Market Insights Recap — Week of February 2, 2026

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital’s Private Bank.

January's in the record books for the solid second-gear economy. Our recession checklist is almost all green. Over the last six months, industrial production stats have turned positive. Durable goods orders are rising. Payroll employment is stabilized from the shutdown slowdown last fall. 

Now housing starts, they remain a sore point, currently at their lowest level since May 2020. This week the Institute for Supply Management (ISM for short) updates their surveys this week. I expect new orders and supplier delivery data to show continued improvement. January payrolls, also released this Friday, should exceed 50,000 net new jobs. Not bad. Overall, the economy's in better shape than the media and consumer sentiment would suggest.

Now, how about the stock market in January? January usually ranks in the middle of the pack for performance. Average gains, just barely 1%. But mid-term years like this one, they're usually flat to negative. So last month beat the odds: S&P 500 up 1.4%, small cap up 5.4%. Emerging markets benefiting from a slightly weaker dollar up 8.8%. A rotation away from the Magnificent Seven and that artificial intelligence theme. I expect that rotation to continue towards small cap and value. Industrials, energy, consumer sectors, they're all benefiting at AI's expense. 121 S&P 500 names report this week. Google and Amazon are going to give us some more idea about AI's continued strength. Now positive January returns? Well, they bode well for the rest of 2026. Our trusty dusty Stock Traders Almanac tells us there's been 46 years where January returns were positive. OK, but in 41 of those 46 years, the full year ended positive. That's an 89% win rate for an average gain of 16.5%. For once, I'd like to be average. 

How about interest rates? No surprise last week that the Fed left short-term rates unchanged at 3.5 to 3.75%. The surprise was the committee recognized that the economy's improving. I covered Powell's press conference in more detail on my LinkedIn and X posts last Wednesday. Now I got to give the administration credit, though. On Friday, Trump nailed the traditional 100-day timeline for nominating a new Fed chair. Kevin Warsh will go to the Senate for confirmation to take Miran's expiring term. And then the administration will try to hit a double, getting him confirmed as the next Fed chair when Powell's term ends May 15. 

Now a little background on Kevin Warsh. He was a Fed governor from 2006 to 2011. And during the 08’–09’ financial crisis, he was Bernanke's representative from the Fed to Wall Street. He is tight with Treasury Secretary Bessent and his current boss, Stanley Druckenmiller. All things considered, a down-the-fairway pick that Trump telegraphed a year ago. Markets will like the choice. 

Now, what about those lower interest rates that Trump wants? Warsh historically has been a hawk, more willing to raise rates to tamp down inflation. A recent writings by Warsh suggest he's in line with the administration that artificial intelligence will lead to a productivity boom and an accelerating economy, and a stronger economy could then handle lower interest rates and not spur inflation. At least that's their thinking. We'll see. 

A quick note about gold and silver. Recent 30% drop in silver, along with gold's drop from its 5,000 heights, was attributed to the Warsh nomination. I don't think you can really do that. Perhaps, maybe that played a small part. But there's always a number of factors involved in pushing prices around, and you don't know until much later. The key for you to remember is that these are rare parabolic rises. When they happen, folks always worry, gosh, they missed out on the rally. Fear not. Parabolic runs always come back down. Just like gold and silver are doing now. And they give way to long, steady recoveries. Slow and steady is always more enjoyable than flying high and jumping out without a parachute. 

So February brings more earnings reports, the start of those One Big Beautiful Bill tax refunds and possibly some action with Iran. Right now, our dashboard's green. We're fully invested; 'til next time.