Did January Really Predict the Rest of 2026? | S3 E117 | 02-03-26

January is often seen as a roadmap for the rest of the year — and the markets may already be sending signals for 2026. In today’s episode of Markets with Megan, Megan Horneman breaks down how stocks, bonds, commodities, and the economy performed in January and what investors should take away from it.

We dive into the historical “January Effect” and why a positive January has historically led to positive full-year returns for the S&P 500. Megan also explores what’s happening beneath the surface of the economy, including slowing job creation, resilient consumer spending, mixed inflation data, and rising service-sector prices.

This episode covers key market trends investors should be watching:
• What January market performance says about the rest of 2026
• Labor market shifts and why unemployment is ticking lower
• Inflation progress — and where it’s still sticky
• Why international markets outperformed U.S. stocks
• Small-cap stocks beating large caps
• Rising yields and the Fed’s hawkish tone
• Energy prices surging amid geopolitical tension
• Gold and silver volatility after a historic start to the year

Whether you’re a long-term investor or just trying to make sense of market volatility, this episode helps cut through the headlines and focus on what actually matters.

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Disclaimer:  material was prepared by Verdence Capital Advisors, LLC (“VCA”). VCA believes the information and data in this document were obtained from sources considered reliable and correct and cannot guarantee either their accuracy or completeness. VCA has not independently verified third-party sourced information and data. Any projections, outlooks 
or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. This material is being provided for informational purposes only and is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice. Past performance is not a guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance 
that the future performance of any specific investment, investment strategy, or product or anynon-investment related content, made reference to directly or indirectly in these materials will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any 
discussion or information contained in this report serves as the receipt of, or as a substitute for, personalized investment advice from VCA. Due to various factors, including changing market conditions and/or applicable laws, the c...

Transcript

January As A Market Signal

Megan Horneman 0:00

Some people know that old saying, as goes January, so goes the rest of the year. It's Tuesday, February the 3rd, and this is Markets with Megan. If you like this podcast, please subscribe, hit the alarm bell, share it with your friends, family, or colleagues, anybody who's interested in what's going on in the markets, what it may mean for your investments for the long run. But today we're going to take a focus on looking at the month of January and how market and the economic and the economy performed for investors. But first we want to start with this very old saying is as goes January, so goes the rest of the year. And what that means is if the per what is whatever the performance is for the month of January tends to dictate what investors can be prepared for for the rest of the year. So let's look at that historical uh statement.

Historical January Effect Stats

Megan Horneman 0:48

When you go back to 1939, when the S P 500 is actually negative in the month of January, it does end up being negative on average for the rest of for the full calendar year, and it is negative about 60% of the time. But the good news is the SP ended the month slightly positive. It was up a little bit less than 2% for the month. But if you go back to that same time period when the SP 500 is positive in the month of January, even if it's less than 2%, it is up about 90% of the time for that calendar year. And the actual average return is about 16%. Now we did dig a little bit deeper, and when the return is, is that more muted less than 2%, still positive 90% of the time, but it is less than the 16%, more in those low uh double digits, but still positive for

Jobs, Spending, And Inflation Mix

Megan Horneman 1:40

the year. But let's break down from the economic standpoint for the month of January. We did see the labor market data that we got. Um, job creation did slow. It's actually on a rolling 12-month basis now that US is creating about the least amount of jobs that we've seen since 2021. But because there's been some structural changes in the labor force, we are seeing the unemployment rate actually tick lower. Consumers do keep spending. We saw solid retail sales data. Inflation has been mixed. There is still some progress, but it's slowing significantly. And when you look at services, especially excluding energy, prices are still growing 3%. And then at the end of the month, we got the producer price index, which did surprise where that super core number is growing about 3.5% on a year-over-year basis.

U.S. Vs Global Equities Rotation

Megan Horneman 2:29

From an equity standpoint, it was not just about the US in the month of January. In fact, if you look at the MSCI All-Country World Index and you exclude the US, it outperformed the S P 500 by the most in 10 months. The international markets were primarily driven by Latin America, and that was due to the commodities rally that we saw for the month. When you look within the US, we did continue to see that rotation. Small and mid-cap stocks outperform large cap stocks. The Russell 2000, which is the gauge of the small cap stocks here in the US, it outperformed the Russell 1000, that large cap index, by the most in five months. And when you look at both the SP 500 and the NASDAQ, they actually had their slowest start to a year that we've since seen since 2022.

Bonds, Credit, And Munis Snapshot

Megan Horneman 3:23

In fixed income, again, it was the markets kind of um took the fact that the Fed, the Federal Hawkish Fed comments that we got from the meeting, and they uh interest rates did rise. The Bloomberg aggregate index was um relatively stable for the month. It was it was about up 0.11%. But again, we did see yields rise towards the end of the month. It was more of a municipal story. Um, we did see it's a big seasonal reinvestment month, so municipals did well. And while credit, both investment grade and high yield did rally, we started to see spreads widen out a little bit at the end of the month, and that's because that's when we got the volatility from the equity perspective. On

Energy Spike And Precious Metals Whiplash

Megan Horneman 4:05

a commodity uh basis, it was all about energy this time around. The precious metals did rally significantly, but we saw a big pullback at the end of the month. From the energy perspective, it was geopolitical tensions with Iran and then the the colds, the cold freeze that we're getting here in the United States that caused natural gas prices to surge the most since we've seen since 2022. So a big rally in the energy prices. But let's talk about the precious metal space. Um, gold itself did have its best uh start to a year since 1980, but we did see a big pullback at the end of the month. We saw both gold and silver decline the most. We've seen have some of the worst single-day declines in several decades. And that was because we had a stronger dollar when Trump nominated Kevin Walsh for the Federal Reserve chairman spot. And Kevin Walsh is considered by market said by market participants as a little bit more hawkish than some of the other picks that Trump had had. And also they are less concerned about some political persuasion in that Federal Reserve coming up in the when the new chairman takes takes place in May. So that did help the dollar. It caused a big decline

Dollar Strength And Fed Chair Talk

Megan Horneman 5:22

in the precious metals. So it just shows you how much leverage there is out there on the precious metals.

Takeaways And Sign Off

Megan Horneman 5:27

And while most people consider them to be the ultimate safe haven, when you see the precious metals rally like we have, it is something to be concerned about and get used to these major swings that can be dictated by headline news. That's all we have today. If you want a history of rap podcast, you go to Marcuswithmegan.fm. Thank you.