Investment Commentary | January 2026

While much of the country was covered in snow and freezing temperatures, the markets were heating up in January. Investment gains were broadly recorded across  asset classes and  global markets. Don’t let the strong returns fool you, however. There were plenty of days when it appeared markets were headed for an icy finish.

S&P 500 Gains Led by Energy and Materials

The S&P 500 Index ended the month up 1.45%, led by the energy and materials sectors, which posted gains of 14.43% and 8.71%, respectively. In contrast, the financials and information technology sectors finished the month in negative territory, declining 2.41% and 1.66%.

The market experienced its largest one-day drop since last October on January 20 due to tariff concerns. Losses during the final two trading days of the month further weighed on results.

Big Tech Faces Growing Investor Scrutiny

The decline in information technology was notable as large technology companies continue to face increased investor scrutiny. After years of outsized gains, aggressive spending on artificial intelligence infrastructure has raised concerns about whether these companies can continue delivering exceptional returns.

Investors are increasingly wary that many firms have relied heavily on deals with one another and, more recently, on debt markets to finance AI expansion.

AI Spending Raises Red Flags Across Tech Giants

Recent news surrounding Nvidia’s stalled $100 billion deal with OpenAI, the creator of ChatGPT, unsettled markets. For months, concerns about circular deal structures among major technology firms have lingered. The potential collapse of this agreement only amplified those worries.

Microsoft, which owns a 40% stake in OpenAI, experienced its largest one-day stock decline since 2020 after spending more than $37 billion on AI infrastructure in the fourth quarter. This drop occurred despite the company exceeding analyst expectations for both revenue and earnings.

Oracle has also faced investor pressure since announcing plans to tap debt markets to to support AI related capital spending, including data centers and cloud expansion. The company is expected to issue $25 billion in debt in early February. Oracle is far from alone. In the fourth quarter of 2025, technology companies issued $108.7 billion in corporate bonds.

With estimates projecting up to $3 trillion in AI infrastructure spending in the coming years, investors are increasingly questioning whether returns will ultimately justify the scale of investment.

Investors Rotate Beyond Mega-Cap Technology

Signs of sector rotation are emerging. The S&P 500 Equal Weight Index has outperformed the market-cap-weighted version of the index over the past three months, signaling broader participation beyond mega-cap technology stocks.

Whether this trend persists remains to be seen, as large technology companies have historically found ways to generate outsized gains even amid skepticism.

Mid-Cap and Small-Cap Stocks Start Strong

The S&P MidCap 400 and S&P SmallCap 600 delivered strong performances to start the year, returning 4.05% and 5.61%, respectively. Both indexes have outpaced the S&P 500 over the past three months.

This trend may continue as investors search for more attractive valuations relative to large-cap U.S. stocks. Stability in interest rates, or ideally a decline, would further support mid- and small-cap equities.

International Markets Outshine U.S. Stocks

Some of the strongest market performance continues to come from outside the United States. The S&P Developed Ex-U.S. Broad Market Index (BMI) and the S&P Emerging Markets Index both significantly outperformed the S&P 500 in 2025, a trend that continued into January 2026.

The Developed Markets Index returned 6.58%, while the Emerging Markets Index gained 7.21% during the month.

Global Growth Fueled by Valuations and Geopolitical Shifts

While a weaker U.S. dollar supported international returns last year, additional factors are driving global performance. Shifts in the geopolitical landscape have led to new trade agreements, expanded supply chains, and increased investment in future-focused industries.

Latin America and Asia both posted outsized gains to start the year. Similar to U.S. mid- and small-cap stocks, relatively lower valuations abroad continue to attract investor interest.

Bond Markets Post Modest Gains Amid Fed Uncertainty

Fixed income markets also moved higher in January, with the S&P U.S. Aggregate Bond Index gaining 0.23%. Despite the positive return, uncertainty surrounding the Federal Reserve continues to weigh on bond markets.

The investigation of Fed Chair Jerome Powell, along with an ongoing Supreme Court case involving Fed Governor Lisa Cook, has injected additional uncertainty that is likely to persist until resolutions are reached.

Federal Reserve Leadership Transition Calms Markets

Investors correctly anticipated that there would be no interest rate cut in January. Additional uncertainty was reduced when Kevin Warsh was named the next Federal Reserve Chair.

Mr. Warsh is well regarded in economic circles and is viewed as someone unlikely to compromise the Fed’s independence. He was the youngest appointee in Fed history at age 35 and played a key role during the 2008–2009 financial crisis.

Precious Metals Deliver Volatility Alongside Strong Gains

Precious metals continued their streak of remarkable returns, even after a historic one-day drop to end the month. The S&P GSCI Precious Metals Index finished January up 9.13%. Without any context, that is a remarkable one-month return.

That gain came after gold dropped more than 10% and silver plunged over 30% on the final trading day of the month. The selloff was stomach churning. For silver, it marked the worst one-day drop since 1980. The decline was fueled in part by shifting expectations around monetary policy and the extreme run precious metals had experienced leading into month-end.

The fundamental reasons behind the climb in precious metal prices remain intact. However, a move of this magnitude reinforces the importance of maintaining a disciplined, diversified, risk-controlled investment strategy.

A Month of Extremes Comes to a Close

January certainly delivered extremes in both weather and investment returns. In the end, returns moved higher while the snow came down.

Investment Commentary by Jason Flores, CFA, CAIA – Executive Vice President & Chief Investment Officer at Central Trust Company.

At Central Trust Company, we continue to reassess the rapidly changing investment landscape for both risks and opportunities. If you would like to access our full monthly outlook and additional investment commentary, visit our Investments Learning Center. As always, if you have questions or concerns, please contact your Central Trust Company team. We are always ready to help.