January 2026 Monthly Market Update

Economic Overview

Equities kicked off 2026 on a constructive note with the overall global equity market up 3.0% in January. Leadership in the U.S. continued to broaden meaningfully beyond the Mag 7’s as value outperformed growth. The Russell 1000 Value index (+4.6%) outperformed the Russell 1000 Growth index (-1.5%), and the equal-weight S&P 500 (+3.4%) outpaced the headline cap-weight S&P 500 (+1.5%). Small caps also rallied, with the Russell 2000 up 5.4%, while the Nasdaq Composite (+1.0%) was more muted due to its large company growth orientation. Outside the U.S., returns were even stronger, thanks in part to a weakening USD, with developed markets up 5.2% and emerging markets up 8.9%, highlighting a sharp early-year bid for non-U.S. risk assets. In fixed income, returns were modest but positive with the Aggregate Bond Index up 0.1%, high yield bonds up 0.5%, and Municipals bonds continuing to outperform, up 0.9% on the month. Commodity markets were a standout, with the Bloomberg Commodity Index returning 10.4% led by strength in energy (WTI crude +14.3%) and precious metals nearing mania territory (gold +8.8% and silver +11.6%).

U.S. economic data in January pointed to a slow-but-stable backdrop, with a continued “low hiring, low firing” labor market and the consumer picture somewhat mixed, depending on income threshold. Inflation remained a central theme with data reinforcing a stubborn but gradual moderation narrative keeping markets attentive to the balance between cooling trends and sticky components. Survey data across service and manufacturing sectors were mixed but remained in expansionary territory with pockets of strength showing up in areas like durable goods orders. At the same time, soft consumer confidence readings with concerns surrounding the job market and the cumulative effect of inflation pressuring lower- and middle-income cohorts, kept the tone from becoming overly sanguine, particularly against a still-challenged housing affordability backdrop.

On the policy front, markets spent January weighing a familiar mix of Fed speculation, trade headlines, and political-driven uncertainty. The Fed held rates steady (3.5%-3.75%) at the January FOMC meeting, while attention shifted to Jerome Powell’s likely successor following an announced intention to nominate Kevin Warsh as the next Fed Chair. Trade policy remained ever-present, with tariff narratives recurring alongside renewed focus on their legality pending a forthcoming SCOTUS ruling on executive branch tariff authority under IEEPA. Fiscal policy re-entered the conversation at the margin as Washington again worked itself into a brief government shutdown which was ultimately resolved through another short-term funding solution. Meanwhile, notable political and geopolitical considerations including Russia-Ukraine, potential conflict with Iran, and non-U.S. leaders embracing a new multi-polar world garnered headlines with limited market impact, while saber rattling over Greenland/Denmark and designs on Venezuela added incremental noise to an otherwise risk-on start to the year.

Taken together, January delivered a strong opening to 2026 characterized by improved equity breadth, notable non-U.S. leadership, and a sharp move higher in commodities. While the policy backdrop remained active—and at times noisy—markets largely emphasized earnings strength, resilient economic activity, and a constructive risk environment as the month closed.