Entering the first full trading week of 2026, the entire financial market is buzzing. All sectors of the US stock market are rising in sync, risk assets are taking turns to strengthen, and investors' risk appetite is clearly recovering.

Data speaks the loudest: the S&P 500 rose 1.6% this week, and the Russell 2000 small-cap index surged even more, jumping 4.6%. Interestingly, the passive fund Vanguard S&P 500 ETF(VOO) attracted $10 billion in inflows in just a few days, a speed rarely seen for passive funds.

The market is so lively, but the Federal Reserve isn't quite as optimistic. Next week, a bunch of economic data will be released: CPI, retail sales, PPI, unemployment claims, and more—any one of which could shake the market. Even more concerning is that the latest judgment from Bank of America strategists is that before Powell's successor officially takes over, the Fed is unlikely to cut interest rates again. In other words, the rate cut path has come to an end.

In the coming week, keep an eye on the dense statements from Fed officials, as policy signals will directly influence subsequent asset allocation.