Market Summary: A Month of Milestones and Rotation
During the first month of 2026, European and international markets generally continued their 2025 momentum, often outperforming the U.S. markets, which faced a more volatile start to the year. While U.S. stocks dealt with many moving pieces including high-profile earnings, artificial intelligence (AI) scrutiny, and news from the U.S. central bank, they still reached historic peaks. The S&P 500 crossed the 7,000-point mark for the first time on January 28, 2026. The US dollar experienced a significant decline this month, dropping to its lowest level in four years.
As expected, the Federal Reserve (Fed) left short-term interest rates unchanged at the recent Federal Open Market Committee (FOMC) meeting. The federal funds rate remains in a target range of 3.50% to 3.75%. The FOMC updated its forecasts to be more balanced, with officials noting that labor markets are showing signs of stabilizing—a shift from their December stance. The muted reaction from the bond market following the January meeting suggests the Fed’s decision was in line with market expectations.
Two days after the FOMC meeting, President Trump nominated Kevin Warsh to succeed Jerome Powell as Fed Chair when Powell’s term expires this May. The nomination of Warsh—who is generally perceived as more "dovish" (favoring lower rates) in the current climate—led to an immediate reaction in the bond markets. Treasury yields rose slightly as investors began pricing in a potentially faster pace of rate normalization once the leadership transition occurs this summer. The appointment of Warsh also began to stabilize the dollar and reset interest rate expectations for the rest of 2026.
Market Recap
In January 2026, the U.S. indices showed positive growth but experienced a volatile "tech-led" stumble in the final days of the month. While the S&P 500 and Dow ended in the green, the Nasdaq struggled with late-month earnings pressure from major tech players.
- The S&P 500 ended up gaining 1.37% for the month and crossed the historic 7,000 mark on Jan 28.
- The Nasdaq Composite Index posted a gain of 0.95% due to a sharp drop on the final trading day.
- The Dow Jones Industrial Average (DJIA) was the top performer of the three and saw its ninth straight month of gains, adding 1.73%.
As always, if you have questions about how the economy may impact your investments, please don’t hesitate to reach out to us.
Sources:
https://www.morningstar.com/indexes/spi/spx/performance
https://www.morningstar.com/indexes/dji/!dji/performance
https://www.morningstar.com/indexes/xnas/@cco/performance
https://www.lpl.com/research/blog/weekly-market-performance-january-30-2026.html
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.