Global Market Overview | January 2026

02 February 2026

Written by the FNB Wealth and Investments Research team

The first month of the new year was dominated by headlines surrounding geopolitical tension between the United States (US) and several nations as well as a fresh round of new tariff threats. This continued to fuel the “sell America” rhetoric, pushing the US dollar deeper into bearish territory towards levels last seen in 2022. Sentiment remained broadly “risk on” however and emerging markets rallied strongly with the MSCI Emerging Markets index getting ahead by ~10.8% - a strong outperformance compared to developed markets (MSCI World index: +2.7%). The risk-on shift also extended to the US with the Russell 2000 index (+7%) outperforming the tech sector (FANG+ Index: -2.2%), intensified by doubts resurfacing over whether spending on artificial-intelligence (AI) infrastructure will translate into earnings over time. Precious metals remained in the spotlight as well with safe-haven champion, gold, extending its record-breaking rally above $5 500 an ounce amid escalating geopolitical risks, the possibility of another US government shutdown, dollar debasement and growing expectations of further monetary easing.

Fortunately, there was some amnesty in geopolitics after US President Donald Trump ruled out the use of military force regarding the US’ “plan” to acquire Greenland as a strategic asset for national security purposes. Trump also curtailed the additional import tariff threatened against eight European economies at the height of tensions over Greenland, which was due to be implemented from 1 February. This provided some breathing room for investors and led to the S&P 500 Index adding ~1.9% for the month. The Federal Open Market Committee (FOMC) held its first meeting for the year, where it kept the benchmark federal funds rate unchanged, which was in line with market expectations. Post-meeting commentary from Fed Chair Jerome Powell cited a clear improvement in the US outlook with an upgraded assessment of the job market which has shown signs of steadying. The Fed delivered three cuts last year, maintaining a data-driven approach – recent readings, accelerating GDP growth, steady inflation and steadying employment data have shown little evidence that more intervention is needed to prop up the economy.

In Europe (Euro Stoxx 600 Index: +2.6%), equity markets rebounded towards month end after US and European geopolitical tensions cooled relating to Greenland. However, geopolitics may continue to affect market sentiment as trade tensions between the US and Canada resurfaced.

Moving over to the Asian Pacific region, China delivered a robust performance (MSCI China Index: +7.5%) as strength in the global semiconductor space provided additional upside momentum. Investors also cheered several key economic releases including robust GDP growth figures. The Chinese economy expanded by 5% last year, meeting Beijing's official target as a record trade surplus boosted growth. Chinese property shares also saw some reprieve following news that borrowing limits on property developers, known as the "three red lines" policy, will no longer be required (an apparent end to rules that triggered a debt crisis which continues to weigh on the world's second-largest economy).

On the local front, the JSE was among the top performers in the emerging market space with the All Share Index up 8.2% (USD terms: +13.5%) as a continued commodity price surge led to a 26% gain in the resource sector. This, in conjunction with the US dollar sinking to its lowest level in four years, were key contributors to the stellar performance seen in the rand which strengthened below the R16/$ mark for the first time in four years. The South African Reserve Bank (SARB) also held its first meeting for the year, with policy makers keeping the repo rate unchanged at 6.75% as widely expected after a 25bps cut in November last year. The decision was not unanimous and although the inflation outlook is improving, policy makers will likely aim for a further drop in inflation expectations before cutting interest rates further.

Outlook

Local

• Global growth in 2025 remained resilient despite ongoing geopolitical tensions and shifts in global trade policy. Supportive financial conditions and the ability of firms to adapt, through tactics like import frontloading and reshoring, helped maintain momentum. However, higher US import tariffs are expected to increasingly pressure countries that rely on narrow export bases or that are slow to diversify their destination markets. In the near term, potential fiscal multipliers and generally favourable financial conditions should continue to support global activity. Over the medium term, the risk of higher inflation and asset repricing could strain financial conditions, growth, and currency valuations.
• South Africa’s reform momentum, marked by its successful exit from the Financial Action Task Force’s grey list and the recent S&P sovereign rating upgrade, continues to strengthen the country’s growth trajectory while enhancing its appeal to investors. Investment growth should complement household spending in driving growth towards 2% over the forecast horizon.
• South Africa’s inflation outlook has improved, supported by softer goods inflation, even as services inflation continue to normalise. We see inflation averaging 3.1% this year, down from 3.2% last year and 4.4% in 2024 and oscillating around 3% over the medium term.
• That said, the SARB is likely to maintain relatively restrictive policy as the process of anchoring inflation expectations at the 3% objective unfolds. Nevertheless, we still see a 25bps cut in each half of this year, and policy shifts to neutral territory as inflation becomes firmly anchored. As real and nominal interest rates fall, monetary policy would be more supportive to a broader recovery in credit uptake and investment.
• In summary, South Africa’s macroeconomic outlook is expected to continue to improving, supported by structural reforms, fiscal consolidation, slower inflation, as well as a steady recovery in fixed investment and resilient household spending. More vulnerable households are using recent gains in disposable income to stabilise their finances and should be able to return to credit markets stronger. Meanwhile, higher-income households, benefitting from wealth effects in equity and property markets and reduced policy uncertainty, show a greater willingness to commit capital to the local economy. Together, these dynamics should reinforce the view that the economy is in an upward cycle.

Global

• Global policy uncertainty spiked again in January as the Trump administration captured the President of Venezuela, threatened to take Greenland, and impose more tariffs on certain countries.
• Economic data out of the US has generally been better than expected and growth expectations have lifted. Bloomberg consensus for US 2026 growth has improved to 2.4% versus 1.8% just two months ago.
• Japan, Europe, and China’s growth expectations have also been raised for 2026, mainly on the back of fiscal stimulus.
• US December CPI came out as expected at 2.7% and core inflation at 2.6%. This is still some way off the 2% target of the Fed. Shelter inflation and core services should continue to trend lower, causing overall inflation to move down towards target, but risks remain that inflation proves “stickier” than expected (depending on the rates where tariffs eventually settle).
• The Fed kept rates unchanged at 3.5% to 3.75% at its January meeting, as expected. Ten members voted for this outcome, against two members who preferred a 25bps cut. “The outlook for the economy has improved –clearly improved – since the last meeting, and that should matter for labour demand and for employment over time” Powell told reporters after the meeting. Further interest rate cuts are now only expected after a new Fed chairman steps in after May 2026.
• Gold rallied strongly in January reaching $5 550 per fine ounce. Reasons include central bank buying, geopolitical tensions, uncertainty around policies, lower interest rates, and growing investor appetite. PGM and silver prices also rallied strongly.
• Oil prices rose over 17% for the month on the back of tensions between the US and Iran. Brent crude traded above $71 per barrel on fears that the US could attack Iran at any moment.
• Given all the above uncertainties, we are closely aligned to our strategic asset allocation benchmarks.