Equity markets kicked off 2026 on a constructive note, building on the strong rally from 2025. Despite a selloff mid-month caused by tariff threats and geopolitical headlines, the broad indexes remained resilient in January. Some major milestones were reached during the month with the S&P 500 Index briefly crossing 7,000 for the first time and the Dow Jones Industrial Average crossing 49,000 for the first time ever. The S&P 500, Dow, and Russell 2000 all made new 52-week highs in January, but the Nasdaq Index has yet to break above its October high.
January was a “grind higher” month for U.S. large caps, with new highs driven by optimism around AI and a solid start to earnings season – even as Washington headlines injected occasional volatility. By month end, the S&P 500 gained 1.4%, and the Dow rose 1.7%. Nasdaq lagged, only adding 0.9%. Small caps stood out with the Russell 2000 finishing the month up more than 5%, a notable contrast to the more subdued gains in mega-cap-heavy benchmarks.
Markets digested the Fed’s first decision of the year—holding the federal-funds rate steady, largely matching expectations. Late-month attention sharpened further around Fed leadership and independence chatter after the White House announced the nomination of Kevin Warsh for Fed Chairman.
Trade and geopolitical developments created intermittent risk-on/risk-off waves, contributing to choppy stretches even as the month’s overall trend remained positive. The net effect for most investors was a market that advanced, but not smoothly: Rallies were often followed by pullbacks tied to rates, policy noise, or profit-taking in crowded themes. The relentless stream of headlines out of Washington—from Venezuela to Iran to Greenland, along with renewed challenges to the Federal Reserve’s independence—helped push gold and silver into “meme-like” territory, with the precious metals trading less like traditional safe havens and more like high-risk stocks.
Central banks significantly ramped up gold purchases starting in 2022, directly linked to the freezing of Russian assets after the Ukraine invasion, as countries like China, Russia, and other emerging markets sought to reduce dollar dependency and hedge against geopolitical risks and sanctions. This event accelerated an existing trend, turning gold into a critical geopolitical asset for diversification away from Western-controlled financial systems. A Barron’s Daily article from January 23 cited that gold “recently surpassed Treasuries as a share of global reserves, making it the second-largest holding behind the dollar, according to analysts at LPL Financial.”
Despite strong global demand for precious metals, gold and silver suffered their worst one-day decline in decades on the final trading day in January. The selloff reflected a mix of profit-taking after a massive January rally, the nomination of hawkish Kevin Warsh as Federal Reserve chair, and a surging U.S. dollar.
While strategies that use the FSA Safety Net® do not hold direct precious metals positions, some underlying fund holdings provide indirect exposure through diversified allocations that include gold and silver. In contrast, two passive FSA strategies that remain fully invested across market cycles maintain a 5% allocation to gold at all times. Notably, even after plunging more than 28% on January 30, the silver ETF (SLV) was still up a whopping 186% from the end of 2024 through January 2026. Similarly, despite a one-day drop of more than 10% on January 30, the gold ETF (GLD) remained up 83% from the end of 2024. Note the S&P 500 Total Return Index (green) in comparison:
To end on a positive note, the S&P 500 finished January with a gain. CNBC, citing data from the Stock Trader’s Almanac, noted that the S&P 500 has averaged a 17% annual gain in years when the “January Barometer” is positive. If history holds, 2026 could shape up to be another solid year for stocks—though January’s sharp swings served as a reminder that heightened volatility may be part of the journey.
As always, please contact your advisor if there have been any changes in your circumstances that could affect how we manage your portfolio.
Mary Ann Drucker
Assistant Portfolio Manager
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