Macro Minute: Week of February 23, 2026
“As goes January, so goes the year.”
The so-called January Barometer or January Effect is a heuristic that is used by market participants to gauge how the rest of the year will be based off the stock market returns in January. This might sound silly, but it has a solid track record of over 80% since 1950 for the U.S. If this holds true, then the S&P 500 total return being up 1.45% bodes well for the rest of the year. To me, this is more of a confirmation that markets tend to trend over time. What does trending markets mean? Think of it like inertia. Things in motion will stay in motion unless acted upon by an outside force.
Let me give an update on the trends that I am witnessing and my thoughts about their implications. The global impulse of fiscal policy is one of expansion. Everywhere you look there is a desire for governments to spend and expand. Whether it is China that is spending on industry and to expand domestic consumption, Europe that is spending on defense, Japan that is planning fiscal expansion under new leadership, or the U.S. that is spending to bring back manufacturing and AI infrastructure, monetary policy is increasingly loose or loosening around the world. The inflation response was quick and violent in 2022, by raising interest rates. Now on the other side of that inflation, we have central banks able to ease rates, spurring further growth.
On top of fiscal and monetary policy pointing to expansion, we have a U.S. administration that desires a weaker dollar from a currency exchange perspective. As the dollar falls, it allows emerging markets, international markets, and real assets to grow. All these things are happening. Precious metals, led by gold, has appreciated significantly faster than the U.S. stock market since the beginning of 2025. Both emerging markets and international markets have appreciated faster than the U.S. as well.
This global growth has push long dated bond yields higher. After 2008, global bond yields were abnormally low. But since 2020, the trend has been for yields to be higher.
What do all these trends mean for a portfolio manager? It means that the portfolio of 60% U.S. stocks and 40% U.S. bonds that worked beautifully from the 1980’s until 2020 has changed. Current trends mean that U.S. stocks are lagging international and emerging markets and bond exposure that once complimented your stock allocation has stopped working. 2022 was a wakeup call when both stocks and bonds went down together. I believe that portfolio managers need to broaden allocations and think about alternatives to bonds as a stock allocation diversifier.
In summary, markets trend. The current market trends are ones that encourage international allocations along with alternatives to bonds. Don’t be surprised if these trends stay persistent and unfold for a while.
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