Markets started 2026 on solid footing with U.S. equities rising 2% while core bonds posted modest gains. The rotation into value stocks continued as the Russell 1000 Value outperformed the Russell 1000 Growth by 6% in January. International stocks also extended their rally, beating their U.S. counterparts by 4%. Interest rates were little changed throughout the month, leading to muted returns in fixed income.

Geopolitical turmoil returned to start the year. The U.S. capture of Venezuelan President Nicolas Maduro, President Trump’s threat to invade Greenland, and continued tensions in Iran all made headlines this past month. Despite this, markets ended the month in the black, showing long-term oriented investors should not let geopolitical developments sway their strategic asset allocations. International markets benefited as the dollar weakened by roughly 1% over the month. Over the past year, international equities have significantly outperformed U.S. stocks as companies overseas offer US-based investors diversification from both a region and currency perspective.

Also making headlines was President Trump’s nomination of Kevin Warsh as the next Fed chair. If Warsh is confirmed by the Senate, he would take over for Jerome Powell when his term ends in May. Overall, the market appears sanguine about the pick given Warsh’s prior experience at the Fed and his historical support for Fed independence. The Fed is expected to continue their years-long rate cutting cycle in 2026, with the market pricing in two cuts in the back half of the year.

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