Mid Month Update - January 2026 - Beechhurst Capital Advisors LLC Asset Allocation Model
Happy New Year!
The first two weeks of January 2026 have delivered a surprisingly steady start to the year, especially considering how eventful the final quarter of 2025 was. Markets entered January with a mix of optimism and caution, shaped by last year’s strong performance and the ongoing debate about how quickly the Federal Reserve will continue easing monetary policy. Early January trading has reflected that same push‑and‑pull dynamic.
Equities: A Quiet but Constructive Start
U.S. equities opened the year without the fireworks investors saw in late 2025, but the tone remains broadly constructive. After the S&P 500 delivered a strong 17.9% return last year, investors have been digesting stretched valuations in mega‑cap tech and the possibility that leadership may broaden further in 2026. Early January trading has been relatively muted, in part because markets are awaiting the next round of economic data and the IMF’s upcoming World Economic Outlook update which is be published tomorrow, January 19.
International equities, which outperformed U.S. markets in 2025, have continued to attract attention. A softer dollar and improving global growth expectations have helped maintain momentum in developed and emerging markets.
Fixed Income & Cash: Stability Takes Center Stage
Bond markets have been calm so far this month, supported by the Fed’s December rate cut and expectations for additional easing later in the year. Money market funds remain attractive for investors seeking stability, with top‑tier accounts offering yields above 4% as of mid‑January.
Given the crosscurrents in the macro environment—slowing consumer sentiment, a softening labor market, and ongoing tariff impacts—maintaining a modest cash allocation continues to serve as a buffer against volatility.
Commodities: Gold Holds Its Ground
Gold has held steady through the first half of January, supported by expectations of lower real rates and persistent geopolitical uncertainty. Precious metals were among the standout performers in 2025, and early 2026 trading suggests continued investor interest as a hedge against both inflation and policy uncertainty.
Economic Backdrop: Watching the Data
The U.S. economy ended 2025 on a strong note, with real GDP growing at a 4.3% annualized rate in Q3. But economists remain cautious. Consumer spending is increasingly concentrated among higher‑income households, and tariff‑related distortions may fade as the year progresses. Investors are also watching the labor market closely for signs of cooling.
With the IMF set to release updated global growth forecasts next week, markets may get clearer direction as January unfolds.
Our Current Model Allocation (as of January 15, 2026)
• VTI – 60% - U.S. equities remain the core of the portfolio, supported by resilient earnings and long‑term growth fundamentals.
• IAU – 15% - Gold continues to serve as a stabilizer amid geopolitical and monetary policy uncertainty.
• VXUS – 15% - International diversification remains valuable, especially after last year’s strong performance abroad.
• Money Market Funds – 10% - Elevated yields and near‑term macro uncertainty justify maintaining a healthy liquidity position.
The year is young, and the next few weeks will likely set the tone for the first quarter. For now, markets appear steady, patient, and cautiously optimistic—an environment where disciplined allocation and broad diversification continue to shine.
