January review: Markets push past geopolitics

Market leadership broadens

Stock performance last month was driven by several key shifts: Investors moved money out of mega‑cap technology stocks, companies benefited from the expensing provisions in the One Big Beautiful Bill Act and broader economic conditions continued to improve. Small‑cap stocks stood out in particular, with the Russell 2000 gaining 5.5% for the month. Sector‑wise, energy, materials and consumer staples led the market while technology, financials and health care lagged.

Longer-term yields rise

As expected, policymakers left interest rates unchanged at their first meeting of 2026, balancing mixed signals in the labor market against still‑sticky inflation. Stronger economic data late last year, including 4.4% GDP growth in the third quarter, reinforced the Fed’s cautious stance as they look for more convincing evidence that inflation is on a sustainable path downward.

In the Treasury market, longer‑term yields rose more than short‑term yields, causing the yield curve to steepen. A similar dynamic played out in the municipal bond market: yields on long‑dated bonds edged higher while shorter maturities actually saw yields fall, improving relative value across different parts of the curve. Corporate bonds also benefited from a supportive backdrop despite credit spreads narrowing to their lowest levels in about a year for both high‑quality and high‑yield issuers.

US economy cool but resilient

Job growth remained positive but subdued, with private employers adding a modest number of positions and most of the gains coming from small businesses. Job openings continued to drift lower and remain near post‑pandemic lows, a sign of softening labor demand, and a low quits rate suggests workers are cautious about changing jobs.

Inflation held steady, yet sentiment surveys showed that Americans are still feeling strained by prices and job market concerns. Retail spending was higher than expected in November, though earlier revisions clouded the picture and suggest possible volatility in the months ahead. With leading indicators slipping again, the overall backdrop suggests an economy that remains resilient but is losing some momentum.

Geopolitics and policy moves drive January headlines

With the raid on Caracas and capture of Venezuelan President Nicolas Maduro, the suggestion that the US should control Greenland and simmering tensions with Iran following recent protests, January was marked by geopolitical risk. Domestically, the Trump administration launched an investigation into Fed Chair Jerome Powell, increasing uncertainty, though markets have seemed more focused on President Trump's next pick to lead the central bank, Kevin Warsh. While these actions have the potential to affect individual sectors, markets overall have remained largely unfazed. 

Has silver jumped the shark?

After surging 140% in 2025, silver is up another 17% year-to-date, even after profit-taking at the end of January. In contrast to gold, nearly two-thirds of global silver supply is used in industrial applications, including solar panels and other electrical hardware. The advantage of silver is its high conductivity, but the last year’s price escalation may spur efforts by manufacturers to redesign their products with lower-cost metals like copper. Product redesign and resulting supply chain changes don’t happen overnight, but enough companies moving in this direction could reduce silver demand.

A soft start for the dollar

The US dollar began the year on weaker footing, declining against major currencies such as the yen, euro and British pound. A combination of headline‑driven geopolitical tension and speculation about potential currency intervention contributed to a drop of more than 2% in the trade‑weighted dollar index. Some investors briefly shifted toward a “sell the dollar” stance, but the underlying drivers remain mixed. The US economy continues to show relative stability, while global challenges to US economic leadership have eased compared with a year ago. These dynamics may limit the degree of further dollar weakness, though ongoing questions around US fiscal policy and the outlook for Federal Reserve leadership could temper any near‑term rebound.

The bottom line

The year has started off busy, with shifts in market leadership and geopolitical tension in the headlines. Still, the overall environment remains generally supportive. For long-term investors, keeping attention on the bigger picture rather than noise is as important as ever.

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