Monthly Market Report – January 2026
The increase in geopolitical risk was one of the main drivers behind market movements during the first month of 2026. In addition to the U.S. intervention in Venezuela, Trump's renewed interest in taking control of Greenland, and the political tensions in Iran triggered several episodes of market volatility throughout January.
Equity markets ended the month in positive territory despite the geopolitical uncertainty. The S&P 500 gained 1.37%, while the Euro Stoxx 50 advanced 2.70%. The bullish momentum seen in previous months continued, with cyclical sectors outperforming large-cap technology stocks. Performance among the Magnificent Seven was mixed, with Microsoft (-11.03%) underperforming, while Meta (+8.55%) and Alphabet (+7.94%) posted solid gains. January's rally also pushed the S&P 500 above the 7,000-point mark for the first time in history.
The Federal Reserve (Fed) kept interest rates unchanged at 3.75%, in line with market expectations. Only two of the twelve voting members supported a rate cut, while the remaining ten favored no change. Jerome Powell's comments were well received, as he continued to emphasize the labor market while characterizing any inflationary impact from Trump's tariffs as temporary.
Donald Trump also announced Kevin Warsh as his nominee to succeed Powell as Fed Chair. Although closely aligned with the Republican Party, Warsh was considered relatively hawkish during his previous tenure as a Fed Governor, leading markets to believe that Trump's influence over monetary policy will likely remain limited.
Yield curves ended the month largely unchanged, although U.S. Treasury yields remained volatile. The 10-year Treasury yield climbed above 4.20% for the first time since August, reaching an intraday high of 4.31%.
The rise in Japanese government bond yields, together with the spillover effect across global fixed-income markets, was the main negative catalyst for bonds in January. Japan's Prime Minister called a snap election while advocating expansionary fiscal policies, implying higher public spending in a country with a debt-to-GDP ratio close to 235% and rising inflation.
From a macroeconomic perspective, U.S. inflation remained stable at 2.7% year-over-year, while core inflation eased to 2.6%, its lowest level since April 2021. In Europe, headline inflation fell to 1.70%, below the European Central Bank's target.
Commodity markets experienced significant volatility. WTI crude oil traded as high as USD 66.48 per barrel, bringing its year-to-date gain to 15.78%, driven by geopolitical tensions involving Iran, the United States, and Israel. Markets also remained focused on the Strait of Hormuz, through which around 20% of global oil supply passes.
Precious metals reversed sharply after strong gains earlier in the month. Kevin Warsh's nomination reduced part of gold's safe-haven appeal, while profit-taking accelerated the correction, resulting in a 9.0% decline in gold prices during the final trading session of January.
In the foreign exchange market, the U.S. dollar weakened once again, allowing EUR/USD to briefly trade above 1.20 for the first time since September 2021. The move was driven by the Greenland dispute, speculation over foreign sales of U.S. assets, and Trump's remarks downplaying dollar weakness. However, Treasury Secretary Scott Bessent reaffirmed that a strong dollar remains a priority for the United States. As a result, EUR/USD returned to its trading range established since mid-2025 and closed January at 1.1851.