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Those hoping that 2026 would see less Trump inspired geopolitical drama would have been disappointed last month. In fact, it is hard to remember a month whereby Trump drove the narrative to the extent he did in January. First, we saw the extraordinary move to pluck the Venezuelan dictator Maduro from the middle of Caracas (with oil the obvious motive). Tensions in Iran erupted during the month with mass killings as the murderous regime attempted to quell protests – whilst President Trump hasn’t moved yet against Tehran, the US has moved huge military might to the Middle East – the markets sense something is afoot with the oil price spiking at the end of January. Then of course his brinkmanship with European “allies” in threatening to seize Greenland before he backed down in classic TACO (Trump Always Chickens Out) behaviour.

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Slightly less dramatic but potentially as important for markets longer term is Trump’s pick for Chair of the Federal Reserve announced at the end of the month. If approved by the Senate, Kevin Warsh will take the reins in May. The 55-year-old economist has previously served on the Fed board and was known for being hawkish in wanting to control inflation. But more recent rhetoric suggests that he will support short-term interest rate cuts and look to reduce the powers of the Central bank in influencing economic policy. Under incumbent Jay Powell the Fed kept rates on hold last month, given their view that the US economy “has been expanding at a solid pace”. Markets are now pricing in that the next US rate cut will not be until the Summer under the new regime.

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Away from the US and interest rates have also remained stable in UK and Europe.  Eurozone GDP figures beat expectations to register growth of 1.5% for 2025 with stronger growth in Germany and Spain making up for the lack of activity in France. The UK economy grew faster than expected in latest figures (for November) but still only showed 0.3% growth that month whilst inflation data took a turn for the worst in December with the first rise in five months (to 3.4%) which reduced the chance of a February rate cut.

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In Japan new prime minister Sanae Takaichi called a snap election, to be held next weekend. Her popularity is riding high which if translated into seats will mean a stable government for the foreseeable future and potentially more fiscal stimulus.

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In corporate news all eyes remain on big tech players announcing quarterly results. Meta rallied on strong sales and Tesla beat expectations despite falling revenues, but Microsoft saw a 10% daily fall as investors took umbrage at their AI spend. There seems to be little sign of an end to technology dominating markets, and it could be a bumper year for IPOs in the US. Elon Musk’s SpaceX is supposedly planning a $1.5 trillion float in June whilst, Chat GPT developer OpenAI is planning a $1 trillion float.

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Market watch

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Investors continued to shake off elevated geopolitical uncertainty in January and global equity markets had a good month with the MSCI World index posting a gain of 1.7%, Within developed markets the UK stockmarket has continued the strong run of last year with the FTSE rising a creditable 3%. However, it has been Asian and Emerging markets that have set the running at the start of the year. The MSCI Emerging Markets index posted a monthly gain of 8.8% and the MSCI Asia Ex Japan index was up by 8.6%. A weakening dollar proved to be a key catalyst, pushing investors to continue to diversify outside of the US. Tech companies in Asian markets are benefiting with Chip makers in Taiwan and Korea highly sought after and commodity driven markets in Latin America also seeing strong demand.

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Looking at the bond markets now and it’s been a quieter month with no major interest rate moves. Obviously incoming Fed chair Kevin Warsh might shake things up on this front! The UK ten-year gilt ended the month with a marginally higher yield than at the turn of the year offering 4.52% today compared to 4.48% at the end of December. In the US, the ten-year treasury also spiked higher after starting at 4.17% it ended January paying 4.24%. The action has been in Japan again with the ten-year JGB jumping from a yield of 2.06% to finish the month offering 2.24%. Like their equities, Emerging market bonds have started the year strongly, with demand driven by the weakening dollar.

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Turning to commodities and gold was up a further 4% during the month, but it has been a bumpy ride and even more so for silver. During January gold hit a new all-time closing high of $5480 after starting the month $4552. However, an ounce of gold at the end of January cost $4745 after an almighty plunge late last week with the biggest one-day percentage fall since the early 1980s (as Trump’s choice of Fed Governor reduced inflation concerns), the volatility highlighting that precious metals are not a low-risk asset.

