Weekly Market Update: January 26, 2026

The Federal Reserve was expected to hold its benchmark short-term interest rate in the range of 3.50% to 3.75% at the Federal Open Market Committee (FOMC) meeting scheduled to conclude on January 28th. Such a pause would give Fed officials the opportunity to assess additional inflation and jobs data. Too, the current Fed interest rate has moved closer to the estimated neutral level, which is the rate where the Fed’s policy is neither stimulating nor restricting the economy. At that level, it’s possible for growth to take place with stable inflation. 

The U.S. economy does not appear to be in need of near-term stimulus from interest rates or from the government putting additional cash into circulation. The nation’s gross domestic product (GDP) expanded by estimated annualized rates of 3.8% and 4.3% in the second and third quarters of 2025, respectively. We also think the final quarter probably exceeded the consensus forecast of around 2%, fueled by a record retail holiday sales season and a slowly improving manufacturing sector. On the latter front, industrial production advanced in both November and December, and surveys of manufacturing activity in the New York and Philadelphia areas showed notable gains last month. 

Fourth-quarter earnings season got off to a solid start. The consensus forecast is calling for profit growth of around 8% for the S&P 500 companies. If realized, this would mark the 10th-consecutive quarter of growth for the index companies. 

Meanwhile, geopolitical concerns have increased. In addition to the ongoing unrest in Iran, the financial markets were roiled by bickering over Greenland, which President Trump wants to acquire from Denmark for national security reasons. This has brought pushback from the European Union. In response, the Trump Administration has threatened tariffs against a number of European nations, beginning on February 1st, if a settlement can’t be reached. This highly fluid situation remains a potential headwind for global equity and bond markets. 

Conclusion: The variables, including solid corporate earnings growth and supportive tax and monetary policies, are in place for another good showing for the U.S. stock market this year. However, as we have recently witnessed, some volatility over the course of 2026 can’t be ruled out. 

Source: ValueLine.com