capital spending incentives that hit the system last summer. Wall Street analysts, like those at Goldman Sachs, are betting this bill will push U.S. GDP growth to about 2.7% this year.
But there’s a catch.
Tariffs. The "T-word" is the biggest source of volatility right now. While they protect some domestic industries, they also act as a tax on consumers. The market is currently waiting to see if the Supreme Court will uphold certain tariff powers under the IEEPA. If they don't, some companies might actually get massive refunds, which would be like throwing rocket fuel on the S&P 500. If they do, we stay in this "high-tariff, high-cost" environment.
What the "Smart Money" is Predicting for 2026
If you look at the big bank forecasts, nobody is really "bearish" yet, which is almost a little scary.
Morgan Stanley thinks the index could hit 7,800 in the next 12 months. Oppenheimer is even more aggressive, calling for 8,100 by year-end. They’re basically betting that corporate earnings will grow by 15% this year. That’s a big ask. For that to happen, the AI hype has to turn into real, cold, hard profit.
✨ Don't miss: Slime Honey Net Worth: How a Teenager Turned 200 Dollars Into a Slime Empire
But there are cracks. Charles Schwab and Fidelity are waving yellow flags about "market concentration."
The "Magnificent 7" still carry the team. If Nvidia trips, the whole index falls. Interestingly, we are starting to see a "broadening" of the rally. In the last few months, Energy and Financials have actually started to pick up the slack. PNC Financial just reported a 25% jump in profits, and the stock popped nearly 4% this week. When the banks are making money, it usually means the underlying economy isn't as broken as the headlines suggest.
Is the AI Bubble Finally Popping?
Probably not today. But it is changing.
In 2024 and 2025, you could just say "AI" and your stock would go up. In 2026, the market is demanding receipts. Investors are moving away from "pure-play" AI software and toward the physical side of things. We’re seeing big moves in Robotics and Automation.
Keep an eye on companies dealing with the power grid. AI data centers are eating electricity like crazy. Shares of GE Vernova were up 6% this week because they make the gas turbines that keep these data centers running. On the flip side, "independent power providers" like Constellation Energy have been volatile because the government is looking into making tech giants pay more for the surging power costs.
Actionable Insights: How to Play This
So, what do you actually do with this information? Watching the numbers wiggle every day is a great way to get an ulcer, but there are a few tactical moves that make sense right now.
1. Don't chase the 7,000 "Breakout"
Everyone is waiting for the S&P 500 to cross 7,000. When it happens, there will be a lot of "FOMO" (Fear Of Missing Out). Historically, when the market hits these big round numbers, it tends to pull back shortly after as people take profits. If you have extra cash, wait for the dip.
2. Watch the "Equal-Weight" Index
If you want to know how the real economy is doing, look at the S&P 500 Equal Weight Index (RSP). While the standard S&P 500 is up 16% this year, the equal-weight version (where every company counts the same) is doing much less. If the equal-weight index starts to catch up, it’s a sign the bull market is getting healthier and more sustainable.
3. The "Trump Account" for Kids
If you have kids born between 2025 and 2028, look into the new government-seeded accounts. The $1,000 start plus the ability to add $5,000 a year is a massive compounding opportunity that most people are ignoring because they're too busy watching Nvidia.
4. Diversify into "Physical AI"
Instead of just buying more tech stocks, look at the companies that build the stuff AI needs: copper miners, electrical grid equipment, and even specialized real estate (REITs) that own data centers. These are less "bubbly" than the software names right now.
The bottom line? The S&P 500 is in a "prove it" phase. The earnings are there, the policy support is there, but the valuations are high enough that there’s zero room for error. If we get a bad inflation report next week or a geopolitical flare-up in the Middle East—where oil just hit $64 a barrel—things could get spicy.
Stay diversified, keep an eye on those Treasury yields, and maybe don't check your balance every single hour.
What to Watch Next Week
Next week is a big one for "real world" earnings. We have United Airlines, 3M, and Intel reporting. These will tell us if the American consumer is still flying, if manufacturing is actually rebounding, and if the "other" chipmakers can finally catch up to Nvidia's shadow.
Keep an eye on the PCE Price Index coming out soon too. That is the Fed’s favorite inflation metric. If it comes in hot, expect those 10-year yields to climb even higher, which usually puts a lid on the S&P 500's gains. For now, the bull market is intact, but it's definitely breathing a little heavier than it was last month.