Market Commentary: Monthly Bulletin January 2026

Key Points

• Emerging Markets Outperform
• (The Wheels Came Off) The Precious Metals Rally
• New Fed Chair Implications – Are markets Brain Warshed?

Markets 

January 2026 opened the year with a complex blend of optimism, caution, and structural shifts across global markets. The month offered a clear reminder that geopolitical and global macro forces rarely move in unison. Instead, they tend to unfold through overlapping themes that influence asset classes differently across regions. The performances of the main equity indices are highlighted below:

(All figures are based on bid-bid prices with income reinvested, unless otherwise stated) 

Emerging Markets Outperform

Emerging Markets (EM) have outperformed so far in 2026. The dollar’s recent decline raises local currency returns for foreign investors and eases US dollar denominated debt stress in many emerging countries, improving credit and equity sentiment. Commodity exporters and select Asian markets outperformed where sector growth signals were stronger; in South Korea (semiconductors & hardware), Brazil (commodities and energy) and India (financials and consumer). In fixed interest, lower global rates and expectations of rate cuts in developed markets reduced the appeal of safe assets and pushed yield seeking flows into EM bonds.

EM corporates reported improving profits and healthier balance sheets, which supported higher valuations. China’s disinflation eased global inflation pressures, which helped demand for EM exports and commodities, supporting cyclical stocks. In 2025, we saw large passive and active flows into EM, as investors looked to diversify away from US Large Cap stocks and rebalance into EM after long-term underperformance. With solid demographics, improved earnings outlook, better valuations and intertwined trade deals with China, this trend is likely to continue throughout 2026, with now less of a risk premium attached to investing in the region.

(The Wheels Came Off) The Precious Metals Rally

The metals rally in January was driven by supply fears, geopolitical risk and speculative retail flows, but it collapsed in the final days after a sudden policy-related news shock. Gold and silver surged to record highs through January, then plunged in the last days of the month. Silver fell roughly 30-31% in a single session, and gold dropped around 9–10% on the same day, as markets rapidly repriced risk.

Initially, disruptions at mines, refineries and concerns about refined availability tightened physical markets, supporting base and precious metals. In addition, geopolitical risk drove the need for safe‑haven demand, with Trump targeting Greenland and pushback from European counterparts with tariff threats. Heightened geopolitical tensions pushed investors into gold and silver as insurance, lifting prices to multi‑year highs.

However, the nomination of Kevin Warsh (a known traditional hawk of monetary policy) as new Fed Chair coincided with the sharp drop. The dollar strengthened sharply after the news, increasing the dollar cost of metals and pressuring prices. After speculation had driven prices up, initial selling forced automatic unwinding of positions particularly in silver futures and Exchange Traded Funds (ETFs).  

(All figures are based on bid-bid prices with income reinvested, unless otherwise stated)

New Fed Chair Implications – Are Markets Brain Warshed? 

The nomination of a new Fed Chair Kevin Warsh altered the market’s interest rate and dollar projections. Kevin Warsh is known for his hawkish views on interest rates but now sees AI as a tool to fight inflation and supports shrinking the balance sheet to allow for future rate cuts.

A change in Fed leadership matters for three reasons. First, the new Chair has been perceived to be more tolerant of higher rates and more hawkish on inflation, potentially pushing global yields higher and compressing valuations on long‑duration assets. Second, a firmer Fed stance tends to support the US dollar which can help support valuations of overseas assets denominated in dollars. Third, policy uncertainty may create windows of volatility through the confirmation process and early speeches, as markets attempt to interpret the new Chair’s priorities – inflation or the labour market.

With Trump arguing for lower interest rates, we think the probability of lower rates for this year are high. Kevin Warsh will likely fulfill the President’s wishes, despite the rhetoric that is put out by the financial media.   

Portfolio Changes

This month we have reduced our position in the Liontrust UK Smaller Companies Unit Trust by 2%, which resulted in a full sale for Cautious clients. The proceeds have been added to the Janus Henderson Global Smaller Companies OEIC and Blackrock European Dynamic Unit Trust, to add further diversification and potential for stronger returns.

In addition, within our OEIC funds we have added slightly (<1%) to the VanEck S&P Global Mining ETF from the higher cash levels across all three risk funds. The aim being to capture further value from gold, silver and copper strength as this translates into the earnings for mining companies.

BOOLERS INVESTMENT COMMITTEE