Market Flash – January 2026

• Performance broadened within U.S. equities: small caps gained 5.35% and value stocks rose 4.56%, marking small caps' best month since August 2025, while Microsoft alone drove most of the Russell 1000 Growth decline
• Commodity volatility was extreme: despite a 25% single-day drop in silver and 9% drop in gold on January 30th, both precious metals still finished with near double-digit gains; crude oil rose 14% and natural gas surged nearly 40% on geopolitical tensions and cold weather
• Fixed income markets repriced Fed expectations significantly as futures now indicate the first 2026 rate cut in June versus earlier investor expectations of a March cut at 50%+ probability and April cut at nearly 80% probability

Market Summary – January 2026

Performance Overview

Global equity markets exhibited significant performance dispersion in January 2026. Emerging markets led with an impressive 8.85% return (USD terms), while U.S. growth stocks declined 1.51%. Bonds posted marginal gains of 0.11%, and commodities surged over 10%, marking a standout performance.

Equities

U.S. markets saw rotation into small caps (+5.35%) and value stocks (+4.56%), with small caps posting their best monthly return since August 2025. Microsoft drove growth stock weakness, falling 11% on capital expenditure concerns and accounting for most of the Russell 1000 Growth index decline.

Emerging markets outperformed across regions: Brazilian equities benefited from natural resource exposure, while South Korean and Taiwanese technology sectors also contributed to gains.

Fixed Income

U.S. investment-grade bonds rose 0.11% as rates increased across the yield curve due to strong economic data and persistent inflation. Interest rate cut expectations shifted, with markets now pricing the first 2026 cut for June rather than March. Emerging markets local bonds gained over 2%, supported by declining rates and a weaker dollar.

Commodities

Commodities delivered exceptional returns exceeding 10%. Despite a dramatic one-day crash on January 30th (silver down 25%, gold down 9%), precious metals still achieved near double-digit gains for the month. Crude oil rose 14% on geopolitical tensions, while natural gas soared nearly 40% due to colder-than-expected weather in the U.S. and Europe.

Market Implications

The month demonstrated clear rotation from growth to value and international markets, suggesting investors are repositioning amid geopolitical uncertainty and shifting rate expectations. The commodity surge reflects both supply concerns and inflation hedging demand.