The year got off to a positive start for global equity investors (MSCI World Index +2.3% in January), though with a big rotation in the drivers of those returns. Value shares significantly outperformed their growth peers. The MSCI World Value Index rose 4.7% MoM, while the MSCI World Growth Index declined by 0.3% MoM. One-third of S&P 500 companies reported results during January, and three of the US mega-cap tech stocks saw their share prices down meaningfully in the wake of their earnings announcements. Microsoft (-11% MoM) recorded underwhelming cloud growth alongside record AI spending. Netflix (-11% MoM) issued disappointing guidance, with investors raising concerns over subscriber growth amid the contested US$72bn Warner Bros. acquisition. Apple (-5% MoM) posted record sales but warned about rising component prices, particularly as AI demand increases chip costs. In contrast, Meta (+9% MoM) bucked the trend, with its share price rising after posting results that included record revenue, and management issued 1Q26 guidance that materially exceeded expectations.
S&P 500 energy shares (+14% MoM) were comfortably the best-performing sector in January, driven by a spike in the Brent crude oil price (+16% MoM) to above US$70/bbl amid protests in Iran and threats of US military strikes on the country, which stoked supply concerns.
Emerging market (EM) equities significantly outperformed their developed market (DM) peers at the start of the year (MSCI EM Index +9% MoM). Semiconductor companies (+20% MoM) were responsible for about half of the EM Index performance in January, while miners (+12% MoM) added 1% to performance.
The US Federal Reserve (Fed) kept rates on hold at its January meeting (as expected). However, the US government’s 10-year funding rate still jumped 0.15% during the month. The spike in yields began with a selloff in Japanese government bonds (JGBs), as 40-year JGB yields surpassed 4% p.a. for the first time in three decades in response to Prime Minister Sanae Takaichi’s election pitch to cut taxes ahead of snap elections expected in February.
Geopolitical tensions between Europe and the US over the sovereignty of Greenland added to selling pressure on US government debt, contributing to US dollar weakness. The US Dollar Index (-1.4% MoM) reached its lowest level in almost 4 years as the greenback weakened against most major currencies.
