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Politics dominate market direction
28 January 2026
Markets were driven largely by geopolitics last week, with renewed US tariff threats and the Greenland dispute sparking a wave of caution before de-escalation later in the week helped sentiment stabilise.
| Global Stocks | US Stocks | UK Stocks | EU Stocks | EM Stocks | Japan Stocks | Gilts | GBP/USD |
| -1.6% | -2.2% | -0.9% | -1.0% | -0.3% | -2.3% | -0.6% | +1.9% |
Market update
Last week, US equities edged lower as a sharp early-week risk-off move, driven by renewed tariff rhetoric linked to the Greenland dispute, was mostly reversed by a late rebound in large-cap technology and a partial de-escalation in trade tensions, ending the week -0.3% lower in USD terms. For UK investors, returns from US assets were dominated by the currency effect, as the GBP appreciated 1.9% against the dollar on stronger than expected retail sales data. In GBP terms, US stocks returned -2.2% over the week. UK equities decreased by -0.9%, as domestic yields rose, which pressured rate-sensitive sectors. EU equities fell by -1.0% after a multi-week run, as tariff headlines prompted some profit-taking, even as the immediate threat appeared to ease later in the week. In contrast, EM equities advanced by 0.9% in local currency, yet still saw a -0.3% decline when viewed in GBP, benefitting from improved risk appetite after the mid-week policy-tone pivot. In GBP terms, Japanese equities declined ‑2.3% over the week.
Gilt yields rose over the week, with the UK 10‑year yield up +12bps, as investors pared back expectations for near-term Bank of England easing amid firmer UK data. By contrast, US 10-year Treasuries were little changed, as the benchmark yield ended around 4.23% (flat versus the prior week).
Gold surged as safe-haven demand intensified, rising +6.4% in GBP terms, supported by a mix of geopolitical uncertainty and policy credibility concerns, including debate around central-bank independence. Oil also gained, rising +0.2% in GBP.
Macro news
The IMF expects global economic growth to remain steady at 3.3% in 2026, supported by technology investment and accommodative financial conditions. Inflation is continuing to decline worldwide, though US inflation is expected to return to target more slowly. Key risks highlighted include geopolitical tensions, re-evaluations of tech-sector valuations, and the need for governments to rebuild fiscal buffers.
Similarly, the World Economic Forum’s Chief Economists’ Outlook (Jan 2026) shows that 53% of leading economists expect weakening global economic conditions, citing inflated asset prices, rising debt burdens, and shifting trade dynamics.
Following weeks of rhetoric surrounding the potential purchase, annexation or invasion of Greenland by the US, President Trump announced that he would not pursue a military takeover. The US President also scrapped proposed tariffs against European nations. Trump claimed to have reached an agreement with NATO Secretary General Mark Rutte on a 'framework for a future deal' regarding Arctic security. Markets reacted positively to the de-escalation.
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