January 2026 Market Review: Navigating Fed Policy, Geopolitics, and Precious Metals

February 9, 2026

Sean Gross, CFP®, AIF® | Co-Founder & CEO

 

Equities and fixed income began the year on a positive note, extending the momentum from prior years. This outcome may have caught some market participants off guard given multiple bouts of turbulence stemming from geopolitical developments and Federal Reserve policy decisions. Though news flow generated near-term fluctuations, including the S&P 500's steepest decline since the previous October, markets recovered swiftly. Within a matter of days, benchmark indexes touched fresh record highs, bolstered by robust corporate earnings that have underpinned portfolios.

For those with extended investment horizons, January offers an important lesson that news cycles can influence markets in unexpected directions, yet underlying fundamentals and strategic planning remain paramount. Although geopolitical developments and policy ambiguity will probably generate additional turbulence during 2026, the optimal approach to managing these obstacles continues to be a flexible, well-balanced portfolio consistent with long-range financial objectives.

Principal Market and Economic Factors in January

• The S&P 500 advanced 1.4% during January and momentarily surpassed 7,000 for the first time on an intraday basis. The Nasdaq Composite increased 0.9% while the Dow Jones Industrial Average posted a 1.7% gain.
• The CBOE VIX volatility gauge concluded the month at 17.44 following an increase above 20 amid geopolitical pressures.
• The Bloomberg U.S. Aggregate Bond Index edged up 0.1% throughout the month as longer-dated interest rates moved higher. The 10-year Treasury yield finished the month at 4.24%, representing the peak level since the prior September.
• International developed markets surged 5.2% in U.S. dollar terms according to the MSCI EAFE Index, whereas emerging markets rose 8.8% per the MSCI EM Index.
• President Trump announced Kevin Warsh as his nominee for the next Fed Chair. Should the Senate confirm him, he would assume the position in mid-May.
• Gold climbed to a record closing price of $5,417 per ounce before dropping nearly 10% on January 30.
• In parallel fashion, silver reached a closing high of $116.70 before declining sharply to end the month at $85.20.
• The U.S. dollar index declined further to approximately 97.0, hitting its lowest point in close to four years, before recovering modestly after the Fed Chair announcement.
• The Federal Reserve maintained its policy rate at 3.50 to 3.75% during its January gathering, after three straight quarter-point reductions in the latter half of 2025.
• Consumer Price Index inflation held steady at 2.7% year-over-year in December, remaining above the Fed's 2% objective. The Producer Price Index rose to 3.0%.
• Washington concluded the month experiencing a partial government shutdown.
• Harsh winter conditions throughout substantial portions of the Eastern and Southern United States prompted natural gas and electricity prices to surge.

 

Geopolitical pressures elevated market volatility

Early during the month, a U.S. operation in Venezuela led to the detention of Nicolás Maduro. Although the operation focused on narco-terrorism, considerable attention rapidly shifted toward oil. Venezuela possesses the world's largest confirmed oil reserves yet produces less than 1% of worldwide crude output owing to inadequate infrastructure. For market participants, the main pathway through which geopolitical developments influence financial markets runs through commodity valuations, with oil maintaining its central role in the worldwide economy.

Geopolitical anxieties intensified further following U.S. commentary about acquiring Greenland given its strategic significance for defense and commodities. This triggered diplomatic friction with NATO nations involving tariff measures that produced the S&P 500's sharpest decline since the previous October. Nevertheless, the circumstances rapidly cooled down after President Trump convened with the NATO secretary general and created a "framework of a future deal," prompting the market to rally.

For investors focused on the long term, geopolitical developments may generate near-term ambiguity though historical evidence indicates that their impacts on markets and the economy are frequently exaggerated. Markets have generally bounced back as the initial disruption subsides. Investors ought to refrain from overreacting to news cycles and instead preserve a long-range emphasis on financial objectives.

Fed-related concerns influenced gold, silver, and the dollar

Precious metals sustained their advance until a substantial reversal on January's closing day. Gold climbed to almost $5,600 on an intraday basis whereas silver's spot price topped $120 per ounce before both experienced selloffs. These movements have been propelled by multiple elements including geopolitical risk, central bank acquisitions, and apprehensions regarding Federal Reserve independence.

The forces propelling gold and silver have been characterized as the "debasement trade," representing the notion that fiscal and monetary policies that effectively diminish the dollar, generate deficits, and contribute to inflation might bolster precious metals. Fed ambiguity, encompassing whether a new Fed chair could advocate for lower interest rates, has pushed these metals upward.

Nevertheless, on January 30, President Trump revealed his intention to designate Kevin Warsh as the subsequent Fed Chair once Jerome Powell's term concludes in mid-May. Warsh is a former Fed governor who has recently indicated that he favors lower interest rates. Though, he has also demonstrated hawkish tendencies historically, signifying he has supported maintaining rates elevated to combat inflation. For market participants, this altered expectations as it implies there might be a more seamless transition between Fed Chairs. This resulted in a sharp decline in both gold and silver, with the dollar rising modestly.

This reversal highlights both that precious metals are susceptible to boom-and-bust patterns and illustrates how rapidly markets can pivot based on policy expectations. Although precious metals can benefit investors, their volatility throughout January shows why they need to complement, instead of substitute, core allocations in stocks and bonds.

Corporate earnings stayed solid despite uncertainty

Apart from the primary global developments, the fourth quarter earnings revealed that companies continue to deliver strong results. Per FactSet, 33% of S&P 500 companies have disclosed results and 75% have exceeded expectations. Should these patterns persist, large public companies might be positioned to reach a growth rate of 11.9% for the quarter, marking the 5th straight quarter of double-digit earnings expansion. On a trailing 12-month basis, earnings growth has risen to 12.8% per consensus projections.

Understandably, numerous investors are concentrating on AI and technology earnings given these stocks have driven market returns throughout the past several years. Thus far, markets have exhibited varied responses to the earnings of these companies, even when they surpass estimates, attributable to elevated expectations and uncertainties surrounding the sustainability of this spending. Simultaneously, numerous other sectors have gained from broad economic expansion and have increased their earnings at an accelerated pace as well.

For investors with extended time horizons, the fundamental message from earnings season is encouraging. Corporate profitability stays robust across numerous sectors, validating stock valuations. This foundational strength is one explanation major indexes remained positive for the month notwithstanding significant volatility.

Harsh weather impacted substantial portions of the country

January's harsh winter conditions, designated Winter Storm Fern, impacted no fewer than 21 states and over half the U.S. population. The storm necessitated state emergency declarations and produced disruptions to economic operations, encompassing power failures and thousands of flight cancellations.

Although the welfare of those impacted by the storm is the foremost priority, historical evidence demonstrates that weather-related disruptions such as hurricanes and blizzards have minimal long-term impact on the national economy. The crucial difference is whether these events influence productive capacity such as factories, equipment, and businesses, or whether they merely defer activity. In this instance, temporary disruptions to sectors such as retail and construction simply relocate economic activity forward.

The bottom line? January witnessed market turbulence stemming from geopolitics, the Fed, and additional factors. Nevertheless, markets demonstrated resilience and solid corporate earnings have pushed major indexes to fresh record highs, even as precious metals faltered. For investors with long-term horizons, this reinforces the significance of sustaining an appropriate asset allocation that aligns with financial objectives.