Market Commentary

 It was a far more eventful start to 2026 than many investors anticipated. While January often brings hopes of a gradual reset, the past month served as a clear reminder that markets and news operate on a schedule all of their own.

President Trump continued making headlines in the US. First was news the US had seized Venezuelan President Nicolás Maduro in a raid, highlighting the recent move towards power-based orders. Then came a probe into the Fed and Powell, threatening US central bank independence. The US asserting control over Greenland also captured significant market attention, sparking fresh trade tensions with the EU. Together, these developments helped gold extend its roaring rally, pushed US yields higher, weakened the Greenback, and prompted some investors to lean into the ‘sell America’ trade.

In the markets, it is earnings season in the US, and companies have continued to post healthy results. A US policy capping credit card interest rates rippled through markets, moving card issuers and networks such as Visa, Mastercard, and American Express lower. Calls for higher defence spending and a political threat to block defence contractors from paying dividends or buying back shares continued the bullish momentum in the defence sector. Tech remained volatile as investors continued to assess whether current valuations are justified. Microsoft reported late in the month and saw its share price plunge by over 11% on concerns regarding AI spending.

It was a bit quieter closer to home in New Zealand. The CPI edged up to 3.1%, pushing inflation back outside the RBNZ’s target range. This moved yields higher, increasing the chance of rate hikes later this year. Recent data releases have been mixed, but there is growing optimism that the economy is positioned for a lift in activity.

In Australia, inflation is still causing the RBA headaches. CPI came in hot at 3.8% over the 12 months to December, well above the target range. Notably, since the month-end, the RBA has raised the cash rate 25bps in response. This is likely adding to the cautious tone seen among several other central banks globally. Although there are still headwinds for inflation control, Australian consumers have remained relatively resilient.

Against that backdrop, US equities posted gains, with the S&P 500 rising 1.37% and the tech-heavy NASDAQ up 0.95%. The UK’s FTSE 100 led global markets, climbing 2.94% as investors rotated in on the back of stronger-than-expected economic activity. NZ was the only market covered to finish lower at -0.92%, while Australia ended the month with a respectable 1.78% gain.