AE Wealth Management: Weekly Market Insights | 1/25/26 – 1/31/26
Weekly Market Commentary
THE WEEK IN REVIEW: Jan. 25-31, 2026
Trump taps Warsh for Fed chair
January came to an end last week — and we can’t say the final week of the first month was uneventful. To no one’s surprise, the Federal Reserve didn’t cut rates for the fourth consecutive time at its first meeting of 2026.1 The market had largely accepted that if the Fed didn’t cut last December, it would in January, so we got our Christmas present shortly before the holiday.
The surprise came after the Fed meeting, when President Donald Trump announced on Friday that Kevin Warsh would be his pick to succeed current Fed Chair Jerome Powell.2 Warsh is currently at Stanford University’s Hoover Institution as a scholar. Before that, he was at the Fed, notably during the financial crisis in 2008. And prior to that, he worked at Morgan Stanley.
Warsh is viewed by Wall Street as an inflation hawk who doesn’t like quantitative easing. Both views favor keeping interest rates higher, and Trump wants lower interest rates to continue stimulating economic growth. We would also end up paying lower interest on the national debt as a byproduct of lower rates.
But which Kevin Warsh will show up?3 If he remains true to his past positions — which don’t favor easy money — that would be contrary to what Trump would like, which is lower rates at a minimum. Maybe Warsh has changed his tune after his conversations with the president and Treasury Secretary Scott Bessent?
The market didn’t take the news well initially, but time will tell.4 The final surprise, in a most eventful week for the Fed, was that the Fed shifted its gaze from the jobs market to inflation. In its post-meeting statement, the Fed said, “employment has stabilized.”5 You could just as easily say “inflation has stabilized,” since the consumer price index (CPI) has been sitting between 2.5% and 3.0% since June 2024.6
The last time we were at 3% was last September, and the Fed cut rates. We still had tariffs and all the other things the Fed would use to suggest inflation was on the way — and yet, inflation hasn’t materialized. It has been rangebound for 18 months, so lowering rates did not lead to higher inflation the same way tariffs haven’t had the kind of impact everyone told us they would. Higher tax refunds also likely won’t impact inflation, as some may expect.
In the same 18 months, the unemployment rate went from 4.1% to 4.5% last November and dipped to 4.4% in December.7 You can argue that’s stabilization, too, but it seems better to have a job and pay higher prices than have no job and pay lower prices on things you have no money to buy. We can only conclude that the Fed, for whatever reason, has decided to shift to fighting the same inflation it was unable to tame when rates were 0.75% higher. So, how will it tame inflation now?
Powell said the economy was on solid footing and that should lead to job growth.8 Well, the economy would grow a lot faster if rates were lower. Job growth would also grow faster. All this will soon be moot since it appears Trump is set to replace Powell with Warsh, but will the devil we know be better than the devil we don’t?
Markets ended a tumultuous month with an equally tumultuous week. We hit 7,000 on the S&P 500 early on Wednesday but never closed above that level.9 The producer price index (PPI) came in hotter than expected despite lower energy and food costs, which reaffirmed the Fed’s shift toward fighting inflation.10 The unfinished business with the potential lockdown (see below) and the Warsh news contributed to the market notching a very modest monthly gain as it limped to the end of January.
Partial shutdown as funding deal stalls
As of Friday afternoon, it appeared the government barely avoided shutting down again, as the Senate agreed to five of six funding bills to avoid shutdown by its end-of-January deadline.11 Last-minute negotiations between President Trump and Senate Minority Leader Chuck Schumer led to stripping out the sixth bill, which funded the Department of Homeland Security (DHS).
The House still needs to approve the funding package, and that won’t happen until late Monday at the latest. Since the deal wasn’t reached quickly enough, funding for many agencies lapsed at midnight on Jan. 31, resulting in a partial (and hopefully temporary) shutdown.12
The disagreement this time wasn’t about the Affordable Care Act subsidies, which still haven’t been addressed. This time it was about pulling funding for Immigration and Customs Enforcement (ICE); the agency has become a political lightning rod in recent months, most notably due to its operations in Minneapolis. The weird part is that ICE is funded through 2029 via the One Big Beautiful Bill, so it looks like FEMA will probably bear most of the cost if a new bill isn’t passed and funding dries up in two weeks.13
We had just begun to get back to normal from the 43-day shutdown in 2025 and could ill afford another one. Maybe this was the best way forward, but it would be great if these politicians would get serious about their responsibilities and stop all this brinkmanship. It isn’t helpful to add more uncertainty to the markets, and waiting until the last minute to fund the government is certainly doing that.
Coming this week
- Now that the Fed meeting is over, we’ll see if job growth truly has “stabilized.” This week will be dominated by jobs data.
- Monday will be quiet, with auto sales and ISM manufacturing.
- Tuesday will feature job openings, the Job Opening and Labor Turnover Summary and ISM services data.
- On Wednesday, we’ll get the ADP employment report and the usual MBA mortgage applications.
- Thursday will feature fresh weekly unemployment claims. Fed speakers will also begin to come out of the woodwork now that the January meeting is over.
- Finally, Friday is the big day for jobs data. Last month, the Bureau of Labor Statistics (BLS) employment situation reported +50,000 new jobs created, while the unemployment rate was 4.4%.14 The number will have to be significantly higher if the most recent comments from Powell are going to make sense. Wages are expected to continue growing above inflation, which is always a good thing.
