Markets were volatile in January, with geopolitics a key driver of sentiment. Rising geopolitical tensions around Venezuela, Iran and Greenland triggered a brief risk-off phase, before sentiment recovered as tariff threats towards Europe were walked back. Despite this volatile backdrop, global equities posted low-to-mid-single-digit positive returns, with emerging markets outperforming developed markets. Gains were fuelled by a broad US dollar sell-off and resilient global data. US equities were supported by cyclicals and strong small-cap performance, while rotation out of mega-cap tech continued. Japanese stocks gained on political momentum and fiscal stimulus, while European equities benefitted from weaker inflation and strength in industrial and defence stocks.

Source: Bloomberg as at 30 January 2026.

US equities sustained positive momentum in January, supported by improving market breadth. While large-cap indices, including the S&P 500, Nasdaq and Dow Jones Industrial Average, advanced, leadership continued to rotate towards small- and mid-caps.

Equal-weight indices outperformed their cap-weighted counterparts, reinforcing the broader participation seen beneath the surface, while mega-cap technology performance was mixed. Parts of the software complex came under pressure late in the month, with heavyweight names such as Microsoft and Apple lagging as investors reassessed cloud momentum, AI-related capex and valuation. Software stocks more broadly were volatile, contributing to a choppier path for the Nasdaq, even as the index finished January higher overall. Other large-cap names, including Meta and Amazon, proved more resilient, underscoring the increasingly selective nature of leadership within big tech.

Volatility was elevated as markets digested a mixed macro and geopolitical backdrop. Economic data surprised to the upside early in the month, with activity indicators and labour market data pointing to continued momentum. However, rising geopolitical tensions around Venezuela, Iran and Greenland triggered a brief risk-off phase, before sentiment recovered as tariff threats towards Europe were walked back. The Federal Reserve held rates steady and signalled patience, anchoring expectations amid uncertainty about the timing.

South African capital markets extended their strong momentum into the start of the year, supported by resilient domestic fundamentals and a favourable external backdrop. The JSE All Share Index advanced over the month, with resources leading market gains amid a sharp rally in global commodity prices driven by ongoing geopolitical tensions and a sustained surge in safe-haven asset demand. The price of gold rose above $5,000/oz for the first time, providing meaningful support for precious metals and mining shares; however, prices declined towards the end of the month as noted in the Commodities section.

The South African Reserve Bank’s Monetary Policy Committee (MPC) left the policy rate unchanged at its first meeting of the year. Although headline inflation printed at 3.6% in December and is expected to moderate in the months ahead, Governor Lesetja Kganyago remained cautious, and highlighted food inflation and electricity prices as key upside risks to the inflation outlook. With the stronger rand and low oil prices, there is still an increased likelihood of a rate cut in March and scope for a further reduction later in the year.

The rand closed the month at R16.15 per US dollar, marking an impressive run for the currency which saw it breach the R16.00 per US dollar level for the first time since 2022. This was supported by broad-based US dollar weakness, elevated precious metal prices and sustained foreign demand for South African government bonds. The yield curve flattened as longer-dated yields fell more than front-end yields: the benchmark 10-year government bond yield ended January at around 8%, down from 8.2% at the start of the month. However, yields edged modestly higher following the SARB’s decision, which occurred amid a global risk-off environment.

Source: Bloomberg as at 30 January 2026.

Chinese equities participated in the broader emerging market (EM) rally, with the Hong Kong market outperforming, while the domestic A share market lagged regional peers. Sentiment benefitted from the weak US dollar and the broader global backdrop, which improved EM financial conditions and flow dynamics into Chinese equities. However, persistent property-sector fragilities, weak domestic demand and a general slowdown in activity in the run-up to the Chinese New Year holiday season capped upside, preventing a more meaningful re-rating.

Macro signals also remained uneven. The official manufacturing PMI slipped back into contraction in January, reinforcing the view that China's growth recovery remains fragile and uneven. While parts of the production cycle showed signs of stabilisation, weaker new orders and subdued domestic demand continued to constrain expectations for a sustained cyclical rebound.

Late-month news flow around China Vanke weighed on confidence. Reports of deepening losses and ongoing balance-sheet stress at the developer rekindled concerns that property-sector strains are yet to see any inflection, thus keeping investors cautious towards related sectors despite policy backstops.

The US dollar's decline provided some offset. A weaker dollar typically supports EM risk appetite and eases FX pressures, and China saw modest benefit from this dynamic. A slightly firmer renminbi into month-end helped stabilise sentiment, though longer-term currency dynamics remained sensitive to global rate expectations. The MSCI China All Shares was up 4.1% in US dollars in January.

