Stay up to date with the latest market trends, economic shifts and key financial developments across the UK, US, and Asia – giving you clear insights to support client conversations.
This week's headlines
- Greenland takes centre stage – the spotlight at the World Economic Forum fell firmly on the Danish territory and President Trump’s brazen pursuit of the region. After stepping back from earlier threats of military action, the US President announced that he had reached a preliminary “framework” for a future agreement with NATO Secretary General Mark Rutte. Concrete details remain absent, and both Denmark and Greenland have yet to signal any formal approval.
- Japan’s Liz Truss moment – Prime Minister Sanae Takaichi’s election related proposal to cut food taxes without offsetting savings, raised fears about Japan’s already fragile fiscal outlook this week. The selloff was intensified by the Bank of Japan’s reduced bond purchase activity, which effectively removed a key source of support for long‑term debt. A weak 20‑year auction added further pressure, pushing yields on 30‑ and 40‑year maturities up by more than 0.25% in a single day – an extraordinary move for very long-term Japanese bonds, which are usually very stable.
- UK inflation ticks up – the headline Consumer Prices Index (CPI) rose to 3.4% year-on-year, up from 3.2% the previous month and marginally above market expectations of 3.3%. Core inflation – which strips out volatile food and energy prices – held firm at 3.2%. This is unchanged on the month and slightly above the Bank of England’s (BoE) comfort zone, suggesting underlying price pressures remain sticky.
- UK labour market softens – the headline unemployment rate held at 5.1%, HMRC payrolls fell by 43,000 and wage growth excluding bonuses cooled slightly to 4.5%. The claimant count also rose by 17,900, showing the declining demand for labour.
- Ukraine talks imminent – President Trump declared that a peace agreement between Kyiv and Moscow was “reasonably close,” and confirmed he would meet President Volodymyr Zelensky, while his special envoy Steve Witkoff prepared to travel to Moscow for talks with President Vladimir Putin. Witkoff said negotiations were “down to one last issue,” signalling unusual optimism from Washington.
What this means for financial advisers and clients
This week delivered a dense mix of geopolitical drama, and another reminder that concentration risk – whether in a single region, policy regime or asset class – can quickly amplify volatility.
The “Sell America” trade came back into focus with a broad retreat from US assets. What makes it notable this time, is the unusual alignment of market reactions, a hallmark of the “Sell America” pattern. Normally in risk off environments, US Treasuries rally as investors seek safety. Instead, both the dollar and Treasuries fell, while long dated yields spiked and US equities recorded their worst losses of the year. At one point the Dow dropped more than 800 points, the S&P 500 fell over 2%, and the dollar index saw its sharpest decline since April – moves that signal investors actively rotating out of US centric exposure. Gold and silver, meanwhile, surged as global capital shifted toward classic safe havens.
But we once again saw a sharp rebound in global markets after President Trump unexpectedly softened his stance on Greenland, reversing tariff threats that had triggered a broad selloff only days earlier. Trump’s sharp U‑turn is consistent with his self‑described negotiation style. When challenged about the TACO label (Trump Always Chickens Out) last year, he rejected the idea that he “chickens out,” insisting instead that he begins talks with a deliberately “ridiculous high number” before dialling it back. The TACO trade – where investors see market drops from geopolitical events as short-term opportunities – remains popular, but it comes with significant risks. Each successful TACO rebound strengthens investors’ belief that threats won’t be carried out, raising the risk that one day, a bluff may not be reversed.
The Japanese Government Bond episode acted as a reminder of how sensitive global bond markets are to fiscal credibility. UK gilts and US Treasuries saw sympathetic upward pressure in yields, weighing on duration heavy holdings. However, it should be remembered that higher yields today can improve the long-term outlook for fixed income.
Geopolitical and bond market instability is uncomfortable, but it's manageable within well diversified portfolios.
Chart of the week - US credit card issuers hit by Trump
Source: Bloomberg
Why this matters
On 9th January President Trump announced a proposal to cap US credit card interest rates at 10% for one year, a dramatic reduction from current average APRs near 20–21%. The chart above shows the decline in stock valuations for credit card issuers over the week that followed.
The chart highlights why concentration risk can be an issue, and particularly so in this environment of interventionism and policy change. In this instance, the majority of investors aren’t overly exposed to this sector, which amounts to less than 5% of the S&P 500 index.
There would be far more concern if the technology, media and telecom sector, which accounts for over 45% of the S&P 500 index, were to suffer a serious setback, be it through policy change or otherwise.
The Markets
V-shaped week for stocks
This week’s global market story was dominated by geopolitics – particularly US tariff policy and the Greenland negotiations. After starting the week under pressure, markets across the US, Europe, and Asia rebounded sharply mid‑week as tariff concerns faded. Tech names spearheaded the US recovery, while Asian indices maintained steady year‑to‑date leadership, helping global sentiment stabilise into Friday.
Currency swings
Sterling climbed modestly towards the end of the week, underpinned by shifting BoE policy expectations following stronger consumer prices data. In contrast, the US dollar suffered a week of pronounced swings, starting with broad selling to multi-week lows amid geopolitical risk and ending with cautious stabilisation. The Japanese Yen was one of the most notable movers this week, weakening sharply as Japanese government bond yields surged and fiscal policy uncertainty – amplified by an unexpected snap election announcement – rattled markets. The net effect of these moves is a lower return on unhedged foreign assets for UK investors, given the appreciation of sterling.
UK midcaps lead
This week’s rise in the FTSE 250 was driven by a multi‑sector rally, led first by strong commodity and mining names, reinforced by retail resilience, and rounded out by gains in technology, life sciences, and industrial stocks. A diversity of names including Ferrexpo, RHI Magnesita, Currys, Premier Foods and Oxford Nanopore Technologies were among the strongest performers.
Bond market weakness
Global bond yields climbed sharply this week as a mix of escalating geopolitical tensions, shifting fiscal expectations, and a sudden deterioration in Japanese government bonds reverberated across fixed income markets. A broad selloff began after President Trump intensified threats of new tariffs on European allies, sparking renewed fears of a transatlantic trade conflict. The most dramatic moves came from Japan, where long‑dated Japanese government bonds (JGBs) suffered a sharp correction and the 40-year yield surged to a record high amid concerns over fiscal discipline. The sell-off spilled into global markets and lifted US, European, and UK yields as investors reassessed relative value and anticipated potential return flows from Japanese buyers.
Gold rush continues
Gold surged to fresh record highs above $4,900 per ounce in response to a chaotic week for geopolitical relations. Goldman Sachs has raised its forecast to $5,400 by the end of the year, citing central bank diversification into gold and increased private sector demand. A reduction in risks around long-run global monetary policy pose a downside risk to the precious metal.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | -0.83% | 2.25% |
| FTSE 250 | 0.28% | 4.12% |
| S&P 500 | -1.10% | 0.83% |
| NASDAQ | -0.75% | 0.88% |
| FTSE Developed Europe Ex-UK | -0.38% | 2.62% |
| FTSE Emerging Markets | -0.42% | 4.39% |
| FTSE Japan | -2.15% | 4.71% |
| Brent Crude | -0.50% | 5.17% |
| Gold Spot | 6.48% | 13.67% |
| UK 10yr Gilt yield | +5bp | -3bps |
| US 10yr Treasury yield | +2bps | +10bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 23rd January 2026.
2026 Let's Talk Markets webinars
The next Let's Talk Markets webinar takes place on Thursday, 5th March 2026, continuing our series of insights for the year ahead.
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This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
