February 2, 2026

 

Stocks and bonds began the year on a positive note, extending the rally from previous years. Some investors may find this surprising given multiple episodes of volatility stemming from geopolitical developments and Federal Reserve policy decisions. Although headlines triggered short-term market movements, including the S&P 500’s steepest decline since the previous October, markets recovered swiftly. Within a matter of days, major indices climbed to fresh all-time highs, supported by solid corporate earnings that have bolstered portfolios.

January offers clients an important lesson: while headlines may cause unpredictable market fluctuations, sound fundamentals and long-term planning remain paramount. Although geopolitical developments and policy uncertainty will probably generate additional volatility during 2026, maintaining a balanced portfolio that aligns with your long-term financial objectives continues to be the most effective approach for managing these challenges.

January’s Primary Market and Economic Factors

  • The S&P 500 advanced 1.4% during January and momentarily surpassed 7,000 for the first time on an intra-day basis. The Nasdaq Composite increased 0.9% while the Dow Jones Industrial Average rose 1.7%.
  • The CBOE VIX volatility index concluded the month at 17.44 after climbing above 20 amid geopolitical tensions.
  • The Bloomberg U.S. Aggregate Bond Index edged up 0.1% throughout the month as long-term interest rates increased. The 10-year Treasury yield finished the month at 4.24%, marking the highest level since the previous September.
  • International developed markets surged 5.2% in U.S. dollar terms according to the MSCI EAFE Index, while emerging markets rose 8.8% based on the MSCI EM Index.
  • President Trump announced the nomination of Kevin Warsh as the next Fed Chair. Following Senate confirmation, he would assume office in mid-May.
  • Gold climbed to a record close of $5,417 per ounce before dropping nearly 10% on January 30.
  • Similarly, silver reached a high close of $116.70 before declining to end the month at $85.20.
  • The U.S. dollar index declined further to approximately 97.0, touching its weakest level in nearly four years, before recovering modestly after the Fed Chair announcement.
  • The Federal Reserve maintained its policy rate at 3.50 to 3.75% at its January meeting, after three consecutive quarter-point reductions in the second half of 2025.
  • Consumer Price Index inflation held steady at 2.7% year-over-year in December, remaining above the Fed’s 2% target. The Producer Price Index increased to 3.0%.
  • Washington concluded the month with a partial government shutdown.
  • Harsh winter weather throughout much of the Eastern and Southern United States led to spikes in natural gas and electricity prices.

Geopolitical developments pushed market volatility higher


A U.S. operation in Venezuela early in the month led to the capture of Nicolás Maduro. Although the operation focused on narco-terrorism, discussions rapidly shifted to oil. Venezuela possesses the world’s largest proven oil reserves yet produces less than 1% of global crude output because of inadequate infrastructure. For investors, commodity prices represent the main pathway through which geopolitical developments influence financial markets, with oil maintaining a central role in the global economy.

Geopolitical worries intensified following U.S. statements about purchasing Greenland based on its strategic significance for defense and commodities. This triggered diplomatic tensions with NATO countries involving tariffs that caused the S&P 500’s sharpest decline since the previous October. Nevertheless, the situation rapidly cooled after President Trump met with the NATO secretary general and established a “framework of a future deal,” prompting the market to recover.

For clients, geopolitical developments may create short-term uncertainty but historical evidence indicates that their impact on markets and the economy is frequently overstated. Markets have generally recovered once the initial shock subsides. Investors should refrain from overreacting to headlines and instead preserve a long-term focus on financial objectives.

Fed uncertainty influenced gold, silver, and the dollar


Precious metals maintained their rally until a substantial reversal on January’s final day. Gold climbed to nearly $5,600 on an intra-day basis while silver’s spot price surpassed $120 per ounce before both experienced sell-offs. Multiple factors have propelled these movements including geopolitical risk, central bank acquisitions, and questions about Federal Reserve independence.

The forces driving gold and silver have been characterized as the “debasement trade,” reflecting the notion that fiscal and monetary policies that effectively diminish the dollar, generate deficits, and produce inflation may bolster precious metals. Fed uncertainty, including speculation about whether a new Fed chair might pursue lower interest rates, has pushed these metals higher.

On January 30, however, President Trump announced his intention to nominate Kevin Warsh as the next Fed Chair once Jerome Powell’s term concludes in mid-May. Warsh is a former Fed governor who has recently expressed preference for lower interest rates. Nevertheless, he has also demonstrated hawkish tendencies in the past, indicating he has supported maintaining higher rates to contain inflation. For investors, this changed expectations by suggesting a potentially smoother transition between Fed Chairs. This prompted a sharp decline in both gold and silver, with the dollar experiencing a modest increase.

This reversal highlights both the susceptibility of precious metals to boom-and-bust cycles and illustrates how rapidly markets can adjust based on policy expectations. While precious metals can benefit investors, their volatility throughout January shows why they should complement, not substitute, core holdings in stocks and bonds.

Corporate earnings stayed healthy amid uncertainty


Apart from the major global headlines, fourth quarter earnings revealed that companies continue performing well. According to FactSet, 33% of S&P 500 companies have released results and 75% have exceeded expectations. If these patterns persist, large public companies could achieve a growth rate of 11.9% for the quarter, marking the 5th consecutive quarter of double-digit earnings growth. On a trailing 12-month basis, earnings growth has increased to 12.8% according to consensus estimates.

Understandably, many investors are concentrating on AI and technology earnings since these stocks have driven market returns during recent years. Thus far, markets have responded variably to these companies’ earnings, even when they surpass estimates, because of elevated expectations and concerns about the sustainability of this spending. Simultaneously, numerous other sectors have profited from broad economic expansion and have increased their earnings at an accelerated pace as well.

For long-term investors, the fundamental message from earnings season is encouraging. Corporate profitability continues robust across multiple sectors, supporting stock valuations. This fundamental strength explains why major indices stayed positive for the month despite substantial volatility.

Harsh weather impacted much of the nation

January’s harsh winter weather, designated Winter Storm Fern, impacted at least 21 states and over half the U.S. population. The storm necessitated state emergency declarations and produced disruptions to economic activity, including power outages and thousands of flight cancellations.

While the safety of those impacted by the storm remains the highest priority, historical evidence demonstrates that weather-related disruptions such as hurricanes and blizzards have minimal long-term impact on the national economy. The critical distinction involves whether these events damage productive capacity such as factories, equipment, and businesses, or whether they merely delay activity. In this instance, temporary disruptions to sectors such as retail and construction simply shift economic activity forward.

The bottom line? January witnessed market volatility stemming from geopolitical events, Fed policy, and other factors. Nevertheless, markets proved resilient and solid corporate earnings have propelled major indices to fresh all-time highs, even as precious metals faltered. For clients, this emphasizes the significance of maintaining appropriate asset allocation that aligns with financial objectives.

Taylor Salisbury is a registered representative with, and securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Stratos Wealth Partners, Ltd., a registered investment advisor.  Stratos Wealth Partners, Ltd. is a separate entity from LPL Financial.  Trading instructions sent via email, fax, or voicemail will not be honored.  There is no assurance that these messages can be retrieved on a timely basis, nor is there any sure method of confirming the customer identity. The information contained in this message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed.  If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited.  If you have received this message in error, please immediately delete.

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