January Market Commentary
- Marc Lowe
- Jan 16
- 4 min read
Updated: Jan 30
Regime Change
The weekend following a mid-week New Year’s Eve is usually quiet. This year was anything but.
The first days of 2026 opened with a major geopolitical development: the Trump administration announced that Venezuelan President Nicolás Maduro had been captured.
U.S. opposition to Maduro’s regime dates back to the Biden administration, but the Trump administration had made its intentions clear—escalating military presence in the Caribbean and tightening economic pressure in an effort to force regime change.
Despite the geopolitical implications, markets responded positively. By the end of the first week of January, the administration announced that a second wave of attacks had been called off, and U.S. energy companies were reportedly in discussions with the White House about rebuilding Venezuela’s oil infrastructure.
Rather than triggering fear, markets appeared to interpret the situation as stabilizing—and potentially economically constructive.
Let’s Get Into the Data
Labor Market Slows, but Remains Stable
December non-farm payrolls came in at 50,000, below expectations of 73,000. Despite the miss, the unemployment rate fell to 4.4%, signaling that the labor market continues to cool without cracking.
Trade Deficit Narrows Sharply
The U.S. Bureau of Economic Analysis reported a $29.4 billion trade deficit, a 39% month-over-month decline and the lowest level since 2009.
Productivity Surges
The U.S. Bureau of Labor Statistics reported that productivity increased at a 4.9% annual rate in the third quarter—one of the strongest readings in years.
Consumers Feel Better
The University of Michigan Consumer Sentiment Index rose by 2 percentage points, marking the second consecutive month of improvement, with inflation expectations holding steady.
GDP Expectations Improve
The Atlanta Fed’s GDP Now model doubled its estimate for Q4 2025 real GDP growth to 5.4%.
What Does the Data Add Up To?
The Federal Reserve closed out the year with a widely anticipated 25-basis-point rate cut, but its messaging turned more cautious. While job growth came in below expectations, employment remains positive and the unemployment rate declined—hardly the conditions that would pressure the Fed into aggressive cuts.
With Chair Powell’s term ending in May, it is increasingly likely that rates remain on pause until at least the June meeting under new leadership.
The standout theme in the data is productivity. Output rose sharply while hours worked increased by just 0.5%. Over time, higher productivity tends to translate into stronger GDP growth and rising incomes—both positives for long-term economic health.
What’s driving it?
AI is often cited as a productivity catalyst, and business-friendly tax and deregulation policies are designed to encourage capital investment. But this trend may also reflect longer-term shifts—automation investments made during the pandemic and a labor market with lower turnover. With fewer workers changing jobs, firms may be extracting more output from stable, experienced teams.
While economic data remains constructive, markets don’t move on data alone. Questions around refining Venezuelan “heavy, sour” crude, energy infrastructure investment, and an approaching election year will continue to generate headlines—and short-term volatility.
Chart of the Month: Consumer Sentiment Upswing
Consumer spending remains the backbone of the U.S. economy. After trending downward for much of 2025, consumer sentiment is finally showing signs of sustained improvement.
Source: University of Michigan; Axios Visuals
Equity Markets – December Review
S&P 500: −0.05% for December | +16.39% for 2025
Dow Jones Industrial Average: +0.73% for December | +12.97% for 2025
S&P MidCap 400: −0.10% for December | +5.90% for 2025
S&P SmallCap 600: −0.26% for December | +4.23% for 2025
Source: S&P Global. Performance as of December 31, 2025.
Ten of the eleven S&P 500 sectors posted positive returns for the year, led by Communication Services, while Real Estate lagged. Market volatility increased 31% compared to 2024.
Market leadership remained narrow. The “Magnificent Seven” once again drove a disproportionate share of returns and now account for 34.9% of total market capitalization, while overall market breadth declined.
Bond Markets – December Review
10-Year U.S. Treasury: 4.17% (up from 4.02%)
30-Year U.S. Treasury: 4.85% (up from 4.67%)
Bloomberg U.S. Aggregate Bond Index: +0.25% in December | +7.30% for 2025
Bloomberg Municipal Bond Index: +0.18% in December | +4.25% for 2025
Rising yields late in the year weighed on bonds, but full-year returns remained positive across major fixed-income benchmarks.
The Smart Investor
The start of a new year is a natural time to reassess your financial plan.
2025 delivered solid returns—but also higher volatility. If the swings felt uncomfortable, it may be time to revisit your risk tolerance and portfolio structure.
With interest rates likely to trend lower, 2026 could also present opportunities for mortgages or home equity strategies that were less attractive just a year ago.
A well-designed financial plan looks at everything together—income, debt, savings, investments, and long-term goals—so decisions are made with clarity rather than reaction.
We’re always available to help you evaluate where you stand and keep your financial journey moving forward with intention.
About the Author
Marc Lowe, CFP® is a fee-only fiduciary advisor based in Waterford, CT, helping retirees & business owners make smarter financial decisions.
The information presented in this article is the opinion of the author and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through In The Money Retirement, an investment adviser registered with the state of Connecticut. The information linked to on third-party sites is being provided strictly as a courtesy and convenience. We make no representation as to the completeness or accuracy of information provided at these websites. When you access these websites, you are leaving our website and assume any and all responsibility and risk for use of the web sites you are visiting.The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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