Market Movers & Shakers

U.S. equities rallied in January. The S&P 500 closed higher by 1.37%, posting its best month since October and ticking above 7,000 for the first time ever. The Nasdaq snapped a two-month losing streak, finishing the month higher by 0.95%, but was the laggard of the major indices as mega-cap tech’s performance was relatively mixed. The small-cap Russell 2000 was the standout performer, advancing 5.31% and outpacing the S&P 500 by the largest margin in months.

Market leadership broadened this month as a rotation away from mega-cap tech and into more cyclical and value-oriented sectors took hold. From a sector standpoint, Energy, Materials, and Consumer Staples were the top performers, while Technology, Financials, and Healthcare closed in the red. The shift in markets was underscored by the equal-weight S&P 500, which outperformed its market-cap-weighted counterpart by roughly 200 basis points. Small caps, specifically the Russell 2000, notched 14 consecutive days of outperformance in January, the longest streak since 1996. Value, as measured by the Vanguard Value ETF (VTV) outperformed growth, as measured by the Vanguard Growth ETF (VUG), by nearly 6%. The rotation to small, cyclical, and value factors was largely fueled by policy expectations from the Trump administration, specifically anticipated stimulus and the One, Big, Beautiful Bill Act’s potential to drive consumer spending through tax refunds.



Source: FactSet

January was marked by significant geopolitical volatility, yet markets remained remarkably resilient. A U.S. special operation in Venezuela, culminating in the capture of Maduro and the subsequent control of the nation’s oil exports, sent ripples through the energy complex early in the month. Simultaneously, diplomatic friction with NATO allies intensified following President Trump’s renewed interest in purchasing Greenland and the threat of fresh tariffs, though these tensions eased after a framework deal was established following meetings at the World Economic Forum in Davos, Switzerland. In the Middle East, the deployment of a U.S. carrier strike group in response to Iranian domestic unrest and the reported killing of thousands of protestors added another layer of uncertainty to global markets. Despite these developments, market participants largely brushed off the turbulence, focusing more on macroeconomic news and corporate earnings over geopolitical noise.

The Federal Reserve held interest rates steady during last week’s January FOMC meeting, as anticipated. The meeting and post-meeting press conference brought very little new to the table for markets. Consensus suggests interest rates are now likely to remain unchanged for the remainder of Jerome Powell’s tenure. The most notable Fed-related development last week came on Friday, when President Trump announced his nomination of former Federal Reserve Governor Kevin Warsh to succeed Powell as Fed Chair. The selection of Warsh as the next leader of the central bank surprised many market participants. While the President has consistently pushed for aggressive rate cuts and easy monetary policy, Warsh’s history suggests a more hawkish lean.



Source: U.S. Federal Reserve, Reuters

The selection of Warsh may have been a strategic move to restore market confidence. By selecting a nominee with deep institutional roots and a reputation for independence rather than a rubber stamp loyalist beholden to the President’s agenda, the administration is signaling a commitment to Federal Reserve credibility and independence. Warsh’s thoughts on monetary policy do, however, seem to fall in line with the White House’s “Main Street over Wall Street” narrative. In an Op-Ed titled “The Federal Reserve’s Broken Leadership” in the WSJ last November, Kevin Warsh wrote “The Fed . . . should abandon the dogma that inflation is caused when the economy grows too much and workers get paid too much. Inflation is caused when government spends too much and prints too much. Money on Wall Street is too easy, and credit on Main Street is too tight. The Fed’s bloated balance sheet, designed to support the biggest firms in a bygone crisis era, can be reduced significantly. That largesse can be redeployed in the form of lower interest rates to support households and small and medium-size businesses.”

The Fed has two primary levers it can pull to calibrate monetary policy: interest rates and the size of its balance sheet. Warsh believes that higher productivity (sparked by AI) and the deflationary nature of technology create non-inflationary growth that allows for interest rate cuts without the risk of running the economy too hot and sparking inflation. The easing from rate cuts could then be offset by shrinking the central bank’s balance sheet, effectively pulling the levers in opposite directions to keep policy net neutral, while having different effects on Wall Street versus Main Street. In other words, in Kevin Warsh’s mind, to increase economic growth and lower inflation, cut interest rates and shrink the Fed’s balance sheet. The early nomination of Warsh introduces a “shadow” Fed Chair dynamic to markets, where Powell’s official policy and guidance now compete with his successor’s looming influence – potentially creating additional uncertainty and near-term market volatility.



