January 2026 Market Review & Commentary

We hope you and your family well as the New Year begins. Our discussions and communications with clients throughout the month revealed that many were either recovering from the flu or dealing with upper respiratory issues. We hope you have avoided these or are on the path to recovery soon. The recent Arctic temperatures have not helped the situation, and with ice still present weeks after its arrival, please exercise caution while traveling.

     In January, the overall markets started the year in a relatively normal manner, led by chip manufacturers setting the direction. However, both the market and investors grew concerned due to headlines about administration announcements, such as the Justice Department's investigation into the Federal Reserve Chair over renovation costs for a Federal Building. This was followed by ongoing geopolitical concerns regarding Greenland and potential undisclosed tariff options. As the markets remained relatively flat for much of the month, the Nasdaq managed to squeak out a +0.95% return. The S&P 500 ended the month with +1.37% as there was a shift/ rotation towards more overlooked or defensive market areas.

   Regarding sectors, eight of the eleven S&P 500 sectors finished the month positively, indicating a broadening of market leadership. Energy was the clear leader with +14.18%. This shift was also evident with Materials posting +8.64% and Consumer Staples ending at +7.51%. Conversely, Healthcare was down -0.04%, Technology -0.06%, and Financials trailing at -2.43% to start the year. With no Federal Open Market Committee (FOMC) meeting scheduled for February, interest rates remain stable.

     Looking ahead, markets continue to benefit from a favorable mix of easing inflation pressures, reasonable labor market conditions, and the Fed’s wait-and-see approach. Assuming geopolitical headlines do not lead to significant disruptions, markets have the opportunity for broader participation, selective rotation, and a focus on earnings. While near-term conditions call for some caution, particularly since February is typically a weaker period, the end of January does not indicate a significant decline in the long-term trend. As mentioned in last month’s 2026 outlook, we believe that focusing on long-term goals and maintaining calm risk management is crucial for navigating these times.