Macro Snapshot – February 2026

January 2026 Market Trends: A Weak Dollar Resets the Global Playing Field

January started the year with a clear shift in market leadership. Despite persistent geopolitical noise, global risk appetite improved and returns broadened beyond the U.S., helped by a weakening dollar and renewed interest in emerging and Asian markets. Commodities again played a supportive macro role, while bond markets remained range-bound, offering little in the way of direction.

The defining story of the month was not aggressive policy change, but relative moves: currency shifts, regional dispersion, and rotations beneath the surface of headline indices.

Regional market overview

United States

U.S. equities modestly underperformed several international peers in sterling terms, with dollar weakness offsetting local market gains. Treasury yields edged higher at the long end, leaving returns negative for sterling-based investors. Market attention remained on potential Federal Reserve leadership changes, though January passed without material policy signals.

United Kingdom

UK equities extended last year’s momentum, delivering solid positive returns. Performance was supported by stable domestic rates and improving breadth within the market. Sterling strength, however, continued to dilute returns from overseas assets for UK-based investors.

Europe

European equities posted gains broadly in line with the UK. Markets benefited from global risk-on sentiment rather than region-specific catalysts, with returns supported by improving trade expectations and cyclically exposed sectors.

Asia (ex-Japan)

Asian markets delivered mixed but generally positive returns, with technology-heavy segments (e.g., semiconductors in Taiwan and Korea) supported by AI demand and a softer dollar, though performance varied significantly by country.

Emerging Markets

Emerging market equities recorded solid gains in January. A weaker dollar, improving commodity sentiment, and renewed interest in selected regions supported returns, highlighting the continued sensitivity of EM assets to currency dynamics and global capital flows. India benefited from specific factors (e.g., trade optimism or domestic momentum late-month).

Monthly and long-term performance snapshot

The table below provides a snapshot of unhedged index fund investment returns for a selection of asset classes and regional exposures, measured in sterling terms. It compares performance for January alongside one- and three-year outcomes, illustrating the contrast between short-term momentum and longer-term trends.

January’s returns show selective leadership rather than broad-based extremes. Commodities and several non-U.S. equity markets delivered positive monthly performance, while bonds and U.S. assets lagged in sterling terms, reinforcing how leadership can shift even when longer-term trends remain intact.

Asset Class Performance – January 2026

Sterling returns. Past performance is shown for context only.

Key themes shaping markets in January

Dollar weakness and regional rotation

A softer U.S. dollar was a central driver of performance dispersion in January, shaping returns across regions more than local economic developments. Emerging market equities delivered positive gains, while several non-U.S. developed markets also outperformed U.S. assets in sterling terms. For UK-based investors, sterling strength diluted overseas returns, reinforcing the influence of currency effects. Overall, January highlighted how currency movements can act as a powerful transmission mechanism across markets, often overshadowing underlying fundamentals in the short term.

Commodities reassert their macro role

Commodity markets delivered solid gains over the month, though performance was uneven across the complex. Precious metals showed pronounced intra-month volatility, with strong early-to-mid January rallies pushing gold and silver to new record highs before experiencing abrupt late-month pullbacks on profit-taking, shifting policy expectations, and technical factors, yet still delivering meaningful net advances while maintaining strong longer-term trends. Oil prices also advanced amid heightened geopolitical risks and supply concerns. In equity markets, commodity-linked regions continued to benefit from supportive pricing and currency dynamics. The month reinforced commodities’ sensitivity to macro and geopolitical developments, alongside their inherently higher volatility.

Bonds tread water as yields drift higher

Government bond markets were relatively subdued, with yields edging modestly higher across major economies. UK gilts and U.S. Treasuries delivered slightly negative returns over the month, reflecting the absence of clear policy inflection points. Global government bonds also remained flat overall. In this environment, bonds offered stability but limited diversification benefits, particularly for sterling-based investors facing currency headwinds.

What stands out for investors

• Market leadership broadened beyond the U.S., though gains were selective rather than uniform.

  
  

• Currency effects played a meaningful role in shaping sterling-based returns.

  
  

• Commodities delivered positive performance, reinforcing their sensitivity to macro and geopolitical signals.

  
  

• Bond markets remained subdued, offering limited offset to equity market movements.

In summary

January 2026 illustrated how quickly relative performance can shift when currencies move and leadership broadens. With policy settings largely unchanged, returns were driven more by currency dynamics, regional dispersion, and geopolitical sensitivity than by new macro data. Leadership broadened but remained selective: commodity-linked and select emerging market exposures led the way, while U.S. equities and bonds lagged in sterling terms. As the year begins, sentiment appears constructive but increasingly discerning, underscoring the importance of understanding what has been driving returns, not just where they appear.

Disclaimer: This commentary is for informational purposes only and reflects general market observations. It does not constitute investment advice, a recommendation, or an invitation to engage in any investment activity. Everyone’s situation is different, so if you are unsure about a decision, it’s important to seek guidance from a qualified financial professional.

The views, forecasts, and figures included reflect analysis at the time of writing, unless otherwise stated. sources used are believed to be reliable, but markets and circumstances can change quickly, which means our views may also evolve over time.