Source: FactSet

Corporate results continue to roll in as we enter the busiest two-week stretch of earnings season. According to FactSet, the blended growth rate for Q4 2025 is now +11.9%, up from the +8.3% expected at the end of December. If the growth rate holds up, it will mark the fifth straight quarter of double-digit earnings growth for the S&P 500. Profit margins have held up remarkably well despite market concerns over tariffs and higher costs. The blended net profit margin for the S&P 500 for Q4 2025 is 13.2%, which would mark the highest margin since FactSet began tracking the metric in 2009. Analysts believe profit margins will be even higher in 2026, evidenced by estimates for Q1 2026 through Q4 2026 – 13.2%, 13.8%, 14.2%, and 14.2%, respectively.

Corporate commentary around AI monetization, productivity, and capex continue to receive outsized focus as AI adoption remains a topic widely discussed, though very few companies are actually quantifying the impact. One of the companies quantifying the impact is Meta, which reported AI investments are resulting in users spending even more time scrolling on Instagram and Facebook. According to Mark Zuckerberg, this AI-driven engagement has led to higher advertising efficiency, driving up ad revenue with impressions rising 18% while the average price per ad increased 6%. As a result, Meta now projects $125 billion in capital expenditures in 2026 alone, effectively betting the entire company’s cash flow on the AI infrastructure buildout.

Beyond the AI hype, recent earnings from payment giants Visa and Mastercard, travel & leisure companies Southwest Airlines and Royal Caribbean, and retailers like Apple and Levi Strauss paint a picture of a resilient consumer. Their collective results and holiday commentary underscore a season of robust, healthy spending across both physical goods and travel experiences. This upbeat commentary is met with a pickup in job cut headlines from some of the largest U.S. companies, featuring the likes of Amazon (cutting ~16k corporate jobs) and UPS (cutting up to ~30k jobs).

Updates & News*

When earnings season rolls around, we tend to see a bit more “action” or volatility in individual stocks. This idiosyncratic volatility can create opportunities for us to put cash to work on the transition level. New manager-trader accounts and accounts with recent deposits that have been under Tandem’s management for two weeks are approximately 40% of the way invested in our strategies. By the one-month mark, new money is just over 60% of the way in line with our strategies, and by the three-month mark new accounts and deposits are over 80% of the way transitioned.

On the earnings front, Visa and Mastercard both posted strong quarterly results, with revenues up 15% and 18%, respectively. The payment giants’ reports highlighted a stable and strong consumer environment, with both companies benefiting from robust holiday spending, with particular strength in retail and travel categories. Management from both Visa and Mastercard expressed confidence in the 2026 outlook, citing the continued wealth effect from record-high financial markets and balanced labor markets as catalysts for consumer spending. In the healthcare space, ResMed delivered a strong quarter marked by 11% revenue growth, over 300 basis points of gross margin expansion, and mid-teens earnings-per-share growth, reflecting strong ongoing demand for its sleep and respiratory care devices. Stryker also delivered an exceptionally strong finish to 2025, reporting double-digit organic sales growth and 11.5% earnings-per-share growth in the fourth quarter. Stryker’s strength was driven largely by its MedSurg and Neurotechnology segments and the continued expansion of its Mako robotic platform.

Source: Source of all data is FactSet, unless otherwise noted.

*The transition level activity taken by Tandem is applicable to new manager-traded accounts and new money in manager-traded accounts, not the composite or firm-wide level. New manager-traded accounts and new money in manager-traded accounts are not automatically invested on the first day. Rather, they are transitioned into our strategy over a longer time period that is dependent upon market conditions, this process differs from Tandem’s model-provided strategies, where money is invested on the day the account opens. Strategy level activity is applicable to the composite and action is taken at the firm-wide level.

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