Robert Krueger

Alexander Randolph Advisory Inc.

8200 Greensboro Drive, Suite 1125

McLean, VA 22102

703.734.1507

www.alexanderrandolph.com

January 2026
Market Update
(all values as of 12.31.2025)

Stock Indices:

Dow Jones 48,063
S&P 500 6,845
Nasdaq 23,241

Bond Sector Yields:

2 Yr Treasury 3.47%
10 Yr Treasury 4.18%
10 Yr Municipal 2.73%
High Yield 6.48%

YTD Market Returns:

Dow Jones 13.07%
S&P 500 16.46%
Nasdaq 20.36%
MSCI-EAFE 27.89%
MSCI-Europe 31.95%
MSCI-Pacific 29.87%
MSCI-Emg Mkt 30.58%
 
US Agg Bond 7.30%
US Corp Bond 7.77%
US Gov’t Bond 6.88%

Commodity Prices:

Gold 4,325
Silver 70.34
Oil (WTI) 57.42

Currencies:

Dollar / Euro 1.17
Dollar / Pound 1.34
Yen / Dollar 156.18
Canadian /Dollar 0.73

Macro Overview – January 2026

Pronounced uncertainty throughout 2025 created volatile trading sessions as labor market concerns and lingering inflation kept the Fed from lowering rates to the extent that had been expected. Regardless, both equity and fixed income markets rose throughout the year, driven by consistent earnings and optimism surrounding massive investment and capital expenditures related to Artificial Intelligence (AI).

Tariffs remained a focal contention in 2025, as economists struggled to determine how much of an affect tariffs have been on consumers and U.S. companies. A study by the Federal Reserve Bank of San Francisco concluded that the tariffs imposed in April 2025 actually resulted in lower inflation and higher unemployment primarily due to uncertainty surrounding the tariffs. Geopolitical tensions in Europe, the Middle East and Asia drove skepticism about international trade and commodity prices.

An ounce of silver cost more than a barrel of oil at the end of 2025, the first time this price disparity has occurred since 1980 when the infamous Hunt brothers cornered the silver market. Silver reached $70 per ounce and oil closed at just over $57 per barrel at the end of 2025.

The U.S dollar lost ground in 2025 driven by excessive U.S. debt concerns and uncertainty surrounding fiscal initiatives. A weakening dollar increases import costs for consumers yet is beneficial for U.S. exporters as U.S. exports become more affordable.

Cryptocurrencies experienced a pull back towards the end of 2025, as leveraged digital currency positions unraveled. Rampant speculation among crypto traders created tremendous volatility throughout the year. Cryptocurrencies experienced gains early in the year followed by a sharp correction late in the year. Regulatory clarity and institutional adoption continue to be leading concerns surrounding digital currencies.

The President proposed that the federal government buy approximately $200 billion of mortgage bonds through housing authorities Fannie Mae and Freddie Mac, in an effort to push mortgage rates down and increase affordability for buyers. Buying mortgage bonds in the open market curtails the supply of bonds which can lead to lower mortgage rates.

Sources: U.S. Treasury, Federal Reserve, Fannie Mae

 

Bond Prices Edge Higher in 2025 – Fixed Income

Markets Overview Fixed income markets across various sectors had a favorable year, with bond prices advancing in 2025. U.S. Treasuries, investment grade corporates and high yield bonds all elevated in price as the Fed teetered on easing rates throughout the year, with affirmation of a lower rate trend towards the end of 2025. The Fed’s trajectory, along with still attractive bond yields in 2025, drove demand throughout the year. Uncertainty in the equity markets added to demand for bonds as volatility led to greater bond demand. The 10-year Treasury bond yield finished the year at 4.18%, down from its peak of 5% in October of 2023. Bonds had their best year since 2020, when the pandemic drove funds toward bonds as a safe haven and for stability.

Sources: U.S. Treasury, Federal Reserve

 

 

Equities Advance in 2025 – Domestic Equity Market Overview

Equities were resilient throughout 2025 as uncertainty surrounding tariffs, geopolitical tensions and Fed rate cuts induced volatile trading sessions. The Dow Jones, S&P 500 Index, and the Nasdaq all posted strong performance results for the year, exceeding most analysts expectations. Massive capital injections by numerous technology companies in AI led to broad appreciation in sectors and industries associated with AI expansion. The spillover from AI investment benefited companies with indirect ties to AI, similar to what occurred in the late 1990s and early 2000s as the internet expanded.

