Weekly Commentary (1/26/26) – The data looks strong, but conviction hasn’t arrived yet.

Weekly Commentary (1/26/26) – The data looks strong, but conviction hasn’t arrived yet.
Markets were mixed last week as investors weighed stronger-than-expected economic growth against subdued consumer confidence, elevated equity valuations, and the early signals emerging from earnings season.
For the week, the DJIA declined 0.50%, while the S&P 500 fell 0.34% and the tech-heavy Nasdaq slipped 0.06%. Small-company stocks, represented by the Russell 2000, lost 0.32%. International equities were modestly higher, with the MSCI EAFE up 0.14% and emerging markets, measured by the MSCI EM, gaining 1.09%. Fixed income posted slight gains as the Bloomberg Aggregate rose 0.07%. The 10-year US Treasury closed the week at a yield of 4.24%. Commodity prices were mixed, with gold rising sharply while oil gained 2.92% to $61.07 per barrel.
Economic data released last week reinforced the message that US growth remains firmer than many had anticipated. GDP was revised higher, showing the economy expanding at a 4.4% annual pace in the third quarter. Measures tied to business activity and employment remained generally constructive, with jobless claims continuing to hover near historically low levels. At the same time, consumer confidence and sentiment data remained weak, highlighting the persistent disconnect between headline economic performance and the experience of the median household.
Earnings season is now gaining momentum, and early results suggest corporate profits continue to grow at a healthy pace. Importantly, a growing share of equity returns is being driven by earnings growth rather than further multiple expansion, a more sustainable backdrop following several years of strong market gains. That said, valuations remain stretched by historical standards, and earnings growth expectations are increasingly concentrated in a relatively narrow group of large technology and financial companies. This concentration leaves markets more sensitive to shifts in sentiment around AI investment cycles, capital markets activity, and corporate spending.
Global interest-rate dynamics also drew attention last week. Rising Japanese government bond yields, tied to political developments and fiscal policy uncertainty, briefly spilled over into global bond markets, pushing yields higher before stabilizing. While the moves were contained, they served as a reminder that global fixed-income markets remain tightly interconnected, and that overseas developments can influence US rates and equity valuations, particularly at current levels.
Looking ahead, investors will focus on key inflation data and the Federal Reserve’s policy meeting and press conference. With growth holding up, consumer confidence lagging, and valuations elevated, markets remain dependent on continued progress on inflation and a steady policy backdrop. As conditions evolve, patience and discipline remain essential.
We continue to advise investors to stay aligned with their long-term investment policy, maintaining diversification and resisting the urge to react to short-term market noise.
“The essence of investment management is the management of risks, not the management of returns.” — Benjamin Graham