Monthly Market Summary - February 1, 2026
Economic Activity Remains Solid Despite Weak Sentiment
Economic data continues to highlight a widening gap between how people feel and how the economy is performing. Measures of real activity, such as retail sales and industrial production, indicate the economy ended 2025 with solid momentum. In contrast, consumer confidence fell to multi-year lows, driven by concerns about inflation, job security, and geopolitical uncertainty, and an index of manufacturing conditions remained in contraction. The gap between sentiment and behavior has been a recurring theme over the past 12 months. Despite weak consumer and business confidence, data that measures actual spending and economic activity is supportive of continued growth.
Treasury Yields Rise as the Fed Pauses its Rate-Cutting Cycle Again
Treasury yields rose in January in anticipation that the Federal Reserve would pause its rate-cutting cycle. The shift was driven by better-than-expected economic data and signs of stabilization in the labor market. While job growth continued to slow and the number of job openings fell ,unemployment unexpectedly declined and jobless claims remained low. The datapoints to a continued hiring slowdown, but the lack of widespread layoffs signals underlying stability. Overall, January’s economic data offered little new information on inflation or growth, which allows the Fed to remain patient.
As anticipated, the Fed held interest rates steady at its late January meeting, ending a streak of three consecutive 0.25% cuts in late 2025. The policy statement struck a more optimistic tone compared to recent months, describing consumer spending and business activity as solid despite disruptions from the Q4 government shutdown. The Fed’s decision and commentary signal await-and-see approach as policymakers assess the lagged impact of last year’s cuts. Based on pricing in futures markets, the next rate cut isn’t expected until June.
Market Leadership Broadens
Two market themes defined the month. First, market leadership shifted away from mega-cap technology stocks. Major indexes traded higher, but the average stock outperformed the index. The equal-weighted S&P 500 outperformed the traditional market-cap-weighted index, small-cap stocks outperformed the S&P 500 by nearly +4%, and the Value factor outperformed the Growth factor by over +5%. The rotation is a significant change after a small group of mega-cap stocks drove a large portion of the stock market’s recent gains. The shift is attributed to an improving economic outlook and a catch-up trade, as expensive mega-cap technology valuations prompt a rotation into more traditional, domestically focused companies that will benefit from lower interest rates and trade at more attractive valuations.
This material prepared by Coastal Bridge Advisors is for informational purposes only. Additional data provided by MarketDesk Research. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by CBA are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. CBA, however, cannot guarantee the accuracy or completeness of such information, and certain information may have been condensed or summarized from its original source.