Emerging market (EM) equities started 2026 where they left off in 2025, delivering strong performance over the month. The MSCI Emerging Markets Index rose 8.9% in January (in US dollars) – recording its best month since November 2022. This strong showing came on the back of US dollar weakness over the period and investor diversification, which drove early-year inflows across EM assets.

Asia performed well, with South Korea and Taiwan surging over the month amid sustained conviction in the AI capex cycle and tightening supply dynamics across advanced memory and leading-edge foundry. Taiwan's index bellwether TSMC unveiled upbeat 2026 investment plans and demand outlook, helping reinforce the narrative that AI-related semiconductor spending remains durable. Meanwhile, South Korea's trade data showed exports from Asia's fourth-largest economy expanded 34% from a year ago, highlighting a sharp uptick in semiconductor exports and providing additional fundamental backing for the rally in index heavyweights such as Samsung Electronics. Chinese equities participated in the broader EM rally, with the Hong Kong market outperforming, while the domestic A share market lagged regional peers. Sentiment was supported by the weak dollar and stronger global growth picture, but recurring property-sector fragilities hamstrung what could have been more robust performance; in particular, late-month news flow surrounding Vanke's deepening losses and ongoing balance-sheet pressures kept investors wary of second-order effects spilling over to related financials. Domestic macro signals also remained uneven, with the official manufacturing PMI slipping back into contraction in January, underscoring that the growth impulse remains uneven.

Elsewhere, India was a key outlier among the major EMs, falling around 5% in US dollar terms over the month. The bourse came under stress from a less supportive mix of persistent foreign outflows from domestic stocks, currency pressure amid muted central bank support, and delays in finalising a trade deal with the US – all of which combined to weigh on risk appetite, notwithstanding an otherwise resilient domestic growth narrative.

Regionally, Latin America and Eastern Europe added to overall EM gains, supported by a combination of commodity sensitivity, supportive real rates and the global push into EM assets over the month.

European equities posted gains despite President Trump’s trade tariff threats linked to escalating tensions around Greenland. Stocks in the region benefitted from weaker inflation and its implications for a potential further rate cut, better-than-expected growth and strength in industrial and defence stocks. Inflation moved below the European Central Bank's (ECB's) 2% target in December and Q4 growth of 0.3% beat expectations. In addition, the euro strengthened against the US dollar, reaching its highest level since 2021. Earnings season seemed to matter more in the latter part of the month than macroeconomic data, with banks showing notable strength as results and guidance helped keep confidence intact. Furthermore, news flow of higher defence and infrastructure spending, combined with valuations that appear less demanding than the US, provided further tailwinds to the region’s markets.

Having hit a record high at the end of 2025, the FTSE 100 tracked the broader European risk-on tone, finishing January 3.0% higher. The market’s value and earnings bias continued to support the UK market. Reflecting moves in the commodity market, mining sector stocks performed well, as did financials. Signs of strength in the global economy boosted the flagship index, which comprises companies with significant overseas operations. The more domestically focused FTSE 250 delivered a 3.7% return against a mixed macro picture for the UK: inflation printed higher than expected, with headline CPI rising to 3.4% in December, although growth data was slightly stronger than expected.

US

US Treasury yields ended the month higher across much of the curve, led by a combination of more stable labour market indicators, renewed tariff uncertainty and the nomination of the next Chair of the Federal Reserve (Fed). While labour market weakness had prompted the Fed to deliver two rate cuts in late 2025, data released in January pointed to a stabilisation, with the unemployment rate falling to 4.4%. Meanwhile, inflation remained steady at 2.7% and the Fed held policy rates in January at 3.5–3.75%, as expected. Although the Fed adopted a slightly hawkish tone by emphasising the firmer jobs data, Chair Powell noted that the scope for easing remains should inflation decline further. Towards the end of the month, President Trump nominated Kevin Warsh as the next Fed Chair, causing US Treasury yields to rise given Warsh's previous criticism of the Fed's use of its balance sheet (a reduced balance sheet implies less support for bond markets). Tariff-related headlines also came back into focus, with President Trump threatening tariffs on a range of countries before walking back on many of these.

Europe

European sovereign bond yields fell over the month, supported by a lower-than-expected inflation print. Eurozone annual inflation fell to 1.9% in December, the first time it has dropped below the European Central Bank's (ECB's) 2% target since May, prompting a rally in government bonds. Alongside this, economic growth was better than expected in Q4, while the ECB raised its 2026 GDP growth forecast to 1.2%. The euro strengthened against the US dollar, reaching its highest level since 2021. On the monetary policy outlook, markets continue to expect little change to the ECB policy rate in 2026.

