THE WEEK ON WALL STREET
Stocks trended lower last week amid signs of year-end profit-taking and some sour investor sentiment over the Fed meeting minutes.
The S&P 500 Index fell 1.03 percent, while the Nasdaq Composite Index lost 1.52 percent. The Dow Jones Industrial Average slid 0.67 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, ticked up 0.31 percent.
FACT OF THE WEEK
On January 7, 1896, Fannie Farmer’s first cookbook appears, one of the first to replace "handfuls" and "pinches" with precise measurements. The publisher made her personally pay to print the first 3,000 copies. It went on to sell millions.
MARKET MINUTE
Santa Rally, Interrupted
Stocks opened lower to start the shortened holiday week with tech shares under pressure. Markets then moved sideways, but came under pressure after minutes from the December Federal Reserve meeting were released. Investors digested the details, which showed members remained divided.
Stocks recovered some ground on the first trading day of 2026. The tech sector was mixed, with AI chip stocks pushing higher, while other areas of technology, especially software companies, declined. Overall, the S&P 500 and Dow Industrials logged gains to kick off the new year, which helped pair losses from earlier in the week.
It remains to be seen whether the “Santa Claus rally”, which ends Monday, January 5, will materialize. The Santa period is the last five trading days of December through the first two trading days of the new year.
Focus on the Fed
There was little economic data last week, leaving investors to focus mostly on the minutes from the Fed’s December meeting. The minutes, released Tuesday, revealed a divided Federal Open Market Committee regarding short-term interest rates. The news unsettled investors a bit, which led to some selling pressure.
A divided Fed has been a persistent theme during the second half of 2025, and investors will closely watch in 2026 to see whether the Fed’s outlook may change with the appointment of a new Fed Chair.
FINANCIAL STRATEGY OF THE WEEK
Inflation and the Real Rate of Return
The real rate of return is an important personal finance concept to understand.
It’s the rate of return on your investments after inflation. The real rate of return indicates whether you are gaining or losing purchasing power with your money.
So if inflation checks in at a rate of 6%, does that mean any investment with less than a 6% rate of return is losing purchasing power?
That’s where it gets a little complicated.
In theory, any investment with less than a 6% rate of return may lose purchasing power. But there are other factors you want to consider as well. For example, are inflation rates likely to continue their current trend, or are they transitory effects of broader market changes?
In the end, the real rate of return is only one factor to consider when building a portfolio. Your time horizon, risk tolerance, and goals are the primary drivers.
A financial professional can help you better understand market conditions and build an investment strategy that manages the potential loss of the purchasing power of your money.