The New Year celebrations continue in the investing world.
The S&P 500 (^GSPC) is near a record. The Nasdaq Composite (^IXIC) is near a record. The Dow Jones Industrial Average (^DJI) is knocking on the door of breaking through 50,000 for the first time.
“The rally is broadening out — and that’s exactly what you want to see at this stage of the cycle,” SlateStone Wealth chief market strategist and Yahoo Finance contributor Kenny Polcari said. “More stocks (think the other S&P 500 names) are participating. Capital is finding opportunities in other places. For me, that suggests a more durable bull market.”
Read more: What’s ahead for stocks and gold in 2026? What experts are watching.
The bullish activity prompted me to post “Where are you having your Dow 50k party?” on LinkedIn last night. That ultimately led to a friend asking if the Dow rally was solely because of massive artificial intelligence investments in the US and the potential productivity-driven profits.
I thought about it for a second and thought, well no, there is more going on than just AI captivating the minds of investors.
So here is the simplest set of reasons why stocks are rocking.
Fiscal stimulus stands to boost consumer spending in the first half of the year. Policy changes under the One Big Beautiful Bill Act of 2025 (OBBBA) will lead to higher tax refunds this spring.
“The upcoming tax refund season will benefit significantly from the OBBBA,” the Keybanc consumer team wrote in a new note. “More specifically, the OBBBA retroactively adjusted tax rates for 2025 (for a higher standard deduction, expanded SALT deductions, and no tax on tips/overtime), with many Americans likely not updating their withholdings.”
“It is estimated this could benefit refunds by $50 billion to $100 billion, with Treasury Secretary Scott Bessent saying in December he estimated it could even be a $100 billion to $150 billion benefit. At the $50 billion level, if consumers were to spend their entire refund in the first half, we estimate it could lift retail sales by 2% to 4%, after netting out SNAP headwinds.”
Keybanc said Walmart (WMT), Target (TGT), Dollar General (DG), Dollar Tree (DLTR), and Five Below (FIVE) should be prime beneficiaries.
We entered the year with lower interest rates versus 2025, which could help jump-start the stagnant US housing market this spring. The federal funds target rate was lowered by about 0.75% over the course of 2025. Mortgage rates (30-year fixed) have declined to 6.2% vs. 6.9% last year.