- Fourth-quarter 2025 earnings roll on.15 As of Jan. 30, 33% of S&P 500 companies had reported actual results, with 75% reporting positive earnings per share (EPS) and 65% reporting positive revenue. Earnings growth for Q4 for the S&P 500 is 11.9% so far, up from 11.8% last quarter. If this number holds, it will mark the fifth consecutive quarter of double-digit earnings growth for the index.
- Finally, for the current quarter, seven S&P 500 companies have issued negative EPS guidance and 17 have issued positive. Valuation is still historically high for the S&P 500, with the forward 12-month price-to-earnings (P/E) ratio at 22.2 versus 22.7 last quarter. This P/E ratio is higher than the 5-year (20.0) and 10-year averages (18.8).
Index Performance Returns % | |||||
| 1 WK | YTD | 1YR | 3YRS | 5YRS | |
| S&P 500 | 0.34% | 1.37% | 14.87% | 19.40% | 13.31% |
| NASDAQ | -0.17% | 0.95% | 19.54% | 26.52% | 12.41% |
| DJIA | -0.42% | 1.73% | 9.76% | 12.78% | 10.27% |
Interest Rates: | |||||
| 1/30/2026 | 1/23/2026 | ||||
| UST 10 YR Government Bond Yield | 4.24% | 4.23% | |||
| Germany 10 YR | 2.85 | 2.89% | |||
| Japan 10 YR | 2.25% | 2.26 | |||
| 30 YR Mortgage | 6.17% | 6.20% | |||
| Oil | $65.21/ppb | $61.08/ppb | |||
| Regular Gas | $2.87/ppg | $2.86/ppg | |||
| All data as of Jan. 30, 2026. | |||||
Sources:
1 Alicia Wallace. CNN. Jan. 28, 2026. “Fed holds interest rates steady for first time since July.” https://www.cnn.com/business/live-news/federal-reserve-interest-rate-01-28-2026. Accessed Feb. 1, 2026.
2 Christopher Rugaber. The Associated Press. Jan. 30, 2026. “Trump’s choice of Warsh to lead Fed could reshape the world’s most influential central bank.” https://apnews.com/article/warsh-trump-federal-reserve-chair-6b4441263c1b7ecb40b96adf17adeea2. Accessed Feb. 1, 2026.
3 Charlie Garcia. Morningstar. Feb. 1, 2026. “Kevin Warsh isn’t who investors think he is – how you can profit from their mistake.” https://www.morningstar.com/news/marketwatch/20260201114/kevin-warsh-isnt-who-investors-think-he-is-how-you-can-profit-from-their-mistake. Accessed Feb. 1, 2026.
4 Stan Choe and The Associated Press. Fortune. Jan. 31, 2026. “Kevin Warsh’s Fed nod sends gold plunging and chops 31.4% off silver as dollar strengthens in Friday trading.” https://fortune.com/2026/01/31/what-happened-gold-silver-dollar-markets-kevin-warsh-fed-reaction/. Accessed Feb. 1, 2026.
5 Jim Tyson. CFO Dive. Jan. 28, 2026. “Fed holds main rate steady, highlighting signs of job market stability.” https://www.cfodive.com/news/fed-holds-main-rate-steady-highlighting-signs-of-job-market-stability/810771/. Accessed Feb. 1, 2026.
6 Trading Economics. “United States Inflation Rate.” https://tradingeconomics.com/united-states/inflation-cpi. Accessed Feb. 1, 2026.
7 Trading Economics. “United States Unemployment Rate.” https://tradingeconomics.com/united-states/unemployment-rate. Accessed Feb. 1, 2026.
8 Federal Reserve. Jan. 28, 2026. “Transcript of Chair Powell’s Press Conference, January 28, 2026.” https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20260128.pdf. Accessed Feb. 1, 2026.
9 Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Feb. 1, 2026.
10 U.S. Bureau of Labor Statistics. Jan. 30, 2026. “Producer Price Index News Release summary.” https://www.bls.gov/news.release/ppi.nr0.htm. Accessed Feb. 1, 2026.
11 United States Senate Committee on Appropriations. Jan. 30, 2026. “Senate Passes Five Funding Bills, Strips Out DHS Bill to Ensure Negotiations Proceed to Rein in ICE and CBP.” https://www.appropriations.senate.gov/news/minority/senate-passes-five-funding-bills-strips-out-dhs-bill-to-ensure-negotiations-proceed-to-rein-in-ice-and-cbp. Accessed Feb. 1, 2026.
12 Caitlin Yilek, Stefan Becket and Kaia Hubbard. CBS News. Jan. 31, 2026. “Partial government shutdown begins as funding lapses despite Senate deal.” https://www.cbsnews.com/live-updates/government-shutdown-deadline-senate-funding-deal/. Accessed Feb. 1, 2026.
13 Bill Chappell. NPR. Jan. 21, 2026. “How ICE grew to be the highest-funded U.S. law enforcement agency.” https://www.npr.org/2026/01/21/nx-s1-5674887/ice-budget-funding-congress-trump. Accessed Feb. 1, 2026.
14 U.S. Bureau of Labor Statistics. Jan. 9, 2026. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed Feb. 1, 2026.
15 John Butters. FactSet. Jan. 30, 2026. “Earnings Insight.” https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_013026.pdf. Accessed Feb. 1, 2026.
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