Commentary for January, 2026

Hello all - we hope you had a nice January.  Hard to believe it’s already 2026!  

With a lot of ups and downs, the markets closed the month in the green.  The Dow added 1.8%, the S&P 500 gained 1.5%, and the Nasdaq, which has a higher concentration of tech stocks, was up 1.0%.  

Theres an old Wall Street adage that says “So goes January, so goes the year.”  It means that if January is higher, the year will be higher, and vice-versa.  It has about an 85% accuracy rate, so as silly as it sounds, hopefully the positive January is a good sign for the year. 

Here’s a look at how the markets moved this month:

Here’s a look at how the various market sectors performed this month.

After extremely low volatility in the markets last month, volatility started ticking up this month.

Tech stocks saw a little more volatility this month, too.  The areas of tech benefitting from AI, like Nvidia or even Facebook, have held up well.  

On the other hand, companies where AI has the possibility of disrupting their business, like software stocks like Microsoft or Oracle or Adobe, did very poorly.  

Here’s a look at an index ETF focused on software-related companies:

Those big tech stocks have made up a bigger and bigger slice of the overall market.  However, the concentration of those 10 biggest companies in the market declined slightly this month.

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We continue to keep an eye on the commodity markets as there have been some interesting moves.  

The US Dollar continues to decline and now stands at the lowest level in four years.

When currencies do poorly, commodities and metals tend to do better.  Gold and silver continued on their incredible run, although a late-month selloff dented the performance slightly.

 

Here’s a look at gold, whose price continues to skyrocket:

Silver was even more remarkable.  It seems like an irrational bubble, but it keeps going higher.   It has benefited from the weaker currency, but it’s also used in many important products today, like AI data centers and electric cars.  China announced new restrictions on exporting silver beginning Jan. 1, so this also fed into the rapid rise.

Oil is starting to move higher, too.

Oil was initially lower after the Venezuelan government overthrow (yes, that was in January, but it seems so long ago!), since it meant the possibility of new oil eventually coming on the market.  

Below is a great chart showing how much Venezuela used to produce:

While Venezuela caused oil to move lower, new threats with Iran, plus the weaker dollar, caused oil prices to rise into the end of the month.  Look out for higher prices at the pump.

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MARKETS

So, what was going on with the markets this month?  Old causes of volatility returned, mostly coming out of Washington.  

The threat of tariffs reappeared in a big way this month, causing markets to drop sharply.

Stocks moved higher when the worst-case scenario was taken off the table, but the threat of tariffs being used as a tool in every foreign disagreement will stay in the back of investors’ minds. 

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GOVERNMENT SHUTDOWN

The threat of a government shutdown also resurfaced this month.  

As the month ended, it looked like some compromise might be in the works…

…but the betting markets still saw a very high chance of a shutdown occurring.

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FED

Then there was the Fed.  For the last several months, it’s been like an Apprentice-style reality show searching for the next Fed chief.  The various candidates bounced in and out of favor and were paraded on TV.

 

The candidates that seemed to be favored by Trump all supported lowering rate further, and the markets rose on those expectations.

However, it turns out the new Fed chief is likely to be Kevin Warsh.  To us, he always seemed less likely to lower rates, but he has a lengthy record as an economist and with the Fed and we thought he was the best choice.

Warsh never seemed to be in line with what Trump was looking for, so we aren’t sure why Trump picked him.  

Nevertheless, the market expectations for lower rates ended with the announcement and the markets reversed.  The dollar strengthened and the metals that had done so well, like gold and silver, all saw strong drops.  

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The Fed also held a policy meeting this month, announcing they were holding rates steady after lowering them at the previous three meetings.  This had little impact on the markets, though, because investors had expected this to me the case. 

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INFLATION

The inflation numbers released this month showed that on an annual measurement, inflation was mild.

However, when we look at inflation month-by-month, prices are clearly still rising. 

When excluding food and energy (what economists call the “core” inflation), prices are still higher every month.

Inflation at the business level came in higher than expected.

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OTHER ECONOMIC DATA

Other economic data releases were mixed this month, too.

The unemployment picture still looks weak as very few jobs are being added.

 

The manufacturing side of the economy showed another decline, while the service side saw another increase. 

Retail sales saw a nice improvement.

Durable goods looked good, too.

Consumer confidence continues to be an issue as it keeps falling. 

Small business optimism rose slightly, too.

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Where does the market go from here?

In the very short term, looking out a few weeks, we’re a little expensive and may have just started a short leg lower.  We’d need to see it go much lower before dipping our toes in again.   

One note for the year, historically the midterm year for a president is a decent year.

This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.