Cirilium Passive Portfolios monthly commentary - Review of January 2026

In January, US equities delivered modest gains in US dollar terms, but due to the weakness of the US dollar, this resulted in a 0.7% loss for sterling-based investors. Strong corporate earnings and upbeat economic data supported markets, although leadership narrowed compared with previous months. Smaller and mid-sized companies outperformed large caps, reflecting improved confidence in domestic growth. Meanwhile, financials and industrials performed well, while tech stocks lagged late in the month due to valuation concerns. Policy uncertainty weighed on sentiment throughout January, with renewed tariff threats and concerns around the independence of the US Federal Reserve (the Fed) following the decision by the US Department of Justice to begin a criminal investigation into current Fed Chair, Jerome Powell. However, the nomination of Kevin Warsh to be the next Fed chair was well received at the end of the month.

European equities rose by 2.2%, benefiting from an improving global risk appetite and a broadening of market leadership away from US mega cap stocks. Economic data surprised positively, with eurozone growth exceeding expectations and unemployment falling to record lows. Falling inflation supported confidence in a gradual easing of monetary policy. Defence, energy, and information technology stocks performed well, helped by increased government spending commitments and solid earnings. However, consumer-focused sectors and property lagged. Geopolitical tensions, particularly surrounding US policy, caused temporary volatility but eased later in the month.

UK equities posted solid gains of 3.3% in January, supported by improving economic momentum and strong performance from value-oriented sectors. Rising commodity prices, particularly metals and energy, boosted the large mining and oil stocks. However, smaller companies outperformed larger peers, reflecting growing confidence in domestic growth prospects. Economic data was encouraging, with GDP growth picking up and business surveys signalling economic expansion. However, inflation remained elevated, keeping expectations for interest rate cuts cautious. Consumer discretionary and technology stocks underperformed, while materials, utilities, and energy led gains.

Japanese equities were among the strongest performers in January ending the month up by 4.5%. Markets were supported by resilient economic data, optimism around pro-growth fiscal policies, and ongoing corporate governance reforms. Technology-related stocks benefited from continued demand linked to AI, while financials gained as bond yields rose. Political developments, including the prospect of a snap election, added volatility but also reinforced expectations of continued structural reform.

Emerging market equities, up 6.7%, outperformed developed markets in January helped by a weaker US dollar, strong commodity prices, and improving earnings expectations. Technology and materials stocks led gains, reflecting robust AI-related demand and rising metals prices. Latin America performed particularly well, supported by easing inflation and expectations of future interest rate cuts. Parts of Asia also saw strong returns, especially in markets linked to semiconductor production. However, performance was uneven. India lagged due to valuation concerns, foreign investor outflows, and higher oil prices, while China underperformed amid weaker domestic economic data and ongoing structural challenges.

Fixed income markets delivered mixed returns in January. Stronger economic data and the improved risk appetite pushed bond yields higher in the US and Japan, weighing on government bond prices, which were broadly flat over the month. Short-dated US Treasury yields rose as expectations for near term rate cuts were pushed back. Credit markets were more resilient, with global corporate bonds up by 0.4%, as economic data remained supportive and default risks stayed contained.