MARKET BRIEFING — January in Review, February Ahead

1. The Big Picture

• January 2026 closed with a strange mix of strength on the surface and instability underneath. But the path to those gains was anything but normal.
  The S&P 500 (+1.4%), Dow (+1.7%), and Nasdaq (+0.9%) all finished the month higher, extending the Dow’s nine‑month winning streak. Small caps led with a 3% surge, reinforcing early‑cycle energy.
• Markets were hit with geopolitical shocks, violent rotations, a historic metals crash, and a rapidly shifting macro narrative around the U.S. dollar and the Federal Reserve.
• January delivered gains — but it also delivered a warning.

2. Geopolitics Took Center Stage

This was the most geopolitically charged start to a year in decades.

• A U.S. military operation in Venezuela removed the sitting president and effectively put the U.S. in control of the country’s oil industry.
• The White House threatened new tariffs on European allies.
• Tensions with Iran escalated, with Tehran warning that any U.S. strike would trigger a “regional war.”
• Global perception of U.S. policy reliability shifted sharply.

The result:
The dollar hit a four‑year low, commodities spiked, and risk assets traded with a geopolitical risk premium that markets haven’t had to price in for years.

This is the new regime: geopolitics isn’t longer a headline — it’s becoming a driver.

3. The Metals Meltdown

After a year of parabolic gains, precious metals finally snapped.

• Gold: –11% in a single session
• Silver: –31% in a single session
• A combined $7.4 trillion in market value erased

This triggered a forced deleveraging across markets:

• Traders sold equities to cover metals losses
• Bitcoin plunged below $80,000, down nearly 30% in three months
• Volatility spilled into tech, small caps, and commodities

Sunday futures showed metals bouncing, but the damage to positioning is done.
This was a regime‑resetting event.

4. Tech: Leadership Fractures

The AI trade finally showed cracks.

• Microsoft –11% in January
• Apple –4.6%
• Tesla –4.3%
• Bitcoin –30% over three months

Meanwhile:

• Meta +8.6%
• Alphabet +8%

The message:
AI leadership is no longer monolithic.
Crowded trades are vulnerable. Rotation is real.

This week’s earnings from Alphabet, Amazon, AMD, Palantir, and Qualcomm will determine whether tech stabilizes or fractures further.

5. The Dollar’s Identity Crisis

The dollar fell 2.1% in January, hitting its weakest level since early 2022.

But analysts warn the dollar is no longer just reacting to macro conditions — it’s shaping them:

• Tightening financial conditions abroad
• Influencing earnings translation
• Driving global portfolio flows
• Forcing reassessment of dollar‑denominated assets

This is happening just as a new Fed Chair prepares to take over.

6. The Fed: Enter Kevin Warsh

President Trump announced he will nominate Kevin Warsh to replace Jerome Powell in May.

Key implications:

• Warsh has historically been hawkish, skeptical of QE, and supportive of market discipline.
• Trump wants lower rates — but Warsh is only one vote on the FOMC.
• Markets may have overestimated how quickly policy will shift.
• Analysts warn the “Fed put” may be ending.

A Warsh Fed could mean:

• Stronger dollar
• Higher real yields
• More volatility
• Less liquidity support
• Pressure on gold and silver

Markets are already adjusting.

7. Earnings: Strong, But Overshadowed

Fundamentals remain solid:

• 75% of S&P companies beat Q4 EPS estimates
• Slightly below the 5‑ and 10‑year averages, but still strong
• The economy remains resilient
• Consumer sentiment is improving

But earnings strength is being drowned out by:

• Geopolitical shocks
• Metals deleveraging
• Dollar volatility
• Fed uncertainty
• Tech leadership fractures

This is the first time in years that macro and geopolitics are overpowering fundamentals.

8. What Matters for February

Here’s the MyCompass Trading read:

Bullish Forces

• Positive January = historically strong full‑year returns
• Small‑cap leadership
• Solid earnings
• Resilient economy
• Tech earnings catalysts this week

Bearish Forces

• Geopolitical risk premium rising
• Metals deleveraging not fully resolved
• Dollar volatility
• Fed uncertainty under Warsh
• AI‑trade exhaustion
• Bitcoin weakness signaling risk aversion

Most Likely Outcome

A choppy, rotational February where:

• Tech leadership remains fractured
• Small caps and cyclicals continue to outperform
• The dollar stabilizes or strengthens
• Metals remain volatile
• Risk assets trade headline‑to‑headline
• Liquidity becomes more selective
• Traders must stay nimble, not heroic

9. MyCompass Trading Takeaway

January delivered gains — but not comfort.

The market is transitioning from a liquidity‑driven, tech‑dominated regime to a geopolitically sensitive, rotation‑heavy, risk‑managed environment.

This is a year where:

• Positioning matters
• Leverage matters
• Discipline matters
• And chasing parabolic moves will get punished

2026 isn’t about momentum — it’s about adaptability.