January 2 0 2 6 • I S S U E 61

January 2026 Review

1. Market recap and index snapshot (January 2026)

Markets opened 2026 with a constructive tone, even as January delivered sharp day-to-day moves and headline risk. Global equities rose about 3% for the month, supported by better-than-expected activity data and moderate inflation prints, while global bonds made “limited progress.” A single word captured the month’s equity story: broadening. Performance expanded beyond U.S. large-cap leadership, with emerging markets up about 9%, Japan’s broad market up about 5%, and small caps up about 5% in the month’s global review.

In the U.S., the large-cap benchmark briefly touched 7,000 intraday (and later finished the month near the high-6,900s), underscoring how quickly sentiment can swing between optimism and caution.

Commodities added drama: precious metals surged to record levels earlier in the month before a sharp late-month pullback, reinforcing that crowded “safety” trades can unwind quickly when the narrative changes.

Index returns (January 2026) — month only

Index	Region	Month return %
S&P 500	United States	+1.4%
Nasdaq Composite	United States	+0.9%
Dow Jones Industrial Average	United States	+1.7%
STI	Singapore	+5.5%
STOXX Europe 600	Europe	+3.07%
FTSE 100	United Kingdom	+3.0%
Nikkei 225	Japan	+5.9%
Hang Seng Index	Hong Kong	+6.9%
Shanghai Composite	Asia ex Japan	3.76%
MSCI World	Global developed	+2.26%

*returns are in local currency terms

January’s leadership was notably international and broader-based, with strong gains in parts of Asia and a clear lift in smaller companies, consistent with the month’s “broadening” theme.

2. What mattered this month (Key developments in January 2026)

Theme 1 — “Broadening” became the headline (and it’s usually a healthy one)

The clearest development was the widening of market leadership beyond a narrow set of U.S. large-cap winners. In the global review, emerging markets gained about 9% and outperformed developed markets by about 7%, while small caps gained about 5%—a combination that signals improved risk appetite and a more balanced market tone.

A separate market summary echoed that the strongest returns came from the East (Japan and Hong Kong), and also highlighted the role of a weaker U.S. dollar in amplifying non-U.S. returns when measured in dollars.

Theme 2 — Rates and policy “noise” mattered as much as the data

Even with decent growth and moderate inflation in the global review, markets repeatedly reacted to policy headlines, especially around central-bank leadership and independence.

Late in the month, a U.S. funding lapse temporarily delayed key labour-market releases, complicating the data flow and adding another layer of uncertainty for markets trying to price the next policy move.
In Europe, inflation prints came into focus as euro-area inflation fell to 1.7% in January (below target), sharpening the debate about how restrictive policy needs to be.

Theme 3 — Earnings delivered, but valuations kept investors selective

The global review argues the equity rally was driven mainly by earnings rather than valuation expansion and noted earnings surprises running about 9% above consensus in the U.S. reporting season at the time.

The US-focused commentary also emphasized that a majority of reporters exceeded expectations and flagged that the forward valuation multiple sat above longer-run averages, raising the importance of guidance and delivery.

This combination (solid earnings + fuller valuations) tends to produce a market that can move higher but does so with more rotation and sharper reactions to disappointment.

Theme 4 — Gold’s rollercoaster showed how quickly “safe” trades can crowd

Precious metals became a major narrative: gold and silver pushed to records during the month, then experienced a sudden and steep pullback near month-end.
Reporting tied the reversal to a shift in perceived policy and currency dynamics, as well as profit-taking after an extreme run.

The broader lesson is not that hedges “failed,” but that timing and positioning matter—especially when a trade becomes a consensus expression of uncertainty.
For diversified portfolios, the episode reinforced the value of holding multiple, imperfect diversifiers rather than relying on any single “one-trade hedge.”

3. The month ahead- February 2026 outlook

Theme 1 — A February “reality check” on breadth

January’s broadening is encouraging, but February will test whether it was a durable shift or an early-year burst. The global review framed broadening as a positive sign for diversification across regions and styles.

A separate global outlook also emphasizes select international opportunities, particularly Japan, while remaining more selective elsewhere, implying that “broadening” may still be uneven.

Theme 2 — Data flow normalisation after delays

With January labour and inflation data releases disrupted by the funding lapse, February’s calendar becomes more important because it helps markets “re-anchor” expectations.

Markets will watch whether labour indicators confirm a cooling trend or show renewed resilience, and how that interacts with inflation prints that remain above target in parts of the US data discussion.
The key is not one number, but whether the combination supports a stable path for policy or forces repricing.
For investors, this usually argues for staying balanced rather than trying to “trade the print.”

Theme 3 — Bonds: calm surface, meaningful cross-currents

One January bond-market article described an unusually quiet Treasury market despite dramatic headlines, suggesting investors were waiting for clearer signals from auctions and economic reports.
Meanwhile, a late-2025 global outlook remained cautious on long-dated U.S. government bonds, highlighting debt servicing costs and the potential for term premium pressure, even while acknowledging near-term downside risks to yields.
Put together, February may bring a “calm-until-it-isn’t” dynamic in rates: low realised volatility can change quickly when data and supply meet positioning.

Theme 4 — A more practical phase of the AI cycle (and more scrutiny of funding)

A late-2025 outlook argues that the AI investment wave is front-loaded on spending and “back-loaded” on revenue, which can make parts of the system more vulnerable to shocks such as yield spikes.

That framing fits with the market’s sensitivity to rates and funding conditions seen in January’s volatility around major milestones and “risk” trades.
In February, investors are likely to watch for evidence that spending is translating into durable earnings, while also monitoring the health of capital markets as a barometer of risk appetite.
The opportunity set may broaden, but markets tend to reward realism over hype as a theme matures.

Closing: January offered a strong start to the year: global equities advanced, participation broadened, and earnings delivery helped markets absorb uncertainty.
February’s task is confirmation, whether breadth persists, data flows normalise, and policy uncertainty cools.

In a world where narratives can change quickly, the most robust approach remains the same: diversify globally, stay disciplined on risk, and let fundamentals do the heavy lifting.

Sources:

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The Pinnacle: January 2026

January 2 0 2 6 • I S S U E 61

January 2026 Review

2. What mattered this month (Key developments in January 2026)

Sources:

The Pinnacle: December 2025