January Market Recap
Beyond equities, the energy and metals markets saw intense activity. Crude oil rose amid international political shifts, and natural gas prices shot up 40% to meet winter demand. Precious metals outshone both, gaining ground as a weaker U.S. dollar drove investors toward safe-haven assets. This eventful month concluded with the Federal Reserve holding interest rates steady after three rate cuts in 2025.
Three Reasons Why Gold Has Been Unstoppable
The spectacular rally of precious metals in late 2025 and early 2026—with gold surging past $5,300 and silver topping $116 an ounce—is driven by a "perfect storm" of fiscal and political instability.
Chaotic policy stance
Since Trump reclaimed the Oval Office last year, there have been plenty of policy surprises—both good and bad. Unorthodox economic policies and geopolitical maneuvering from the White House have created a "crisis of confidence" in traditional U.S. assets.
- Tariff Warfare: Record-high tariffs on both friends and foes alike have stoked fears of retaliatory trade wars and global instability.
- Institutional Attacks: Ongoing public criticism of the Federal Reserve and Chair Jerome Powell has led investors to fear the erosion of central bank independence.
- Geopolitical Surprises: Threats against Greenland and military interventions have spurred a massive flight to safe haven assets.
The Debasement Trade
Investors are increasingly rotating out of the US dollar and Treasuries and into real and hard assets, a phenomenon market analysts call the debasement trade.
- Ballooning Debt: US government debt, which doubled over the last decade to over $38 trillion, has convinced many that currency devaluation is the only path to solvency.
- Central Bank Diversification: Seeking to reduce exposure to the dollar, global central banks—particularly in Asia—have been buying gold at record levels to diversify their reserves.
- Dollar Weakness: Trump’s stated lack of concern regarding a falling dollar has further fueled its slide to a 4-year low, making dollar-denominated metals cheaper for international buyers.
Lurking Inflationary Pressure
Precious metals are acting as a "barometer of anxiety" for stickier-than-expected inflation.
- Fiscal Profligacy: Aggressive government spending and massive deficits are widely viewed as "money printing" that will eventually trigger a new inflationary cycle.
- Supply Chain Shocks: Tariff-induced costs are passing through to consumers, threatening to push inflation well above the Fed's 2% target.
- Commodity Spillover: The rally has extended into industrial metals like copper and tin, which analysts warn could put an "inflationary floor" under the cost of popular goods like electronics and vehicles.
While stocks are still the core component for long-term investors, gold and other commodities bring unique diversification opportunities, with low correlation to the broader stock market.
Are Taxpayers In For A Pleasant Surprise?
The One Big Beautiful Bill Act (OBBBA) introduced several provisions that many tax experts expect will provide a boost to the economy in form of bigger tax refunds. They include:
- Higher standard deductions: $350 more than 2025.
- The new senior deduction: $6,000 for filers aged 65 or older ($12,000 on a joint return if both spouses are 65 or older).
- Qualified tips deductions: up to $25,000.
- Qualified overtime compensation: up to $12,500.
- Increased cap on state and local taxes (SALT) deduction: $40,000 (from $10,000).
While estimates vary based on individual circumstances, experts, including those from the Tax Foundation, project a boost of $300 to $1,000 for the typical household, with average refund expected to rise from $3,167 in 2025 to roughly $3,800 or $4,000 this year.
What is a Backdoor Roth IRA and Is It Right For You?
Roth IRAs are a premier retirement planning tool due to the tax-free nature of growth and future distributions. However, thanks to IRA rule changes made by Congress in 2010, taxpayers with income above a certain threshold are ineligible to contribute to a Roth IRA.
Anyone with earned income can contribute to a Traditional IRA, though, regardless of their income. A strategy colloquially known as the “Backdoor Roth IRA” can be useful for high earners who would otherwise be unable to contribute to a Roth IRA – but the Backdoor Roth requires an extra step. Check out the graphics below for how it works and chat with us to see if it makes sense for you!
Beware of the IRA aggregation and pro rata rule! What does this mean? All IRA account balances are aggregated, and the portion of any conversion that is taxable is directly correlated to the portion of pre-tax versus after-tax funds in those consolidated IRAs. This means that a Backdoor Roth strategy might make less sense for those who have already accumulated large balances in a Traditional IRA.
Example: Michael has $95,000 in existing IRA assets, all of which came from deductible (pre-tax) IRA contributions. He is now a high-income earner and wants to make a $5,000 non-deductible IRA contribution, then convert that $5,000 to a Roth IRA.
However, because of the IRA aggregation rule, Michael cannot convert only the $5,000 non-deductible contribution—even if it is held in a separate IRA account. Any Roth conversion must be treated as a proportionate conversion of all of his IRA assets.
After the contribution, Michael’s total IRA balance is $100,000 ($95,000 pre-tax + $5,000 after-tax). If he converts $5,000 to a Roth IRA, only 5% of that conversion ($5,000 ÷ $100,000) is considered after-tax.
As a result, only $250 of the $5,000 conversion is tax-free, while $4,750 is taxable. After the conversion, Michael will have a $5,000 Roth IRA and $95,000 remaining in traditional IRAs, which will consist of $90,250 pre-tax and $4,750 after-tax basis.