UK

UK inflation was higher than expected, with headline CPI rising to 3.4% in December. Services inflation – a key focus for the Bank of England – also increased, reaching 4.5%. Economic growth data was slightly stronger than expected, although the unemployment rate rose to 5.1%, marginally above forecasts. The gilt market reacted to the higher inflation print with a bear steepening of the yield curve, as longer-dated yields rose by more than those at the front end. As at month end, market pricing implies between one and two rate cuts in 2026, although no easing is anticipated before July.

Japan

Japanese government bonds and the yen experienced significant volatility in January, driven by monetary-policy uncertainty and political developments. The yen swung significantly, weakening at times before strengthening amid speculation that the Japanese authorities could intervene to counter the currency moves. At the same time, long-dated Japanese government bond yields surged to multi-decade highs, reflecting investor concerns over fiscal sustainability and rising expectations of increased government spending after Prime Minister Sanae Takaichi dissolved parliament and called a snap general election for February. The Bank of Japan kept its policy rate unchanged at 0.75%, but raised its inflation forecast and suggested that rate hikes will resume.

Source: Bloomberg as at 30 January 2026.

Credit markets continued their strong run into the start of 2026, with few exceptions.

Bank capital bonds (AT1s) had a strong January, with credit spreads tightening materially to approach their tightest level seen in the past 10 years. Spreads were also notably tighter in the lower-rated collateralised loan obligations (CLO) market, helping this asset class to post solid gains over the month.

Among more mainstream credit markets, assets in Europe (both high-yield and investment-grade debt) outperformed their US counterparts. Spreads tightened by roughly the same amount across both regions and assets, but the fall in European sovereign bond yields boosted performance there, while the rise in US Treasury yields caused US assets to underperform (although total returns were still positive).

The notable outliers from a spread and returns perspective were US and European loan markets. Spreads widened amid a backdrop of heavy loan supply and pressure in the software sector, which makes up a meaningful share of the loan market.

Emerging market (EM) fixed income began the year on a positive note, continuing the strong performance seen over 2025. Despite geopolitical uncertainty driving significant volatility across markets, all areas of the asset class delivered positive returns in January. The US dollar weakened over the month, boosting EM currencies, while risk appetite continued to help EM high-yield bond markets.

The EM local currency debt market (JPMorgan GBI-EM GD) had a robust month, rising 2.2% in US dollar terms. Performance was driven by EM currencies, which benefitted from the weaker US dollar, particularly in Latin America, where the Brazilian real and Chilean peso were notable outperformers. The outlier was the Indian rupee, which weakened over the month. Local bond market moves also contributed to positive index returns, helped by Turkish rates, which benefitted from falling inflation.

The EM sovereign hard currency debt market (JPMorgan EMBI GD) rose 0.7% in January, driven solely by the high-yield market (1.5%), while the investment-grade market posted a negative return (-0.1%). The rise in US Treasury yields weighed on returns, although credit spread tightening in the high-yield market offset this. Meanwhile, spreads in the investment-grade market remained relatively unchanged. At the country level, Venezuela was the top performer in the index: markets reacted positively to the capture of President Maduro by US forces, given the potential for regime change and optimism that a bond restructuring process could finally begin.

The EM corporate debt market (JP Morgan CEMBI BD) returned 0.7% over the month, with the high-yield market delivering strong returns and outperforming the investment-grade market. Both market segments benefitted from a tightening of credit spreads, particularly in lower-rated tranches. On a sector basis, real estate issuers drove returns, while industrial issuers were also among the top performers.

Source: Bloomberg as at 30 January 2026.

Commodities made a strong start to the year, with notable gains in January for energy and precious metals. Gold ended the month at US$4,894 per ounce, its 13% rise marking the commodity's largest monthly gain for over 25 years. January's price action was extraordinary: at one point gold hit an all-time high above US$5,500/oz as a spike in geopolitical risk – caused by US action and rhetoric against Venezuela, Greenland and Iran – combined with US dollar declines and perceived threats to the independence of the US Federal Reserve (Fed) to send the precious metal soaring. But as the month drew to a close, news that President Trump had nominated Kevin Warsh as Fed Chair – changing expectations regarding the trajectory of Fed policy – triggered a sell-off. Silver (+11% in January overall) was even more volatile, with the commodity topping out at around US$120/oz but finishing the month close to US$80/oz. Precious-metals equities approximately matched the commodities themselves, with the NYSE ARCA Gold Miners Index gaining about 12%. Industrial metals were staid by comparison, with gains for nickel, aluminium and zinc, while iron ore was approximately flat. In energy, oil bounced back in January after months of weakness on oversupply concerns. Heightened geopolitical risks, and consequent uncertainty over the output of producing regions and oil supply routes, saw the price of a barrel of Brent crude rise 16% to about US$71. US natural gas prices gained by a similar percentage over January. Agricultural commodities were mixed, with corn prices declining but wheat gaining.

Source: Bloomberg as at 30 January 2026.