Same As It Ever Was
During January, both equity and bond environments served as reminders that economic markets don’t necessarily follow the Gregorian calendar. Much of the momentum experienced in the latter half of 2025 carried right into January without pause. Unfortunately, so too did the interest rate uncertainty and the equity concentration that developed during the last year. Those might have been nicer left in 2025.
During this first month of the year, markets demonstrated positive economic growth and yielded strong earnings growth expectations. However, the concentrated leadership is demonstrated in earnings growth expectations directly. JP Morgan is projecting technology sectors to contribute 60% of the earnings-per-share growth in 2026.1 In relation, investor sentiment shifted as markets reacted to these earnings updates, economic data, and changing views on when interest rates might begin to decline.
After three consecutive cuts, the Federal Open Market Committee (FOMC)decided to hold rates during their first meeting of this new year. The next Fed meeting is scheduled for mid-March but Bloomberg’s World Interest Rate Probability (WIRP) function doesn’t have investors pricing in the next rate cut until nearly August of this year.
Domestic equity markets were strong during the start of the month but pulled back in the latter half of the month related to the ongoing tariff conversation. Fortunately, both the S&P 500 Index and the Nasdaq Index recovered and went on returning +1.44% and +0.97% respectively for the month. The equity narrative is currently centered around the concentration in top companies.
The top ten holdings (by weight) in the S&P 500 and NASDAQ indices respectively make up nearly ~40% of the 500 holdings and nearly 50% of the 100 holdings. This concentration meaningfully influences the difference in index returns. It goes without saying that this can open the door to some concentration risk in investors’ portfolios.
International equities entered 2026 the same way they exited 2025. Throughout January international equities moved largely in line with U.S. markets, though performance varied by region. Developed markets showed relative stability, returning +5.24% as tracked by the MSCI EAFE index. Emerging markets were more sensitive to global interest-rate expectations and currency movements but ended the month ahead of developed territories at +8.86% for the month as tracked by the MSCI Emerging Markets Index.
Both developed and emerging showed some reaction to President Trump’s tariff announcement mid-month, but it was a rather muted and delayed response relative to domestic equities. In any case, both were able to rebound quickly.
Fixed income markets served their role in providing some stability but were not immune to volatility. Bloomberg’s U.S. Aggregate Total Return Value Unhedged Index returned +0.11% for the month. Bond yields moved as investors adjusted expectations for future central bank policy. Short-term rates remained anchored, while longer-term rates fluctuated based on views of inflation and economic growth. The long-term path of interest rates remains very uncertain. Highlighting this uncertainty, January credit flows reflected more money going into short-term options.2 Investors find solstice in short-term treasuries, when long-term vehicles are less predictable.
In summary, January 2026 illustrated positive equity returns and reflected some transition to a more cautious market environment, particularly in fixed income. With the shifting interest-rate expectations, equity leadership concentration, and ongoing international outperformance, investors may find that diversification and a balanced approach remain key.
Hazel Allen
Portfolio Management Analyst
1https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf (Opens to PDF)
Published January 26, 2026; Accessed January 29, 2026
2https://www.jpmorgan.com/insights/podcast-hub/market-matters/vida-credit-financing-outlook ; Published January 21, 2026; Accessed January 29, 2026
The Federal Open Market Committee (FOMC) is a committee of the Federal Reserve Board that meets regularly to set monetary policy, including the interest rates that are charged to banks.
Bloomberg's World Interest Rate Probability (WIRP) function is a chart that shows the probability of different interest rates for the US benchmark rate. The chart is based on interest rate caps and floors, as well as options on Treasury futures.
Earnings per share is a commonly used measure of a company's profitability. It indicates how much profit each outstanding share of common stock has earned.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI Emerging Markets Index consists of 23 economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.
Bloomberg’s U.S. Aggregate Total Return Value Unhedged Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. Th index includes Treasuries, government-related and corporate securities, MBS(agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
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