Monthly Review and Outlook January 2026
Global share markets continued to advance in January, supported by optimism surrounding artificial intelligence, expectations that central banks may begin easing policy later in the year, and a weaker US dollar. However, the month was not without volatility. Geopolitical tensions, shifting interest‑rate expectations and trade uncertainty all contributed to sharper day‑to‑day market movements.
Below is a review of key developments across global markets and our outlook for the months ahead, highlighting both opportunities and potential risks.
Company shares
Share markets began the year on a strong footing overall, although gains were uneven across regions and sectors.
- United States: US equities ended the month higher, with the S&P 500 rising 1.5%. A renewed rally toward month‑end briefly pushed the index above 7,000 for the first time, even if only briefly. Market advances were narrow, concentrated in a handful of large companies, while volatility spiked at points, including during a sharp sell‑off triggered by renewed tariff concerns. Leadership changes at the Federal Reserve also drew attention, as the Trump Administration selected former Fed Governor Kevin Warsh to succeed Jerome Powell as Chair.
- Europe: Eurozone equities performed well, supported by stronger‑than‑expected economic data. Information technology, energy and utilities were the strongest contributors. Eurostat reported fourth‑quarter GDP growth of 0.3% for 2025, comfortably ahead of forecasts, helping underpin sentiment.
- United Kingdom: UK equities delivered positive returns in January. The basic materials sector, in particular, helped lift overall performance, supported by stronger commodity‑linked demand.
- Japan: Japanese equities extended their upward trend, boosted by renewed enthusiasm for companies likely to benefit from increased demand for generative AI. Rising Japanese government bond yields also provided support to financial companies. However, the bond market faced challenges as yields moved sharply higher following the announcement of a snap election.
- Emerging Markets: Emerging markets outperformed their developed‑market peers, helped by a weaker US dollar, improved risk appetite and strength in technology‑heavy markets such as Korea and Taiwan. Asia ex‑Japan equities also advanced sharply, though China’s performance was more modest. India and Indonesia lagged due to softer corporate earnings, foreign investor outflows and, for Indonesia, concerns around governance and falling commodity prices.
Bonds
Fixed income markets were mixed in January.
US Treasury yields drifted higher while prices fell, and the Federal Open Market Committee left interest rates unchanged at 3.5%–3.75%. Eurozone government bonds outperformed their US counterparts, while Japanese government bond yields experienced a sharp rise linked to political developments.
Credit markets saw stronger performance: investment‑grade corporate bonds generated both positive total returns and excess returns.
Commodities
Commodity markets were broadly strong over the month. Rising geopolitical tensions, including the removal of Venezuelan president Nicolás Maduro and heightened uncertainty between the US and Iran, boosted energy prices.
Energy commodities delivered notable gains, while precious metals were volatile. Gold and silver extended earlier rallies before abruptly selling off toward month‑end, with gold experiencing its largest one‑day decline in more than four decades on 30 January but ended the month up 8.8%.
Outlook
We continue to expect steady global economic growth in the months ahead, supported by ongoing monetary and fiscal measures across many major economies. Progress in inflation continues, although at varying speeds across regions.
We are monitoring two key risks:
- Market concentration in the US, where a small number of large companies continue to dominate returns.
- Rising long‑term borrowing costs, as elevated government debt levels push yields higher and create challenges for global bond markets.
Despite these risks, our overall stance remains constructive. We maintain a positive outlook on equities across regions including the US, Europe, Japan and parts of the emerging world, where underlying economic trends and valuations remain supportive.
We remain cautious toward government bonds, where we believe expectations for policy easing may still be too optimistic. Corporate bonds and commodities, including gold and energy, continue to play an important role as diversifiers within portfolios.
Asset overview
Our general view of assets in the coming months is summarised as follows. These are our in-house views as at the end of January 2026.
| Asset | RAG Status | Details |
|---|---|---|
Equities | Green | We continue to hold a positive view on equities, given the backdrop of ongoing global economic momentum, with a diversified overweight to equities now spread across the US, Europe, Japan and China. However, we have increased exposure to US smaller companies that are more domestically focused and to Germany to help improve diversification. |
Government bonds | Red | We retain a cautious view on government bonds and as we believe that too many US interest rate cuts have been priced in by the market and growth may surprise on the upside. |
Corporate bonds | Amber | We maintain a neutral stance on corporate bonds. |
Commodities | Green | We retain a positive stance on gold as it has benefited from strong central bank demand and remains a useful diversifier of portfolios against policy and geopolitical uncertainty. However, we marginally reduced its exposure to take profit. |
Source: Schroder Investment Management and Schroders Personal Wealth, 6 February 2026.
RAG status legend:
Green - Positive outlook
Red - Negative outlook
Amber - Neutral outlook
Important information
Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.
Any views expressed are our in-house views as at end-December 2025. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.
Schroders Investment Management (SIM) provides investment management and advice services for SPW funds and portfolios respectively.
Schroders Personal Wealth (ACD) is a trading name of Scottish Widows Schroder Personal Wealth (ACD) Limited. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 11722973. Authorised and regulated by the Financial Conduct Authority number 834833.
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