Hello, happy Friday and welcome to Moneyball Economics!
There’s plenty of reason for enthusiasm as we close out this first week of the year.
As you may recall, I’ve been predicting a solid 15% gain in the S&P 500 over the course of 2026. And this week has given us 3 new key data points that are as bullish as anything we’ve seen to date.
Click below to start today’s video and get the full story:
Video transcript:
It’s time for some Moneyball Economics!
I’m Andrew Zatlin. I am extremely bullish this year for the stock market and for the economy.
With that in mind, let me give you some data points that came out which reinforce a lot of why I’m saying we’re going to see some strength this year. Starting with the simple fact, we started this year with five consecutive days in the stock market of growth.
So five consecutive days being in the green for the S&P 500. Well, guess what? Historically speaking, when we start the year with this kind of growth with five consecutive days in the green, 80% of the time, eight zero, 80% of the time we end the year in the green.
So in like a lion, out like a lion. And is that because we got five positive days? No, no, no. Those five days reflect the fact that the Wall Street players are bullish on what they see out there and they jumped in as soon as possible.
What are they seeing that makes them so bullish?
Well, let’s talk about profitability and growth. So let’s go back a decade. Let’s go back to 2015 and talk profit margins, how profitable companies are. And guess what? Looking at 2025, looking at the S&P 500, net profit margins last year were the fattest they’ve been in over a decade. And the reason they got fat, the reason they look so strong is because they went through this long process of getting lean.
And remember, a lot of layoffs, a lot of pullback on hiring, a lot of pullback on spending like travel and entertainment, and it paid off the fattest profit margins in over a decade. And guess what? For 2026, the expectations are they’re going to be even fatter. So we’re starting the year highly profitable. In fact, earning season’s about to kick off and we will see just how profitable things are.
However, having said that, the question is what happens next?
When you’re this profitable, well, the expectation should be we’re going to see a lot of business activity and you’re going to have to support that business activity and you can’t do that with current staffing and with the current level of inventories you have and so forth.
So that’s the third data point I want to share with you, which is we’re about to see these lean and mean companies kick off a lot of top line growth and also kick off a lot of hiring. And that’ll be interesting because that plays a little role with the interest rate story.
But again, if we’re not going recessionary and we’re going up, again, a stronger economy, a strengthened economy is going to lead to a stronger stock market. So there’s a third data point I want to share with you that came out this week. It’s from the Institute of Supply Management, ISM. And every month they release what they call the PMI report. PMI stands for purchasing managers.
Okay, let me explain this. This is actually one of those surveys that’s really useful. The ISM supply managers, they do a survey. They go out to manufacturing companies and they ask the question, how are things going? They ask it around a lot of different parts of what these purchasing managers are dealing with.
So in the manufacturing space, they’re asking, “Hey, how are your prices? How are your inventories? How are your new orders? How are your exports? How’s your hiring going? ” And they compile all this and it says basically each month they’re going to look at manufacturing and they’re going to look at services. They look at them separately and they release a report that dives into the detail and says, “Are we expanding? Are we contracting?”
Well, this week they released each of those reports, one for manufacturing, one for services. And the manufacturing space, it’s the same old story. Life sucks for manufacturers because quite frankly, tariffs continue to create problems both domestically and internationally. Services though, oh my God, they’re off to the races. They’re expanding. New orders are jumping, hiring’s jumping. Everything is jumping. Everything is great news in the services space. The difference here is that the manufacturing space is looking at companies that are incredibly exposed to tariffs. They just are. A lot of them are global. And so they’re struggling. They’re struggling with exports because the rest of the world similarly struggling with a tariff problem. But when we look at the service side of the equation, this is a very domestic story. These are companies that really aren’t as exposed to what’s going on with tariffs and they are seeing nothing but growth.
And I believe both sides, manufacturing and services will see strength throughout the rest of this year. Because let’s face it, this tariff story is going to get wrapped up pretty quickly. So overall, three different data points strengthen the stock market, buttressed by strength at individual company level for that profit margins. And then thirdly, we’re starting to see that play out in the Main Street world.
In fact, speaking of Main Street, just when you thought the AI story was starting to slow down, just when you hadn’t heard about massive spending, massive deal making, we get Meta stepping in…
Meta just signed a major deal, a 20-year commitment to buy electricity from nuclear power plant suppliers in the Midwest, one of which is backed by none other than Bill Gates. The big league players are seeing massive consumption of electricity continuing for some time. They’re putting money down.
And what makes this interesting is that these power generators don’t even exist at the moment. Meta’s just saying, “Take our money, get us electricity as soon as possible.” And what’s interesting to me, off on the side, is most of the electric power plant, nuclear power plant creation is not happening in California. It’s in the Midwest. It’s in Louisiana. Some of it’s going to happen in North Carolina, my backyard.
What happens when you’ve got infrastructure build out?
You get jobs, you get people, you get growth, and all that’s taking place outside of California.
I think it’s going to be interesting to see what happens with California going forward because there is a general hollowing out. People are leaving California. U-Haul released a report. If they stack ranked by state, the trucks that are inbound, basically people moving in using U-Haul trucks, what they found is Florida, Texas, North Carolina are at the top of the pack as destinations. People are moving to these states. At the very bottom, 50th is California.
California has a lot, a lot, a lot of problems. It looks like the consequences for a lot of their policies are starting to drive people away. The economy in California is not as robust. There aren’t as many opportunities as there are in other states. And when you see a move like Meta putting down billions and billions of dollars elsewhere, it’s going to attract jobs, going to attract economic growth.
Unfortunately, for California, they’re on the wrong side of a lot of the economic trends.
So let’s see what happens. That’s a longer term play. This is going to be interesting. Interesting growth going forward outside of California. And because it’s so broad, it looks like the winners are going to be Texas, Florida, North Carolina, and the political ramifications, well, they speak for themselves.
We’re in it to win it, folks. 2026 is here.
Zatlin out.
Andrew Zatlin
Editor, Moneyball Economics