Market Insights

Quarterly Market Insights: January 2026

U.S. and Canadian Markets

U.S. stocks notched delivered strong gains in the fourth quarter as investors responded positively to lower interest rates and solid corporate profits while navigating limited economic updates due to the U.S. government shutdown.

The Standard & Poor’s 500 Index gained 2.35%, while the Nasdaq Composite added 2.57%. The Dow Jones Industrial Average advanced 3.59%. The Toronto Stock Exchange ended a strong year with a 5.63% gain.

An August Advance

In August, a sluggish jobs report, followed by upbeat inflation news, could prompt the Fed to adjust short‑term rates.

Stocks pushed higher in late August after Fed Chair Powell said at the Fed’s annual symposium in that the downside risk of employment was greater than the upside risk of inflation—hinting at a possible policy shift.

October Shutdown

U.S. stocks rose for the sixth consecutive month in October as AI‑ and tech‑led advances pushed major averages.

Solid Q3 corporate results helped drive market momentum during a month that is notorious for declines. However, sentiment became more negative after the U.S. Senate failed to pass dueling funding bills to prevent a shutdown, sentiment.

Late-Month November Rally

Stocks were mixed in November but a late month rally helped recover earlier losses. After the U.S. federal government’s shutdown ended, investors shifted their attention to the Federal Reserve for economic insight—although few official monthly reports were issued.

December Ends Quietly

U.S. stocks regained some momentum in December but faced pressure late in the month. A fresh CPI report showed inflation cooled in November, lifting stocks across the board. The Federal Reserve cut short‑term rates, but the jobs market continued to give mixed signals, creating anxiety about how the Fed will guide rates in 2026.

U.S. Sectors

Health Care (+11.22%) was the clear leader for Q4, while Technology (+2.14%) came in just shy of the overall Index. Financials (+1.65%), Materials (+1.16%), Industrials (+0.55%), and Energy (+0.11%) also posted gains. Consumer Discretionary (−0.36%), Communication Services (−0.57%), and Consumer Staples (−0.88%) were under pressure, while Utilities (−2.32%) and Real Estate (−4.23%) experienced larger declines.

Canada Recap

Canada released its third‑quarter gross domestic product data in October, which showed the economy grew a modest 1.2% year over year. The report indicated that trade tensions and investment weakness had taken a toll on the economy.

Canadian stocks also pushed higher despite a disappointing employment report, which showed the economy created only 2,000 jobs over the quarter (10,000 expected). On the upside, unemployment dropped to 6.5% in November, its lowest level since July 2024. The Canadian consumer continued to spend despite mixed sentiment updates.

The Markets

Market/Index	December 2025 Change	Q4 2025 Change	YTD Change
S&P 500	-0.05%	2.35%	16.39%
NASDAQ	-0.53%	2.57%	20.36%
Russell 1000	0.74%	1.86%	11.29%
S&P/TSX Composite	1.05%	5.63%	28.25%
10-Year Treasury Notes	4.16	4.15	-0.46
Fed Funds Rate	3.50-3.75	4.00-4.25	4.25-4.50

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance doesn't guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

World Markets

The MSCI EAFE Index rose 4.54% in the fourth quarter, outperforming all three major U.S. market averages for both the quarter and the full year.

In Europe, Spain (+11.84%) was the clear leader among major developed markets. The United Kingdom (+6.21%) and Italy (+5.20%) also outperformed the MSCI EAFE Index, while France (+3.21%) and Germany (+2.55%) posted gains as well.

Pacific Rim stocks were mixed: Japan (+12.03%) delivered solid gains, Australia (−1.52%) lagged, and Korea (+23.06%) was the standout performer for both the quarter and the year (+75.63%).