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After the US incursion into Venezuela and the prospect of strikes in Iran, it was no surprise seeing oil jump sharply in January with the price of a barrel of Brent rising from $60.85 to finish at $70.69. A US attack on Iran could severely impact flows from the Gulf, which continues to dominate the global supply of crude oil.

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In currency markets the dollar had another wretched month as Trump’s policies spook global investors. The Greenback fell almost 2% against sterling to leave the pound near a five-year high. That dollar weakness continues to put pressure on UK investors’ overseas assets. The pound also rose against Yen and Euro in January. Interestingly in The Economist’s latest Big Mac index update, it shows that sterling is over valued by 15.7% against the dollar compared to 13.5% six months ago. The Swiss Franc is the most overvalued by 48.4% and the Taiwanese dollar the most undervalued by 59.6%.

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Fund Watch

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To funds now and it is no surprise that precious metals funds had another excellent month although with both gold and silver plummeting at the end of January this fall won’t be fully reflected in the monthly figures. Eight out of the top ten best performing funds in January were commodity focused. However top spot went to one of the surprise markets of the last few months, Korea. Baring Korea topped the tables with a gain of 25.42%.

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From a sector perspective it was surprisingly not Commodity & Natural Resources that topped the tables but Latin America where the average fund delivered a return of 14%. Latam equities benefit heavily from both the commodity boom and a weak dollar. Perhaps the surprise package was the UK Smaller Companies sector which rose just over 5% after being left behind in 2025 – is the UK rally broadening out?

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Turning to the monthly laggards and India continues to struggle with the average India fund losing almost 8% last month. India doesn’t seem to be able to shake off the stigma off high valuations and a weak rupee, which in turn has been exacerbated by investors pulling money out of a weak equity market – a vicious circle? From a fund perspective eight out of the bottom ten funds were India funds. Three of the bottom five sectors were US bond ones: they would have been flat rather than negative if the dollar hadn’t fallen heavily. However, it was Pictet Longevity that propped the tables with a fall of 10.36%. The future of healthcare fund suffered in the wider malaise for health last month – the sector fell 1.55%.

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In investment trust news, Life Science REIT succumbed to a bid (of 42p) from British Land at a 21% premium to the previous closing price. Elsewhere, Edinburgh Worldwide rebuffed Saba’s attempt to oust the board. In performance terms, the Latin America sector led the pack by a large margin with the average trust returning just over 20%. The Commodity sector was a distant second giving a 14% return. Geiger Counter, the uranium focused trust topped the tables in January with a 35% return.

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Manager Watch

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Gilts may not be the most exciting area to get investors pulses racing but are critically important for mortgages and annuities, not to mention the Government’s ability to borrow to try and fund growth. Will 2026 be the year that gilt prices see some recovery?  Certainly bond investors we have been speaking to seem more positive than for some time. The highly regarded Jupiter bond manager Ariel Bezalel expects UK inflation to fall sharply, potentially leading to 3–4 interest rate cuts this year and has been increasing gilt exposure. AXA manager Nick Hayes is also feeling more optimistic believing the Bank of England may have to make more rate cuts than the market expects, citing that the “the worst-case tail risks” of an inflationary Budget have been avoided.

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The numbers…

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Monthly performance figures 30/12/25 to 31/1/26 source FE Analytics. N.b. the fund sectors exclude money market funds, markets are in local currency, and investment trusts exclude VCTs.

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Important Information

This document is produced by Fairview Investing Ltd, an independent research consultancy. The content is for information purposes only and does not constitute financial advice. The commentary or research provided do not constitute a personal recommendation to deal. Any statements, opinions, forecasts, and figures are made by Fairview Investing (unless otherwise stated). They are considered to be reliable at the time of writing but may be subject to change.

Fairview Investing accepts no legal responsibility or liability for the content of this material. The contents of the document are not to be re-produced or circulated without the express permission of Fairview Investing Ltd. Fairview are independent investment consultants sitting on the Investment Committee of EXE Capital Management.

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