Clearview Portfolio Consulting January Market Recap
Key Points:
• Stocks moved higher in January, but volatility increased during the month.
• The rotation away from large growth stocks saw renewed interest in small cap and international equities.
• The Federal Reserve kept rates steady, while a new Fed Chairman was nominated.
Stocks started off 2026 generally positive with the S&P500 gaining 1.5%, Dow Jones Industrial Average up 1.8% and the NASDAQ +1%. There was a rotation away from the growthier areas of the market toward more value and cyclical sectors. Energy +14.4%, materials +8.7% and consumer staples +7.7% were the best performers in January but lagged the overall market in 2025. Financials -2.4% and technology stocks -1.7% were the worst performing sectors in the S&P500. Investors cycled away from mega cap growth stocks and towards small and international equities. The Russell 2000, which measures small cap US domestic stocks, gained 5.4% for the month. International developed markets, measured by the MSCI EAFE Index, gained 5.2% while the MSCI Emerging Market Index was up 8.9%. The US Dollar fell during the month but stabilized after President Trump’s nomination of Kevin Warsh to be the next Chairman of The Federal Reserve.
Commodity prices saw wild swings in January as investors flocked to precious metals, driving gold and silver prices significantly higher. Elevated inflation, growing government deficits, geopolitical concerns and uncertainty at the Federal Reserve are likely some of the reasons for the demand in precious metals. The selloff in crypto prices and elevated valuations in US equities may also be factors. However, energy prices have been more stable. Crude oil stood around $65/bbl which is a sweat spot for both consumers and producers.
The Federal Reserve held rates unchanged in their first meeting of 2026. The Federal Open Market Committee expects inflation to stabilize and move toward its 2% target over the long run. Unemployment ticked down to 4.4% but new jobs added to the economy were underwhelming. The market is expecting between one and two 25 basis point rate cuts for the year, all else being equal. The economic outlook in the US is expected to be positive with shifting labor dynamics as businesses incorporate more AI and automation to increase productivity and contain costs. According to Merrill Lynch, tariffs have raised the price of imports for US consumers but have not materially increased inflation. Reduced imports are increasing the growth rate of the US economy as demand shifts to relatively cheaper domestic goods and services. Lower imports increase GDP growth as net exports have been a drag on growth as we outsourced our manufacturing overseas.
Sources: Morningstar Direct, Wall Street Journal, Merrill Lynch, Guggenheim