Where to begin? After a winter storm disrupted nearly two-thirds of the country at the start of the week, markets faced a barrage of economic and geopolitical crosscurrents. Precious metals spiked, with gold and silver hitting fresh all-time highs on a weaker dollar and rising geopolitical anxiety, only to reverse sharply by week’s end as profit-taking kicked in – Gold tumbled nearly 13% and Silver dropped by 30% from Thursday’s highs. Oil prices held near a six month high as tensions between Iran and the U.S. escalated, injecting another layer of uncertainty into global risk sentiment.
At the policy level, the Federal Reserve opted for a 10–2 vote to keep its benchmark rate unchanged at 3.50% to 3.75%. Chair Powell signaled that policy is “closer” to neutral while emphasizing that unemployment has stabilized and inflation remains stubborn, and the US economy is demonstrably resilient.
Meanwhile, President Trump announced the nomination of Kevin Warsh to succeed Powell as the next FOMC Chair. Warsh’s more recent comments favoring lower interest rates -despite a historically hawkish track record - suggest a potentially more accommodative stance than previously assumed. Rates reacted with a modest bear steepening move, as the long end drifted higher. Markets appear to interpret Warsh’s nomination as slightly less dovish than alternative candidate Rick Rieder, particularly following Trump’s decision to keep Hassett as Director of the National Economic Council.
Equities absorbed a mixed set of earnings from the Magnificent Seven. Microsoft delivered results above expectations but saw nearly a 10% pullback as investors focused on elevated capital expenditure trends tied to AI infrastructure. Meta, by contrast, surged roughly 10% on another strong quarter - its eleventh consecutive earnings beat. Tesla and Apple offered solid results that did little to move their share prices. The AI-centric narrative, however, is only partially complete; forthcoming results from Nvidia, Alphabet, and Amazon will help determine whether tech leadership can continue to dominate market sentiment.
As for January, often viewed as a barometer for the year, the S&P 500’s just over 1% gain clears the bar, but only barely. Momentum is present, but conviction remains thin.
From the Municipal Desk (with contributions from Ryan Riffe):
The municipal market remained quiet in the face of geopolitical news, economic data releases, and a FOMC meeting. With less than $4 billion in new issuance coming to market, secondary trading remained tight. As expected, new issue supply was met with strong demand as most deals were repriced to lower yield targets. The 1-to-15 year part of the curve continues to be the primary area of concentration for the market; while longer‑dated maturities have lagged. This falls in line with the steepening trend observed in the Treasury market. Municipal fund flows remained robust, with investors adding over $2 billion for the week. At the same time, customer bid‑wanteds have been light, making it increasingly challenging for investors to source paper. As a result, Muni/UST ratios continue to trade at rich levels. We look ahead to the first trading week of February where the market will price in $7.6 billion of new issue supply (Up from $3+ Billion the week prior). We anticipate this to be well-received, given strong inflows and the increase in reinvestment capital for the new month.
30-Day Visible Supply @ $11.527 Billion
Weekly Supply @ $7.6 Billion
2-YR Ratio @ 61%
3-YR Ratio @ 60%
5-YR Ratio @ 59%
10-YR Ratio @ 62%
30-YR Ratio @ 88%
An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.
The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield. • The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. • The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. • The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September. • The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.
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