Sources: Dow Jones, S&P, Nasdaq, Bloomberg

 

 

Nine States Reduce Their State Income Tax Rates for 2026 – Fiscal Tax Policy

For tax year 2026, nine states are reducing their individual state income tax rates, Georgia, Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Ohio, and Oklahoma. The tax cuts apply to individual taxpayers living in each respective state. Most of these nine states have established a planned decrease of tax rates over the next few years, hoping to ease tax strains on current state taxpayers and incoming residents. There are currently nine states with a zero state income tax rate, some of which had taxes or higher tax rates in place before eliminating them. California currently has the highest tax rate at 13.3%, followed by Hawaii at 11%, and New York at 10.9%.

Sources: Tax Policy Center

 

Housing Market is Among the Least Affordable in U.S. History – Housing Market  

Measured by the Housing Affordability Index, the affordability of homes has been steadily eroding since early 2021. Factors affecting affordability include home prices, mortgage rates, and household incomes. With historic inflation outpacing income growth, home buyers in the U.S. have been unable to keep up with rising prices and mortgage rates. When the Fed increases interest rates to combat inflation, mortgage rates are similarly affected. The average 30-year mortgage rate rose to a high of 7.24% in November 2023, the highest since 2001. This is a significant difference to the lows reached in 2021, when the average 30-year mortgage fell to 2.65%, the lowest in U.S. history. Higher mortgage rates create a less affordable environment for home buyers and harms potential buyers’ abilities to acquire property. First-time buyers are forced to either buy a home knowing they may not be able to afford it or continue renting until affordability rises. For those who already own a home, remaining in their current house instead of buying a new one has been increasing in popularity as well.

Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Freddie Mac

How AI is Affecting the Economy – Technology & The Economy

Artificial intelligence (AI) is currently boosting U.S. economic growth and market valuations, while also creating valuation risks, labor disruption, and energy challenges. AI related investment in software, semi-conductor chips, data centers, power infrastructure, and networking has already added on the order of hundreds of billions of dollars to U.S. GDP since late 2022, with one estimate putting the contribution at around 250 billion dollars. Economists expect AI to raise productivity, yet unevenly among industries as various companies integrate AI into manufacturing, production, and service. Thus far, AI appears to be a minor factor in the 2025 labor‑market slowdown, but economists expect that wider diffusion could displace some jobs even as it creates new tasks and demand in other roles. AI has been a dominant equity theme, helping propel S&P 500 performance in 2025, with a large share of returns concentrated in AI‑linked megacap tech, data‑center, chip, and cloud companies. Regulators and analysts are considering whether AI‑driven optimism encourages excessive leverage or speculative behavior in equity and credit markets, which could amplify any downturn. At the same time, diversified adoption of AI across sectors is seen as a potential cushion against shocks, making the U.S. economy somewhat more resilient if productivity effects materialize as expected.

Sources: RPS, Current Population Survey, Bureau of Labor Statistics, St. Louis Fed

 

 

 

Dollar’s Decline in 2025, was Largest Since 2017 – Currency Overview

In 2025, the U.S. dollar had a notably weak year and underperformed most other major currencies, with broad indexes showing its largest annual drop since 2017 and one of the steepest declines in decades. The U.S. Dollar Index, which tracks the dollar against six major currencies (euro, yen, pound, Canadian dollar, Swiss franc, Swedish krona), fell roughly 9.5% in 2025, the largest drop since 2017. Earlier in the year, the dollar had been down about 11%, marking the biggest first‑half loss since the 1970s. Factors affecting the dollar in 2025 include slower U.S. growth expectations, high fiscal deficits, policy uncertainty regarding tariffs, political tensions, and shifting global capital flows away from U.S. assets. Easing of U.S. interest rates also reduced the yield advantage of dollar assets, making holding the dollar less attractive relative to other major currencies.

Sources: Federal Reserve Bank of St. Louis

Concerns Heading into 2026 – Economic Dynamics

Uncertainty surrounding numerous dynamics have evolved throughout the year, shedding light on what consumers and the markets are truly worried about. Tariffs – The future of the imposed tariffs from earlier in the year, are in the hands of the Supreme Court, which is expected to make a ruling at any time, but at the latest by the end of its current term which concludes in late June 2026. Fed Rate Cuts – Internal indecision among Fed officials has prompted analysts to expect the Fed to slow its pace of reducing interest rates as well as lengthening the process. Inflation – Consumers are expecting lingering elevated prices for goods and services to continue into 2026, affecting spending and discretionary purchases. Jobs & Income – Weakness in the employment market is translating into layoffs and less pay increases, adding anxiety to an already stressed consumer.
Interest on Debt – Credit card, mortgage, and auto loan rates are hindering additional spending by consumers already saddled with high monthly payments. Geopolitical Tensions & Global Conflicts – Contributes to a general sense of uncertainty that reinforces worries about energy prices, supply chains, and future economic shocks.
As a result, consumers are prioritizing essentials, seeking value and promotions, and delaying or reducing spending on discretionary items such as dining out, furniture, and electronics.

Sources: Reuters, Bloomberg

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.