February 4, 2026
As January Goes, So Goes the Year
January set a constructive tone for markets and gave investors an early reminder that sentiment and fundamentals do not always move in lockstep. The familiar saying that a strong January bodes well for the rest of the year may apply to 2026 as U.S. equities opened with gains.
The S&P 500 rose about 1.4% for the month, while smaller companies led with the Russell 2000 up 5.3%. This extended the positive momentum from 2025 and suggested that risk appetite remains healthy across market segments, not just among the largest technology names.
Headlines were anything but calm. Investors navigated news around Venezuela, protests in Iran, renewed rhetoric surrounding Greenland, and a steady drumbeat of geopolitical and trade related commentary coming out of Davos. Discussion of tariffs resurfaced and precious metals surged sharply before giving back a portion of those gains. Despite the noise, markets largely looked through the troubling news flow and focused on underlying growth and earnings.
Interest rates remain a key point of interest as the 10-year Treasury sits near 4.25% and has proven stubborn even after several Fed rate cuts in 2025. The bond and stock markets are dealing with ongoing economic strength, sticky but declining inflation, and uncertainty with regards to the AI effect on employment. Nevertheless, higher long-term yields have not derailed equities.
Attention is turning upon a leadership change at the Federal Reserve, with chair Powell’s departure in May and Kevin Warsh receiving President Trump’s nod as the next chair.
While markets will watch the transition closely, recent history suggests that fundamentals matter more than personalities when growth and earnings are moving in the right direction.
Earnings season has started with the S&P 500 reporting double-digit growth for the 5th straight quarter, according to FactSet. Roughly three quarters of U.S. companies reporting so far have exceeded expectations, a healthy reminder that corporate America continues to execute well.
The U.S. dollar weakened further against the euro, the yen, and several other currencies. A softer dollar can be a tailwind for large U.S. companies’ earnings, 50% of which come from overseas.
Economic activity itself appears to be firming. Forward-looking indicators point toward stronger growth and the possibility of very robust GDP readings as the year progresses.
In summary, January delivered gains in a classic “wall of worry” environment. Valuations remain historically elevated and headlines remain unsettling, yet stocks continue to climb as earnings, growth, and productivity provide support.
