Global Markets Overview: January 2026

Credit markets strengthened with credit tightened on improved risk sentiment, while equity posted modest gains overall. Policy easing in Europe and continued AI-driven demand in Asia supported performance as US market pulse following cautious guidance from the Federal Reserve. This move marked calibration after a year of strong return.

Overall, investor sentiment remained broadly constructive while volatility stayed contained on average. Despite the large global tariff and trade shock that occurred in April, equity led performance with emerging market, outpacing developed market driven by AI-related investment and a weaker dollar. China, Taiwan, and Korea were standout performers, while Latin America also contributed meaningfully. Developed market posted solid but more moderate gains.

Commodity had another strong year with gold delivering exceptional returns and reinforcing its role as a safe haven asset. Oil and industrial metal also supported overall commodity strength. Fixed income played an important role throughout the year. Early in 2025, global rate cuts and narrowing credit spreads supporting strong bond performance, particularly in US fixed income, helped by the Federal Reserve easing. Towards year end, the tone shifted as government bond yields rose across major markets, reflecting resilient growth and persistent inflation. Despite this, bond remained a key component for liability hedging and downside protection.

Over medium-term, we expect investment grade credit to moderately outperform government bonds, offering better compensation for risk. Currency market added another layer of complexity. The US dollar weakened against major peers late in the year, led by gains in Euro and Sterling, as narrowing rates differential and improve global growth shifted sentiment. Looking ahead, we believe supportive monetary and fiscal policy, strong earnings, and technological innovation, particularly AI, should continue to underpin growth. However, uncertainty around policy path and longer term impact of AI keeps the 5-year view more balanced. Diversification and active risk management will be essential as investors navigate an environment shaped by fiscal stimulus, innovation, and geopolitics in 2026 and beyond.

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