Once again, the long-standing market adage that political events tend to have only a short-lived impact on markets proved correct. Neither the US military intervention in Venezuela in early January, nor the debate over Greenland’s sovereignty, nor speculation about a possible strike against Iran’s political leadership have so far left a meaningful imprint on global equity markets. The S&P 500, the leading US equity benchmark, recorded four new all-time highs year-to-date and ended January up 1.4%. While the technology-heavy Nasdaq Composite gained 0.9%, the more cyclical Russell 2000 rose by a robust 5.3% over the course of the month.
In Europe, the STOXX 600 advanced 3.1%, while the more defensively positioned Swiss market lagged behind. The Swiss Leader Index fell by 1.1%, weighed down in particular by insurance stocks such as Zurich Insurance, Swiss Life and Swiss Re, as well as by Richemont and Nestlé. By contrast, the start to the year in Asia was exceptionally strong: South Korea’s Kospi surged 24.0%, Taiwan’s Taiex gained 10.7%, Hong Kong’s Hang Seng rose 6.9%, Japan’s Nikkei 225 climbed 5.9%, and China’s Shanghai Composite advanced 3.8%.
Bond markets, meanwhile, lacked a clear directional trend in January. The yield on ten-year US Treasuries edged higher to 4.24% from 4.15%, while yields in Europe declined modestly, falling to 2.84% from 2.86% in Germany and to 0.21% from 0.32% in Switzerland. Notably, French government bonds, yielding 3.43%, once again traded marginally below their Italian counterparts (3.46%). Greek (3.35%) and Spanish (3.21%) yields remained below those of France. In Japan, the upward trend in yields continued, with ten-year government bonds rising to 2.25% from 2.07% at the end of 2025.
Credit spreads on both investment-grade and high-yield bonds narrowed slightly in the US and Europe, allowing corporate bond prices on both sides of the Atlantic to record modest gains.
At the same time as Kevin Warsh was nominated as the next Fed chair on the last trading day in January, precious metals experienced a sharp correction. Silver suffered its largest one-day decline on record, plunging 27%, while gold fell by just under 10%, its steepest daily loss since 1983. Margin requirements for futures positions were raised significantly during the same day. Despite this correction, gold remains up 13% year-to-date, while silver has gained 19%. Bitcoin – often referred to as “digital gold” – fared considerably worse, losing more than 10% in January. During the first month of the year, copper rose 4%, while WTI crude oil surged 14%.
In currency markets, the US dollar recovered slightly toward the end of the month but still posted a decline of 1.4% over January as measured by the DXY dollar index. The Swiss franc continued to strengthen. EUR/CHF fell to 0.916 from 0.931 at the end of December, while USD/CHF declined to 0.773 from 0.793. The euro also firmed modestly against the dollar, with EUR/USD rising to 1.185 from 1.175 at year-end.
From a macroeconomic perspective, the US economy continues to display solid momentum. Growth in the fourth quarter of 2025 is estimated at an annualised rate of 4.2%, according to the Atlanta Fed’s GDPNow model (as of 29 January 2026), following growth of 4.3% in the third quarter and 3.8% in the second. Based on the Cleveland Fed’s inflation nowcasting, US inflation is expected to have eased to 2.36% in January, down from 2.7% in both November and December.
Markets currently expect the Federal Reserve to keep policy rates unchanged at 3.50–3.75% at its final two meetings under Jerome Powell in March and April. For the remainder of the year, one to two rate cuts of 25 basis points each are anticipated. The yield on two-year US Treasuries – often viewed as a reliable leading indicator of monetary policy – currently stands at 3.53% and is trending lower. By contrast, rate increases are expected in Australia, New Zealand and Japan by year end.
Looking ahead, we anticipate a classic Goldilocks scenario in the coming months: solid growth combined with easing inflationary pressures. Kevin Warsh’s appointment as the new Fed chair is likely to lead to adjustments in monetary policy from mid-year onwards. The central bank’s focus is expected to shift more decisively toward the supply side of the economy, with the aim of fostering sustainable, non-inflationary growth. Lower interest rates could stimulate investment in productive capacity and support productivity gains, while a simultaneous reduction in the Fed’s balance sheet should help keep the money supply under control.
Warsh is widely regarded as a vocal critic of excessive monetary-policy “mission creep”. He has advocated a return to the Federal Reserve’s traditional mandate of price stability and full employment. Quantitative easing programmes are expected to be scaled back sharply or, in normal times, phased out altogether. The resulting decline in central bank demand for government bonds would increasingly need to be absorbed by commercial banks, potentially facilitated by lower regulatory capital requirements.
Against this backdrop, we remain cautiously constructive on equities. Should this shift in monetary policy prove successful, the conditions for sustainable, non-inflationary growth would be firmly in place. Financial stocks, as well as companies in the energy, industrial and materials sectors, stand to benefit in particular. Alongside our core markets – Switzerland, Europe and the US – we view Latin American equities as an attractive complementary allocation.
In fixed income, we are considering a gradual extension of portfolio duration. Declining inflation argues in favour of lower yields, while bonds also provide a degree of protection against an economic slowdown, although this is not our base-case scenario at present.
We continue to maintain our strategic allocation to gold, even though some further near-term price pressure cannot be ruled out. We expect prices to stabilise in a range of $4,300 to $4,600 per ounce. Our silver exposure was reduced over the course of the month.
In currency markets, we continue to expect a strong Swiss franc. The US dollar may regain some ground against the euro in the near term, while the Japanese yen and the British pound could also deliver positive surprises.