Smart Investor: AI Winners, 6 Charts to Watch, and What’s Next for the Fed

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In this week’s newsletter:

• Weekly Markets Wrap: Stocks Push Higher, Led by Basic Materials
• Jobs Market Stays Soft in December, but Fed Rate Cuts Seen on Hold
• Capital Group’s Polak: Stock Market Risks, Catalysts, Opportunities for 2026
• Watch These 6 Signals for Clues on Where Markets Will Go In 2026
• What’s Next for the Fed in 2026?
• Will the Stock Buyback Boom Continue in 2026?
• AI Stocks Winners, Laggards and Losers for 2025

Before we get into this week’s coverage, I’m going to give a shameless plug for a new addition to the Morningstar newsletter lineup. Curated by my colleague and veteran reporter Alexander Davis at PitchBook, Public Meets Private will bring together in-depth analysis, data, and reporting from both Morningstar and PitchBook to help you understand the public and private market convergence. You can read more about it here, or just go ahead and sign up!

In the land of public markets, it was a good week for stocks. The Morningstar US Market Index gained 1.7%, hitting a fresh record high on the back of solid moves upward in large cap and blend stocks. In a twist from recent market action, the gains were not led by tech stocks, but instead by basic materials and consumer cyclical names.

In the background, the news certainly picked up this week after the holiday lull. We saw lots of activity on the geopolitical front and pronouncements from the White House, and on Friday, we got the December employment report. The jobs data confirmed that the labor market is looking soft to end 2025, but it wasn’t much weaker than it was in November. Check out what economists are saying about the jobs report here.

One takeaway from the jobs report is that it’s unlikely to push the Federal Reserve to cut interest rates at this month’s meeting. But what about the remainder of 2026? This is going to be a tricky, transformational year for the central bank, with new leadership at a time when inflation has been high while the aforementioned job reports have been soggy. Check out Sarah Hansen’s look at what’s next for the Fed.

This week, we also checked in with Capital Group’s David Polak. He’s a 41-year veteran of the markets and heads up the fund giant’s equity team. Polak weighs in with Capital Group’s take on the outlook for the US and global economies. He covers the risks to the markets plus which corners of the stock market are presenting the best opportunities.

Meanwhile, Susan Dziubinski sat down with Morningstar Indexes’ Dan Lefkovitz to talk about the outlook for stock buybacks and what it could mean for dividends. Lefkovitz notes that 2025 was the fifth straight year in which companies spent more on share repurchases than on dividends. Will that continue?

Continuing with the 2026 outlook, Morningstar analysts will be watching the data on trends ranging from AI accelerator spending to electricity prices to AI-driven bond issuance. We have six charts on which trends could shape the narrative the most this year and beyond.

As 2025 closed, the AI stock rally began to fracture. As investors became more selective, it was no longer a “rising tide lifts all boats” dynamic. We look at which AI stocks led the way in 2025, including which ones held in during the volatile fourth quarter and which ones fell behind.

As always, be sure to visit our Markets page for our latest coverage and live stock market updates, along with our full weekly calendar of key upcoming data and events.