January Market Update: Global Events, Central Bank News, and Precious Metals

Stocks and bonds started the year on a positive note, continuing their gains from previous years. This may come as a surprise to some investors because there were several periods when markets moved up and down sharply due to global events and news about the Federal Reserve (the Fed, which is America’s central bank). While news headlines caused short-term swings in prices, including the S&P 500’s biggest one-day drop since last October, markets bounced back quickly. Within just a few days, major stock indexes hit new record highs, helped by strong company earnings reports that supported investment portfolios.

For investors focused on long-term goals, January is a good reminder that news headlines can cause markets to move in unexpected ways, but what really matters most are the underlying fundamentals of companies and sticking to your long-term financial plan. While global events and uncertainty about government policies will likely create more ups and downs throughout 2026, one commonly used approach is holding a balanced mix of investments that matches your time horizon, risk tolerance, and overall financial plan.

Important Market and Economic Events in January

• The S&P 500 (a stock index that tracks 500 large U.S. companies) rose 1.4% in January and briefly crossed above 7,000 for the first time during trading hours. The Nasdaq Composite (an index focused on technology companies) increased 0.9% and the Dow Jones Industrial Average (an index of 30 major companies) gained 1.7%.

• The CBOE VIX (a measure of expected stock market volatility, sometimes called the “fear index”) ended the month at 17.44 after rising above 20 due to tensions between countries.

• The Bloomberg U.S. Aggregate Bond Index (which tracks U.S. bonds) climbed 0.1% over the month as longer-term interest rates increased. The 10-year Treasury yield (the interest rate on 10-year U.S. government bonds) ended the month at 4.24%, the highest level since last September.

• International developed markets (stocks from wealthy countries outside the U.S.) jumped 5.2% based on the MSCI EAFE Index, while emerging markets (stocks from developing countries) gained 8.8% based on the MSCI EM Index.

• President Trump announced he plans to nominate Kevin Warsh as the next Fed Chair (the leader of the Federal Reserve). If approved by the Senate, he would start in mid-May.

• Gold (a precious metal often used as a diversifying asset though its price can be volatile and investors can lose money) surged to a record closing price of $5,417 per ounce before dropping nearly 10% on January 30.

• Similarly, silver (another precious metal) closed as high as $116.70 before falling to finish the month at $85.20.

• The U.S. dollar index (which measures the dollar’s value compared to other currencies) fell to about 97.0, reaching its weakest level in nearly four years, before recovering slightly following the Fed Chair announcement.

• The Federal Reserve kept its policy rate (the interest rate it controls) at 3.50 to 3.75% at its January meeting, after lowering rates three times in the second half of 2025.

• Consumer Price Index inflation (which measures how much prices are rising for everyday goods and services) remained at 2.7% compared to a year earlier in December, still above the Fed’s 2% goal. The Producer Price Index (which measures price changes for businesses) increased to 3.0%.

• Washington ended the month with a partial government shutdown (when some government operations stop due to budget disagreements).

• Harsh winter weather across much of the Eastern and Southern United States caused natural gas and electricity prices to spike.

Tensions between countries pushed market swings higher

Early in the month, a U.S. operation in Venezuela resulted in the capture of Nicolás Maduro. While the operation was related to drug trafficking and terrorism, much of the discussion quickly turned to oil. Venezuela has the world’s largest proven oil reserves but produces less than 1% of global oil output due to its poor infrastructure. For investors, the main way that events between countries affect financial markets is through commodity prices (the prices of raw materials like oil), and oil remains crucial to the global economy.

Concerns about tensions between countries increased further when U.S. officials discussed purchasing Greenland due to its strategic importance for defense and access to raw materials. This sparked disagreements with NATO countries (a military alliance) involving trade fees that led to the S&P 500’s worst day since last October. However, the situation quickly calmed down after President Trump met with the NATO secretary general and established a “framework of a future deal,” causing the market to bounce back.

For investors focused on the long term, events between countries may create short-term uncertainty but history shows that markets have often recovered after past geopolitical events, although there are no guarantees, and the future outcomes may differ. Investors should avoid reacting too strongly to headlines and instead maintain focus on their long-term financial goals.

Fed concerns affected gold, silver, and the dollar

Precious metals (gold and silver) continued to increase in price until a significant reversal on the final day of January. Gold rose to nearly $5,600 during trading hours while silver’s price exceeded $120 per ounce before they both sold off sharply. These price movements have been driven by several factors including risks from events between countries, central bank purchases (when central banks buy gold), and concerns about Federal Reserve independence (whether politicians might influence the Fed’s decisions).

The movements in gold and silver have been called the “debasement trade,” which refers to the idea that government spending and monetary policies that effectively weaken the dollar, create budget deficits, and lead to inflation may strengthen precious metals. Uncertainty about the Fed, including whether a new Fed chair might push interest rates lower, has driven these metals higher.

However, on January 30, President Trump announced his intention to nominate Kevin Warsh as the next Fed Chair once Jerome Powell’s term ends in mid-May. Warsh is a former Fed governor who has recently stated that he prefers lower interest rates. However, he has also been hawkish in the past, meaning he has supported keeping rates higher to prevent inflation. For investors, this changed expectations since it suggests there may be a smoother transition between Fed Chairs. This led to a sharp drop in both gold and silver, with the dollar rising slightly.

This reversal highlights that precious metals are prone to boom-and-bust cycles (periods of rapid gains followed by sharp declines), and shows how quickly markets can shift based on policy expectations. While precious metals can serve a role for investors, their volatility during January shows why they should complement, rather than replace, core holdings in stocks and bonds.

Company earnings remained healthy despite uncertainty

Beyond the main global headlines, fourth quarter earnings (company profit reports) showed that businesses continue to perform well. According to FactSet (a financial data company), 33% of S&P 500 companies have reported results and 75% have performed better than expected. If these trends continue, large public companies could be on track to achieve a growth rate of 11.9% for the quarter, representing the 5th consecutive quarter of double-digit earnings growth. Over the past 12 months, earnings growth has increased to 12.8% according to analyst estimates.

Naturally, many investors are focused on AI and technology earnings since these stocks have contributed to market returns over the past several years. So far, markets have had mixed reactions to these companies’ earnings, even when they exceeded expectations, due to very high expectations and questions about whether this level of spending can continue. At the same time, many other sectors have benefited from broad economic growth and have grown their earnings at a faster rate as well.

For investors with a long-term focus, the underlying message from earnings season is positive. Company profitability remains strong across many sectors, supporting stock valuations (the prices investors pay for stocks). This fundamental strength is one reason major indexes remained positive for the month despite considerable volatility.

Severe weather affected much of the country

January’s severe winter weather, called Winter Storm Fern, affected at least 21 states and more than half the U.S. population. The storm forced state emergency declarations and created disruptions to economic activity, including power outages and thousands of flight cancellations.

While the safety of those affected by the storm is the top priority, history shows that weather-related disruptions such as hurricanes and blizzards have little long-term effect on the national economy. The key distinction is whether these events damage productive capacity (such as factories, equipment, and businesses) or whether they simply delay activity. In this case, temporary disruptions to sectors such as retail and construction just shift economic activity forward in time.

The bottom line? January experienced market ups and downs due to global events, the Fed, and more. However, markets were resilient and healthy company earnings helped major indexes reach new record highs, even as precious metals dropped sharply. For investors focused on long-term goals, this highlights the importance of maintaining a proper mix of investments that aligns with your financial goals. Index performance is shown for illustrative purposes only. Past performance is not a guarantee of future results.