Global Market Update: Early 2026
Equity Markets: Resilient, Broader — and More Selective
Global equity markets have continued to advance into early 2026, though the pattern of returns has become more nuanced. US markets remain the primary engine of growth, with the Dow Jones Industrial Average surpassing 50,000 and the S&P 500 reaching new highs. Unlike much of 2024 and early 2025, performance has broadened beyond a narrow group of mega-cap technology stocks.
Within the US, sector leadership has rotated. Industrials, financials and parts of healthcare have benefited from steady economic growth and easing inflation, while consumer-facing businesses have been supported by resilient employment. Technology remains important, but the market has become far more discerning. The AI-led rally that previously lifted most large tech companies together has fragmented. Firms demonstrating clear earnings growth and disciplined capital spending have been rewarded, while others have seen sharp share price corrections. This dispersion reflects a shift from enthusiasm to evaluation — a sign of a more mature market phase.
Elsewhere, European equities have delivered more modest but improving returns, helped by falling inflation and lower energy price pressures compared with recent years. UK equities, while still lagging the US in headline performance, have benefited from their value bias, higher dividend yields and exposure to financials and energy. Japanese equities have remained supported by corporate reform and improved shareholder returns, while emerging markets have been mixed, balancing weaker Chinese growth against improving conditions in parts of India and Latin America.
Inflation, Interest Rates and Central Banks
Inflation continues to ease, though unevenly. In the UK, headline inflation has fallen to around 3.4%, with expectations that it could approach the 2% target later this year. The Bank of England’s base rate stands at 3.75%, with policymakers signalling gradual rather than aggressive cuts.
In the US, inflation has stabilised close to 3%, still above target but well below recent highs. The Federal Reserve has paused rate cuts, holding policy rates in the 3.5–3.75% range. Adding context, markets have been closely watching the planned transition from Jerome Powell to Kevin Warsh as Fed Chair later this year. While the backdrop has been politically charged, investors have so far taken comfort from Warsh’s credibility and the likelihood of continuity rather than radical change in monetary policy.
Bonds, Commodities and Bitcoin
Bond markets have been calmer, with yields remaining elevated by recent standards. The US 10-year Treasury yield has hovered around 4.2%, offering more meaningful income but remaining sensitive to inflation data.
Commodities reflected shifting sentiment. Gold briefly surged above $5,000 per ounce in January before correcting sharply, while silver experienced its steepest single-day fall since 1980. Oil prices have remained relatively stable around the mid-$60s per barrel, despite dramatic developments in Venezuela.
Bitcoin has been notably volatile. After rising strongly into early January, it has since fallen by roughly 20–25% from recent highs, reflecting shifts in risk appetite rather than any single catalyst. Digital assets remain speculative, but are increasingly influenced by interest rates, liquidity and broader market sentiment.
Geopolitics: A More Uncertain Backdrop
Geopolitics has been a significant undercurrent. US military action in Venezuela, renewed tensions with European allies over Greenland, and questions around the future balance of global power have reinforced the idea that political risk is once again a material factor for markets. While these events have generated sharp headlines, markets have so far distinguished between noise and fundamentals.
As ever, periods like this highlight the importance of diversification, discipline and a long-term perspective. Markets will continue to react to events, but successful investing remains rooted in patience rather than prediction.
Disclaimer: This content is for your general information purposes only and does not constitute investment advice. The commentary is intended to provide you with a general overview of the economic and investment landscape. It is not an offer to purchase or sell any particular asset and it does not contain all of the information which an investor may require in order to make an investment decision. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
Past performance is not a reliable indicator of future results. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances. Your capital is at risk and the value of investments, as well as the income from them, can go down as well as up and you may not recover the amount of your original investment.