World Market Recap

Emerging Markets	December 2025 Change	Q4 2025 Change	YTD Change
Hang Seng (China)	-0.88%	-4.56%	27.77%
KOSPI (Korea)	7.32%	23.06%	75.63%
Nikkei (Japan)	0.17%	12.03%	26.18%
Sensex (India)	-0.60%	6.13%	9.02%
EGX 30 (Egypt)	2.64%	14.07%	40.65%
Bovespa (Brazil)	1.29%	10.18%	33.95%
IPC All-Share (Mexico)	1.12%	2.21%	29.88%
ASX 200 (Australia)	1.16%	-1.52%	6.80%
DAX (Germany)	2.74%	2.55%	23.01%
CAC 40 (France)	0.33%	3.21%	10.42%
IBEX 35 (Spain)	5.72%	11.84%	49.37%
FTSE 100 (United Kingdom)	2.17%	6.21%	21.51%
IT40 (Italy)	3.66%	5.20%	31.47%

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance doesn't guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

Please note that, due to the delayed release of up-to-date government data for most indicators listed below, we have used non-government sources as proxies where necessary and/or as a supplement to the latest available federal data.

• Gross Domestic Product (GDP). Since the release of federal data was delayed due to the government shutdown. Q3 growth estimates  were based on the initial report released by the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) in December 2025. Those data indicated the economy grew at a 4.3% annualized pace in Q3. This exceeded economists’ forecasts of 3.2% and marked the strongest growth in two years.
• Employment. The latest jobs report combined full November data with partial October data. It indicated that employers added 64,000 jobs in November, an upside surprise, as economists had only anticipated 40,000. In contrast, the economy shed 105,000 jobs in October, reflecting government job cuts offset by private‑sector gains.

• Retail Sales. Although federal data for November retail sales was still unavailable as of late December, the Chicago Fed’s Advance Retail Trade Summary estimated that retail and food services sales (excluding autos and auto parts) rose 0.3% month in November, over the previous month.
• Industrial Production. In December, the federal government released three months of delayed industrial production data. Industrial output increased 0.2% in November, slightly above expectations, following October’s 0.1% decline.
• Housing. Homebuilder confidence for newly built single-family homes rose 1 point in December over the prior month, to a score of 39. November’s score of 38 was its highest reading in seven months, suggesting that homebuilder confidence is holding for now, despite less builder optimism overall. (A reading of more than 50 indicates most single-family homebuilders are confident in overall housing market conditions, while a lower reading indicates less builder optimism.)

Sales of existing homes rose 0.5% in November, down from October’s revised 1.5% gain. Year over year, sales fell 1.0% compared with October’s 1.7% increase. Regionally, sales increased month over month in the Northeast and South, were flat in the West, and fell in the Midwest.

The median existing home sale price in November was $409,200—1.2% higher than a year earlier. The supply of unsold homes decreased slightly month over month but increased 7.5% year over year.

• Consumer Price Index (CPI). In November, consumer prices rose 2.7% over the prior 12 months—cooler than the 3.1% economists’ expected and slower than September’s 3.0% pace. Core inflation (which excludes volatile food and energy prices) rose 2.6% year over year, also cooler than expected.
• Durable Goods Orders. Orders for manufactured goods designed to last three years or longer fell 2.2% in October (the latest available federal data), deeper than the expected 1.5% decline. This followed September’s 0.7% rise, revised up from 0.5%. Transportation orders dropped 6.5%, including a 20.1% decline in civilian aircraft orders. Excluding transportation, new orders rose 0.2%. Private‑sector data suggests manufacturing activity picked up in November and December, which may indicate a rise in federal data for November orders.

The Federal Reserve

The Federal Reserve held two meetings in the fourth quarter, during which officials delivered numerous speeches.

The Federal Open Market Committee (FOMC) cut interest rates by a quarter percentage point at its meeting in October, a widely expected move. Fed Chair Jerome Powell said in his post-meeting press conference that another December adjustment was “not a foregone conclusion,” citing the challenge of making monetary policy without up-to-date economic data delayed by the shutdown.

However, the FOMC ultimately cut rates by another quarter percentage point at its December meeting. At his post-meeting press conference, Fed Chair Powell said it would be a higher bar for further rate adjustments.

Minutes from the December meeting, released on December 30, confirmed themes consistent with those presented in Powell’s December press conference. Members remain concerned about a wobbly labor market, but remain focused on the Fed and big consumer-related stocks.

At its first meeting of 2026 (January 27-28), the Fed voted to keep interest rates steady at 3.5% to 3.75%.

By the Numbers: Morning Beverages