F.N.B. Wealth Management Fast Five

1. What happened in markets during January?

It was a roller coaster start to the year, as markets had to react to several global headlines throughout the month. The most volatile day came on January 20, as a sell-off in Japanese government bonds, coupled with trade-related tensions, contributed to the S&P 500's worst single-day drop since October 2025. Nevertheless, equity markets showed how resilient they are, with the S&P 500 hitting all-time highs late in the month and finishing up 1.4% for January. Of course, it was the extended broadening of equity markets that caught our attention, as U.S mid- and small-caps (Russell Mid Cap Index and Russell 2000 Index) outperformed the S&P 500 at +3.1% and +5.4%, respectively, on robust economic data and strong earnings. International equity markets had another very strong month, with the MSCI EAFE (developed international markets) returning +5.2% and the MSCI Emerging Markets Index +8.9% for the month.

Despite some intra-month volatility due to the sell-off in Japanese government bonds and uncertainty around U.S. policy decisions, the major U.S. bond market indexes were positive in the 0.1% to 0.5% range. The two-year Treasury yield and the 10-year yield both ended the month of January where they started, at 3.5% and 4.2%, respectively.

Precious metals and the energy complex dominated commodity headlines during the month with gold +13.3%, silver +18.9%, West Texas Intermediate (WTI oil) +13.6% and natural gas +18.1%.

2. What is the story with gold?

Even with a significant sell-off on the last trading day of January (-10.2% on January 30), gold posted new all-time highs throughout the month and still ended the month +17.1%. In fact, gold reached its all-time closing high on January 29, at $5,595 per ounce, just shy of doubling its price on January 31, 2025, when it was $2,798 per ounce. The near parabolic rise in gold over the last year has captured the attention of a broader set of investors and that can bring some speculation.

Historically, commodity prices rise and fall largely based on the economic principles of supply and demand. Of course, gold has been viewed as an economic store of value (a safe haven asset) because of its relative scarcity and the fact that it once served as the basis for global commerce. It is this dynamic that has been the primary driver of gold prices since the end of 2022. What changed in 2022? Well, because of post pandemic responses, monetary policy from global central banks became desynchronized, with some central banks easing monetary policy while others tightened. As part of that, central banks carry reserves to help support their economies. In 2022, central banks around the world started buying gold, rather than investing their reserves in things like U.S. Treasuries or other sovereign debt instruments. This demand for gold from central banks has only gone up as geopolitical uncertainty has increased around the world.

So, gold has been benefiting from large institutional asset pools that want to own the physical asset, as well as from individual investors who want to have a “safe haven” or real asset in their portfolio. But, as mentioned, speculative behavior can show up when an investment has appreciated like gold has over the last year. Because of this, it would not be surprising to see some additional volatility in gold during February.

3. Why did the Federal Reserve decide to pause their interest rate cuts?

Having cut interest rates for three meetings in a row, the Federal Open Market Committee (FOMC) of the Federal Reserve chose to keep rates unchanged at their January meeting, leaving the Fed Funds target range at 3.50% to 3.75%. Commentary from Federal Reserve Chairman Jerome Powell was constructive on the U.S. economy, with him saying it was “on firm footing” coming into 2026, the labor market was stabilizing in recent data, and inflation is expected to resume a downward trend. In fact, the official press release showed the Committee upgraded its view on the economy, saying economic activity “has been expanding at a solid pace,” and removed the language about downside risks to the labor market. Given the Fed’s decision to pause their rate cutting and the justification they gave for it, it is not unreasonable to think they will not cut again until a new Chairperson is confirmed.

• On January 30, President Trump announced that he will be nominating Kevin Warsh as the next Federal Reserve Chairman. This came as a bit of a surprise to some Fed watchers, since Kevin Warsh is often viewed as an inflation hawk, which means he may be less willing to lower rates if inflation remains at current levels. Of course, Mr. Warsh does have a history at the Fed, serving on the Board of Governors from 2006 to 2011 during the Great Financial Crisis. Global markets responded favorably to the announcement because it does seem to ease some of the concerns around Fed independence.

4. What drove international equity markets in January?

As noted, international equity markets built upon their successful 2025 with January returns of MSCI EAFE (developed international markets) +5.2% and the MSCI Emerging Markets Index +8.9% for the month. A significant driver of the returns in January was the fact that the U.S. dollar reached its lowest level in four years, relative to other currencies, due to U.S. policy concerns. When the U.S. dollar moves lower, the value of international investments tend to go higher due to currency exchanges — but it is not just a U.S. dollar story. The desynchronized global monetary policy landscape gives some countries a competitive advantage by having lower borrowing costs, while others are expanding their fiscal policies to allow for more borrowing and spending, which could be stimulative to their economies. Prior to 2025, international equity markets broadly underperformed U.S. equity markets since 2014. Is the recent performance of international markets just one big catch-up trade? Only time will tell, but there are now several macroeconomic tailwinds supporting international equities that were not as strong before 2025.

5. What is the Chief Investment Office watching for in February?

February could be a very dynamic month, as we have three things that we believe are likely to move markets:

1. Fourth quarter earnings reports for U.S. companies continue to be reported throughout February. As of the end of January, 143 companies in the S&P 500 had reported, with 79.1% of them beating expectations. Of course, expectations are elevated and the costs for missing those expectations or lowering forward guidance can have significant impacts.
2. The Federal Open Market Committee meets again on February 18. We don’t anticipate a rate change at this meeting, but updates to the inflation and employment data could have an impact on the future path of interest rates.
3. Global commodities will remain sensitive to geopolitical risks (Ukraine, Venezuela, the Middle East, etc.) and, given the volatility in certain commodities at the end of January, we will be watching for price movements that could have meaningful impacts on inflation.

Charts of the Month

U.S. economy on “firm footing” heading into 2026:

As Federal Reserve Chairman Powell said, the U.S. economy was on firm footing heading into 2026. Looking at five core areas of the U.S. economy, we can see that 4 out of 5 of them were in fact firming heading into 2026. Of course, there is a delay in the collection and publication of this data, so we will be watching the next release to see if we go from just firming to sustainable strength. It should be noted that these economic segments are interest rate-sensitive and, as such, could have additional activity if interest rates in the U.S. move lower.

U.S. Economic Building Blocks

Watching for inflation:

Inflation remains a focus of ours as the three major measures of inflation — the Consumer Price Index (CPI), the Producer Price Index (PPI) and Personal Consumption Expenditures (PCE) — are all sustainably above the Federal Reserve’s long-term target of 2.0%. We know from historical parallels, such as during the 1970s and early 1980s, that inflation can come in waves. If the U.S. economy continues to have above-trend GDP growth like it did in 2025 while monetary and fiscal policies are accommodative, then there could be an increased risk that inflation remains elevated or even further escalates during the second half of 2026. We are watching a broad spectrum of factors for any indication that inflation is not moderating further from here.

U.S. Measures of Inflation