Economic and Market Commentary – January 2026
- Feb 25
- 5 min read
Shortly after the New Year’s Eve “ball drop” spectacle, symbolizing the commencement of a new calendar year, public celebration undertakings are usually accompanied with pyrotechnic productions. To spectators, the unpredictability and randomness of a fireworks display are two of the many alluring variables that captivate the viewing audience. Both were relatable sentiments harnessed by market participants in the first month of 2026. In conjunction with the innumerable policy uncertainties still looming on the domestic front, investors were faced with a confluence of geopolitical conflagrations and crosscurrents, each having its own idiosyncratic ramifications and market reactions. In the U.S., President Trump petitioned for the following: Banks to cap credit-card interest rates at 10% for an entire year; Curbs on stock buybacks and dividend issuance for defense contractors that have “underperformed” and “underinvested”; Prohibition on institutional investors from purchasing single-family homes; Fannie Mae (FNMA) and Freddie Mac (FHLMC) to purchase $200 billion in mortgage bonds with the intention of improving housing affordability. Regarding geopolitics and geoeconomics, U.S. special forces conducted a military operation that led to the capture of Venezuelan President Nicolás Maduro, deposing him from his post, and extraditing him to the U.S. to face criminal charges, all for the purpose of advancing U.S. energy interest in the oil-rich nation. Moreover, President Trump vehemently expressed his desire to acquire Greenland to gain unrestricted access to its natural resources and for “national security” purposes, while threatening additional tariffs on European Union allies that were in stark opposition to that imperialistic ambition. In response to the aforementioned confluence of entreaties and events, gold (+12.92%) and silver (+18.90%) saw intense, momentous rallies as the U.S. dollar declined (-1.27%), aggregate fixed income indices eked out modest plus-returns, and equity indices were able to endure spouts of heightened volatility finishing the month in positive territory.
On January 28, at the conclusion of the Fed’s first policy meeting of the calendar year, the FOMC voted 10-2 to leave its overnight benchmark rate unchanged, maintaining the federal funds target rate range at 3.50% - 3.75%. The two dissents at this meeting were cast by Fed Board Governors Christopher Waller and Stephen Miran, both who would have preferred to lower the target range 25 basis points. Not to be overshadowed, and quite frankly more concerning and unprecedented, approximately two and a half weeks prior to the FOMC meeting, Chairman Powell issued a video statement announcing the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment, accusing the Chairman of perjury in his June 2025 testimony to the Senate Banking Committee regarding the $2.5 billion multi-year renovations of historic Federal Reserve office buildings. Chairman Powell characterized these accusations as a “pretext,” and proclaimed that “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.” Fed independence is still under siege.
Lastly, on January 30, after months of anticipation from the entire economic and investment community, President Trump announced former Fed Board Governor (2006-2011), Kevin Warsh, would be his nominee to replace Jerome Powell as the Chairman of the Federal Reserve when his term as Chairman expires in May 2026. We will delve more into the nomination of Kevin Warsh in February’s commentary piece.
U.S. Treasury yield curve saw yields in all tenors rise single-digit basis points, except the 1-year yield which was flat, as the debasement trade (sell Treasuries, sell U.S. dollars, buy precious metals) influenced market direction, and the FOMC left rates unchanged.
2-year/10-year spread: 71 basis points
3-month/10-year spread: 58 basis points
2-year/5-year spread: 27 basis points
3-month/30-year spread: 121 basis points
U.S. Treasury Yield Curve Source: Bloomberg
January 2026 Macroeconomic Highlights
Inflation, Expectations, and Consumer Sentiment1:
CPI: 2.7% year-over-year (+0.3% month-over-month); Core CPI: 2.6% year-over-year (+0.2% month-over-month)
PCE: 2.8% year-over-year (+0.2% month-over-month);Core PCE: 2.8% year-over-year (+0.2% month-over-month)
PPI: 3.0% year-over-year (+0.5% month-over-month); Core PPI: 3.3% year-over-year (+0.7% month-over-month) Core PPI less trade services: 3.5% year-over-year (+0.4% month-over-month)
Inflation Expectations: 1-year horizon: 3.4%, 3-year horizon: 3.0%, and 5-year horizon: 3.0%
Consumer Sentiment: 56.4 vs. 52.9 in December 2025; Current Conditions: 55.4 vs. 50.4 in December 2025
Consumer Expectations: 57.0 vs. 54.6 in December 2025
Labor Market2: The U.S. economy added +50,000 nonfarm payrolls in December, moderately short of the +70,000 expected by economists surveyed by Bloomberg. Notable job gains occurred in food services and drinking places (+27,000), health care (+21,000), and social assistance (+17,000). Retail trade lost jobs (-25,000).
U-3 official unemployment rate: 4.4% vs. 4.5% expectation: -0.2% from November 2025.
U-6 unemployment rate (marginalized, part-time workers for economic reasons): 8.4% (-0.3%).
Labor force participation rate: 62.4% (-0.1%); Employment-to-population ratio: 59.7% (+0.1%).
Average hourly earnings for private nonfarm payrolls rose 12 cents to $37.02 (+0.3% month-over-month, +3.8% year-over-year).
Revisions: November 2025 trimmed -8,000 to +56,000; October 2025 slashed -68,000 to -173,000.
Gross Domestic Product (GDP)3: According to the updated estimate, real GDP increased at an annual rate of +4.4% in the third quarter of 2025 vs. an increase of +3.8% in the second quarter of 2025.
Consumption: +3.5%; GDP Price Index: +3.8%; PCE Price Index: +2.8%; Core PCE Price Index +2.9%.
Real disposable personal income: 0.0% vs. +1.8% in the second quarter of 2025.
Personal savings rate as a percentage of disposable income: 4.2% vs. 5.0% in the second quarter of 2025.
Average of Real GDP and Real GDI: +3.4% vs. +3.2% in the second quarter of 2025.
Housing Market4: Existing-home sales surged +5.1% (month-over-month) from November to a seasonally-adjusted annual rate of 4.35 million in December. Month-over-month sales broadened in all four major regions.
South: +6.9%, West: +6.6%, Northeast: +2.0%, and Midwest: +2.0%.
Year-over-year sales increased +1.4%, up from 4.29 million in December 2024.
Total housing inventory registered 1.18 million units, -18.1% from November, but +3.5% from one year ago (1.14 million units). Unsold inventory sits at a 3.3-month supply at the current sales pace.
The median existing-home price for all housing types was $405,400, +0.4% from December 2024 ($403,700), as prices rose in the Northeast and Midwest, but subsided in the South and West.
Average commitment rate for a 30-year, conventional, fixed-rate mortgage: 6.15%.
New Home Sales: 737,000 (-0.1% month-over-month) – October 2025 reading.
1 Source: Bureau of Labor Statistics (BLS), U.S. Department of Commerce, Federal Reserve Bank of New York – Survey of Consumer Expectations, and University of Michigan Surveys of Consumers
2 Source: Bureau of Labor Statistics (BLS)
3 Source: Bureau of Economic Analysis (BEA)
4 Source: National Association of Realtors (NAR), U.S. Census Bureau, and The Department of Housing and Urban Development
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. Investing involves risk including loss of principal. Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data.
