Core Insights - The S&P 500 has experienced three consecutive years of returns significantly exceeding its long-term average of approximately 10% as it enters 2026, despite investor concerns regarding a "K-shaped" recovery in the U.S. economy and geopolitical tensions following U.S. actions against Venezuela [1][2]. Market Performance - The SPDR S&P 500 ETF Trust (SPY) has gained 1.2% from the start of 2026 until January 6, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) and Invesco QQQ Trust, Series 1 (QQQ) have increased by 2.5% and 1.2%, respectively [3]. - Value stocks have outperformed growth stocks, with the State Street SPDR Portfolio S&P 500 Value ETF (SPYV) rising by 1.5% compared to the State Street SPDR Portfolio S&P 500 Growth ETF (SPYG), which increased by 1% [4]. ETFs in Focus - The iShares Russell 2000 ETF (IWM) is expected to benefit from the "January Effect," a seasonal increase in stock prices due to year-end tax strategies, with small-cap stocks typically performing well in January [5]. - The iShares MSCI USA Momentum Factor ETF (MTUM) is likely to see inflows from retirement contributions and fund rebalancing, which often favor high-momentum stocks at the beginning of the year [6]. - The VanEck Semiconductor ETF (SMH) has seen strong performance due to sustained demand for AI, cloud computing, and advanced data centers, with chipmakers benefiting from high-performance processor orders [7][8]. Sector Highlights - Defense stocks have rallied due to increased military spending expectations following U.S. actions against Venezuela, with global defense spending projected to exceed $3.6 trillion by 2030, marking a 33% increase from 2024 levels [11][12]. - The healthcare sector is gaining traction as a defensive investment, with biotech stocks strengthening due to innovations and mergers, and major drugmakers expected to invest approximately $370 billion in U.S. projects over the next five years [14].