US stocks began 2026 cautiously, with the S&P 500 and Nasdaq staying steady as gains in semiconductor companies offset declines in other tech areas. The Dow Jones stabilized after initial drops, finishing near its starting point for the year’s first trading day. Wall Street experts are optimistic about US stocks in 2026, with an S&P 500 target of 7,629 indicating significant gains ahead. Market leadership is expected to shift from just mega-cap tech stocks to include regional banks and other sectors, while some highly valued tech stocks may struggle.

Chipmaker and Tech Stock Performance

Chipmakers like Nvidia and Micron experienced gains due to increased spending on artificial intelligence, while software companies such as Salesforce saw declines. Tesla affected market sentiment with delivery reports that fell short of expectations. However, 2025 ended positively, with the S&P 500 up over 16%, the Nasdaq over 20%, and the Dow around 13%, all reaching record highs. In non-tech sectors, furniture retailers thrived after President Trump postponed tariff hikes on related products for a year. Companies like Wayfair experienced a boost after reassessing trade-related cost pressures. This shift followed variations in sector performance during 2025, where value-focused retailers succeeded while high-end brands struggled. US manufacturing showed signs of slowing in December, based on the S&P Global PMI, with new orders easing up but job creation growing. The Federal Reserve’s future is uncertain, as Jerome Powell has not confirmed his plans after May, which may affect its direction. In corporate news, Warren Buffett passed the CEO role at Berkshire Hathaway to Greg Abel, ending his 60-year leadership. Abel is viewed favorably, but Berkshire’s shares have struggled since the news, raising concerns about the company’s future.

Trading Strategies and Market Outlook

As the market starts 2026 flat after the big gains of 2025, there’s an opportunity for range-bound trading strategies. Selling iron condors on the SPY could help collect premiums while betting that the market will consolidate before making significant moves. This strategy works best if the market stays within expected price ranges in the coming weeks. The divergence between strong chipmakers and struggling software suggests an ongoing rotation. A similar trend occurred in late 2023 when the equal-weight S&P 500 ETF (RSP) gained over 12%, outperforming the cap-weighted index, indicating broader market participation. To benefit from this, we are considering pairs trades, like buying calls on the regional banking ETF (KRE) while buying puts on a software ETF like IGV. Certain company news is creating clear trading opportunities, such as Tesla’s delivery shortfall and the rise in home goods stocks. For Tesla, where implied volatility often exceeds 60% after bad news, bear put spreads can help limit risk while betting on further weakness. Conversely, bull call spreads on companies like Wayfair (W) can capture upside from the tariff delay while managing the increased option costs after the initial stock surge. The greatest uncertainty stems from the Federal Reserve, with Chair Powell’s term ending in May. The market correction in February 2018 during the last leadership change illustrates how such events can lead to volatility. Buying VIX calls or futures with expirations timed around important Fed meetings could serve as a useful hedge against surprises. Even Berkshire Hathaway is feeling some pressure following the handoff to Greg Abel. Since the stock has underperformed since the announcement, generating income from this position seems prudent. We are considering selling covered calls against long Berkshire (BRK.B) holdings to benefit from potentially steady price movements in the near term. Create your live VT Markets account and start trading now.

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