January 27, 2026

Reminder: Postmarks, Deadlines, Uncertainty

If you haven’t already, please read last week’s note regarding updates to US Postal Service rules and how they may affect your obligations to the IRS (including the filing of W‑2 forms for employees).

Welcome, Lisa!

Please join us in welcoming our newest member of the tax team, Lisa Chen! Lisa joins us with experience across public accounting firms and the nonprofit industry. Her background includes financial reporting, tax compliance, and month-end closes. She has experience preparing federal and state tax returns for high-net-worth individuals, partnerships, corporations, trusts, and nonprofit clients.

The Markets

Geopolitics roiled financial markets.

Just a couple of weeks ago, many analysts and asset managers expressed broad optimism about the potential performance of United States stock markets in 2026 – and the stock market started the year strong. “The S&P 500 closed at new records three times in the first seven trading days of 2026, and isn’t far from its all-time high,” reported Teresa Rivas of Barron’s in mid-January.

U.S. Stocks Moved Lower Last Week

Early last week, markets focused sharply on the elephant in the room – geopolitics. Lynn Thomasson and Sabrina Nelson Garcinuno of Bloomberg reported:

“For weeks on Wall Street, markets were unusually subdued as President Donald Trump threatened the post-war order by asserting US dominance of the Western hemisphere. But with his drive to take over Greenland throwing the European and American alliance in disarray… the calm abruptly snapped. As stock markets opened on Tuesday, the ‘Sell America’ trade came back in full force… The S&P 500 dropped over 2 [percent], erasing all of this year’s gains.”

U.S. Treasury Yields Moved Higher

The U.S. Treasury market swooned, too. The yield on 30-year U.S. Treasury bonds rose from 4.79 percent at the end of the previous week to 4.91 percent on Tuesday.

The U.S. wasn’t the only country to see yields move higher. Global bond yields rose after the Japanese Prime Minister proposed to cut taxes on food, which bond markets feared could lead to higher inflation. Phil Serafino of Bloomberg explained:

“…higher yields act as a powerful magnet, pulling Japanese savers’ money out of markets around the globe and drawing it back home. That means less demand for sovereign bonds such as [U.S.] Treasuries… Another factor: governments and companies are flooding the market with new bonds as they ramp up spending on defense, data centers, and just about everything else.”

The law of supply and demand holds that a rising supply of bonds in combination with falling demand is likely to lead to lower bond prices and higher interest rates, reported Jason Fernando of Investopedia.

By the end of the week, U.S. stock and bond markets had calmed. “The S&P 500 danced around the breakeven line Friday afternoon while the Dow Jones Industrial Average was down… and the Nasdaq Composite was up,” reported Karishma Vanjani of Barron’s. The yield on the 30-year U.S. Treasury bond finished the week at 4.82 percent.

Data as of 1/23/26	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 Index	-0.4%	1.0%	13.0%	19.8%	12.4%	13.9%
Dow Jones Global ex-U.S. Index	0.6	4.6	31.4	13.1	5.2	7.2
10-year Treasury Note (yield only)	4.2	N/A	4.6	3.5	1.0	2.0
S&P GSCI Gold Index	8.4	15.6	79.7	37.1	22.0	16.3
Bloomberg Commodity Index	5.3	9.0	15.6	2.1	8.4	4.9

What Could Higher Treasury Rates Mean for the United States?

The U.S. government spends a lot of money. Some of that spending is covered by with taxes, tariffs, and other sources of revenue. When that’s not enough, the government borrows the money it needs to operate.

The U.S. borrows money by issuing U.S. Treasury bills, notes, and bonds. When a person, company, or country buys a U.S. Treasury, they are lending the government money. In return, the United States agrees to pay interest for a specific period of time and then return the amount borrowed.

The interest the United States pays on Treasuries is a lot like the interest people pay on outstanding credit card balances. The higher the debt, the more interest is owed.

U.S. Interest Costs Are Growing

Officially, the U.S. government’s spending year begins in October, which can be confusing. The period from October through December 2025 is known as the first quarter of Fiscal Year 2026 (FY26).

Over that period, Fiscal Data reported the federal government:

• Spent $1.83 trillion,
• Collected $1.22 trillion, and
• Ran short by about $602 billion.

In FY26, the government spent more on interest on the national debt (+13 percent), and Social Security and Medicare (+9 percent). It spent less on the Environmental Protection Agency (-81 percent), Department of Homeland Security/FEMA disaster relief (-38 percent), Department of Education (-26 percent), and Department of Agriculture (-18 percent).

For context, in FY 2025 (the period from October 1, 2024, to September 30, 2025), the U.S. government:

• Spent $7.01 trillion,
• Collected $5.23 trillion, and
• Ran short by $1.78 trillion.

Higher Interest Costs Mean Less Money for Other Priorities

As interest costs rise, they tend to “crowd out opportunities for investment in other important priorities. In fact, the [United States] government is already spending more on interest costs than on education, research and development, and infrastructure combined. If unaddressed, the growing borrowing costs will pose significant challenges for the nation’s fiscal future,” reported the Peter G. Peterson Foundation.

Weekly Focus – Think About It

“Trust yourself. Create the kind of self that you will be happy to live with all your life. Make the most of yourself by fanning the tiny, inner sparks of possibility into flames of achievement.”

—Golda Meir, Former Israeli Prime Minister

Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

---