Frederica Focus | Santa Rally Stalled on the Runway

Yes, I know last year was technically the beginning of the new year, but this is the first Monday.  You can't start diets or resolutions on a Thursday or Friday.  There are laws about that.

Speaking of New Year's Resolutions... I don't do them.  I would love to hear from you if you do, I have just never really thought resetting your life at the same time you are trying to remember the right year to write on a check is a good idea.   

But, for fun, what would my resolutions be?  Eat less, workout more.  Quit looking at old Porsche ads.  My knees couldn't get out of a 911 anyhow.  That's a good start.

Wall street's year-end profit taking and grumpy Fed minutes knocked US stocks lower as the S&P fell 1.0%, the Nasdaq dropped 1.5% and the DOW tilted back 0.7%, while developed foreign markets barely took notice.

Santa Rally, Interrupted

Stocks opened the short holiday week on their back foot, with tech leading the decline.  Markets churned until the December Fed minutes hit, reviving pressure as investors absorbed a divided central bank.

The first day of trading in 2026 brought a partial rebound.  Tech splitting between a chipmaker advance and a software decline.  

Whether a true Santa Claus rally shows up remains uncertain.  The Santa Window wraps up today (Monday, Jan 5).

^{Source: YCharts.com, January 3, 2026. Weekly performance is measured from Friday, December 26, to Friday, January 2. TR = total return for the index, which includes any dividends as well as any other cash distributions during the period. Treasury note yield is expressed in basis points.}

Focus on the Fed

With little economic data to digest, investors zeroed in on December's Fed meeting minutes.  The release highlighted a divided committee on short-term rates, unsettling the markets and triggering modest selling.

A fractured Fed is a recurring theme since mid 2025 and this year, we will see if new new leadership changes that narrative.

This Week: Key Economic Data

Monday: Institute of Supply Management (ISM) Manufacturing Index. Auto Sales.

Tuesday: Richmond Fed President Tom Barkin speaks. Purchasing Managers Index (PMI)—Services.

Wednesday: ADP Employment Report. Job Openings* (Nov). Factory Orders* (Oct). Institute of Supply Management (ISM) Services Index. Fed Vice Chair for Supervision Michelle Bowman speaks.

Thursday: Weekly Jobless Claims. Trade Deficit* (Oct). Productivity* (Q3). Consumer Credit (Nov).

Friday: Employment Report. Housing Starts* (Oct). Consumer Sentiment.

^{* indicates publication of a report delayed by the government shutdown in October and November}

^{Source: Investors Business Daily - Econoday economic calendar; January 2, 2026. The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to provide accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts are also subject to revision.}

Recordkeeping Tips for Small Business Owners

As a business owner, I know that good recordkeeping isn't optional, it is the backbone of everything from tax planning to cash flow to staying in the lines.  Your records should clearly show income, expenses, and business activity.  The system itself doesn't matter as much as this simple rule:  You, and the IRS, better be able to follow the money.

At a minimum, business owners should track and retain supporting documents as:

• Purchases
• Sales
• Payroll
• Sales slips
• Paid bills
• Invoices
• Receipts
• Deposit slips
• Canceled checks
• Travel, transportation, entertainment, and gift expenses
• Assets

Well-organized records save time, reduce headaches, and often can lower your tax bill (certainly should lower CPA bill)!  Like all other tax-tips you read on the internet, please consult a QUALIFIED tax professional for guidance tailored to your needs.

Tiger's Nest Monastery (Taktsang Palphug Monastery)

Paro, Bhutan

In this section, I like to cover questions we get from clients, family, and friends that are worthy of sharing.

Since it is the new year, here is THE MOST COMMON QUESTION:

     "What can I do now to reduce my overall tax liability?"

Here are 5 great ideas:

1) Max out tax advantaged accounts.  401ks, TSPs, IRAs, HSAs, etc. These plans aren't "nice to have", they are the first line of defense against.

2) Be intentional about income timing.  Defer income when possible, accelerate deductions when it makes sense.  Timing matters more than most people realize.

3) Use the tax code for investing.  Tax-loss harvesting, titling, asset location, and capital gains planning can quietly save you big $ over time.

4) Don't ignore charitable strategies.  Donating to Donor-advised funds, gifting appreciated stock, and bunching deductions can dramatically improve your after-tax outcomes.

5) Optimize your business structure. Entity choice, reasonable compensation, depreciation, and retirement plans for owners are often where the biggest wins live.

(Like the tax tip above, speak to a qualified tax pro about your specific situation)

"The power of compounding favors patience, discipline, and a long-term perspective." - Jeremy Siegel, Stocks for the Long Run

Wealth doesn't grow in dramatic bursts, usually.  It is built with years, decades of consistency.  The real advantage is not coming from the perfect timing or constant action, but from staying the course, reinvesting gains, and allowing time to do the heavy lifting.  

Patience and a well thought out plan keep us from reacting to short-term noise, discipline enforces sound habits through any kind of market phase, and a long-term view makes volatility become a tool rather than a threat.

Compounding rewards those who resist the urge to interfere. 

We are grateful that you have gotten this far down our newsletter and we hope that you gleaned at least something helpful.  If someone in your circle would benefit fom our perspective, please feel free to pass it along!  Anyone you send our way will be well taken care of.