Read Between the Lines January 2026

Transcript

Welcome to Matco’s Read Between the Lines, a monthly look at what’s really moving markets beneath the headlines. In each edition, I’ll share the key developments that matter most, provide the context behind them, and finish with a book I’ve recently read and recommend. These books will often touch on investing, wealth planning, economics, historical perspectives, or simply topics I find interesting, so be sure to stay until the end for this month’s feature read. But first, let’s dive into the first 30 days of the year.

January is an important tone-setter for markets. Despite persistent geopolitical headlines, including heightened tensions around Greenland and a U.S. military operation in Venezuela, markets delivered a constructive, though uneven, start to the year. Equity markets finished the month broadly positive, and leadership continued to broaden, a theme that began in 2025. European and Japanese equities outperformed U.S. markets, supported by more attractive valuations and improving investor confidence. Notably, Europe’s IPO market recorded its strongest start to a year in decades, an encouraging signal that risk appetite and capital formation have improved in the region. As outlined in our 2025 positioning and 2026 outlook, we’ve been constructive on Europe given its attractive valuations and pending fiscal stimulus, and these themes remain intact. Brazil also deserves recognition for posting some of the highest returns year to date. Meanwhile, China and India continue to lag, reflecting weaker domestic confidence and ongoing capital outflows. This broadening of leadership beyond the U.S. reduces reliance on a narrow group of technology stocks and supports more durable market returns.

In fixed income, bond yields remained rangebound, though bonds are rarely the most exciting topic. Strong economic data nudged rates higher at times, while geopolitical uncertainty supported demand for high-quality bonds, helping keep a lid on yields. Despite significant debt issuance from AI-related companies to fund long-term investment, credit spreads remained tight. Both central banks met late in the month, with the Bank of Canada holding its overnight rate at 2.25% and the U.S. Federal Reserve leaving the federal funds rate unchanged at 3.75%. The biggest development in interest rates was the announcement of Kevin Warsh as the next Fed Chair. Given his background and experience, the appointment has been well received, though how his relationship with President Trump, and alignment with his preference for lower rates, evolves will be important to watch.

Commodities were a standout during the month. Gold reached an all-time high above $5,000 per ounce, while silver surpassed $100 for the first time ever, milestones that highlight how investors are hedging geopolitical, fiscal, and long-term currency risks. However, these moves proved short-lived. On the final trading day of the month, both metals reversed sharply, falling back below those psychological thresholds. Our earlier positioning, which included increasing exposure to base and precious metals in late 2023 and 2024, has played out well. However, our risk management process led us to trim those exposures recently, locking in gains. Energy price action was more subdued by comparison.

In currency markets, the U.S. dollar softened modestly, while the Canadian dollar appreciated to roughly 0.74 per U.S. dollar, its strongest level since late 2024, supported by firm commodity prices and relative economic stability, but primarily driven by the weakening U.S. dollar.

At Matco, we manage five core investment strategies internally, meaning we remain deeply engaged in the success of our client portfolios. Our platform is off to a strong start this year, but the work continues.

Turning to my most recent read, I picked up 1929 by Andrew Ross Sorkin. In his own words, Sorkin set out to tell a fast-paced story of the final years of the Roaring Twenties and the lead-up to the 1929 stock market crash, aiming to bring the same narrative intensity that Titanic delivered on screen, and I think he did this very well. The book illustrates how extreme speculation, widespread leverage, and weak guardrails transformed a booming market into a historic collapse, setting the stage for the Great Depression. Sorkin weaves in compelling real-life figures such as J.P. Morgan Jr., Andrew Mellon, and Charles E. Mitchell, showing how confidence and misjudgment can amplify both booms and busts.

I highly recommend the book, though it is a bit of a commitment at around 400 pages, particularly if you’re interested in history, markets, or both. My main takeaways were a few important reminders. First, leveraged investing is really only appropriate for a narrow, sophisticated group, not the masses. In the 1920s, leverage became as commonplace as everyday credit use, which ultimately proved disastrous. Second, while some aspects of markets evolve dramatically, others, like the interaction between politicians, bankers, and major market participants, remain constant over time. And finally, market narratives tend to move in dramatic waves. Less experienced investors often let emotions drive both their decisions and their portfolios, while more disciplined investors filter out the noise and follow a more consistent, long-term approach.

Happy reading, I hope you enjoy.

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