February monthly investment update - Reflections on January 2026

Global investment markets certainly started the new year on a high. The strong performance we had seen in 2025, and in previous years, continued, with both US and UK equities reaching new all-time highs. Strong performance from energy, industrial and defence sectors were the clear standouts.

Despite world media coverage, there was little impact on markets relating to President Trump’s capture of the Venezuelan President, Nicolas Maduro, earlier in the month - other than a small movement in oil prices. Most probably due, in part, to the country’s economy being relatively small compared to others on the global stage.

One event that could have disturbed markets, though, and shaken world peace, was President Trump’s relentless pursuit of Greenland. The biggest island in the world (and Denmark’s territory), Greenland has long been on the President’s 'wish list' and one he talked about at his inaugural speech in January 2025.

Located in the Arctic Circle, Greenland is significantly placed for the US to monitor national security and is the reason the President is eager to secure it. The island just happens to be rich in natural resources, such as rare earth minerals. It could also have substantial oil and gas reserves (albeit it, not easy to extract due to the harsh Arctic conditions).

Alliances tested in a changing global landscape

We’ve mentioned before about America’s attempts to reshape world order since President Trump returned to the White House. This was magnified even further during the month, when he threatened additional tariffs on his European allies if they didn’t back him in making Greenland part of US territory. This raised concerns for NATO countries and heightened fears of a widening transatlantic trade rift.

January was also the month that saw world leaders meet in Davos (Switzerland) to attend the 56th Annual Meeting of the World Economic Forum (WEF). President Trump used it as an opportunity to calm nerves stating that force wouldn’t be used in his attempts to acquire Greenland, and that he was in talks with NATO.

The President also took the opportunity at Davos to launch his Board of Peace – a US-led organisation ironically aimed at 'promoting peace and tranquillity' in conflicted parts of the world. Originally created to cement the delicate Gaza ceasefire, it’s now been opened up to other countries – with 35 already committed.

There is concern that it could undermine the union of the United Nations (UN). However, the President has said the board will work with it, not against it. Then, there’s the small cost of $1 billion dollars to join. So far the UK, along with France, has declined to join. Superpower China is yet to comment, and Russia is said to be considering the proposal.

As investors, we are very much aware of how geopolitics can impact global investment markets, and there has certainly been plenty of noise so far in 2026 to cause potential disruption. It’s one of the main reasons why those defence companies (mentioned earlier) are doing so well - driven by continued global conflicts and heightened noise coming from the White House.

Inflation and interest rates – home and abroad

UK inflation (CPI) for December 2025 rose to 3.4% (from 3.2% in November). We, along with other investors, however, expect it to fall throughout the first half of the year which could prompt further interest rate cuts by the Bank of England in the second half.

However, we’ve recently seen oil and metal prices rise globally. Even here in the UK, the latest figures from the British Retail Consortium (BRC) showed that shop prices rose 1.5% in January - as food prices, furniture, and health and beauty products went up. This suggests that inflation could, once again, prove stickier – which might prevent it easing back to the bank’s 2% target and, therefore, prevent those interest rate cuts.

If interest rates stay higher for longer and inflation doesn’t decrease, it could cause UK economic growth to be much lower than the Chancellor, Rachel Reeves, would like. Economic growth, we know, is a top priority of the government, and one which makes the UK look more attractive to overseas investors.

In contrast, economic growth in the US has been much stronger recently – third quarter figures show it increased to an annualised rate of 4.3% - the fastest paced growth in two years. However, a continued weaker US dollar is beginning to cause concern for global investors, and could increase costs for US businesses and consumers alike.

The Federal Reserve (the US Central Bank) cut rates in December by a quarter percent – the third in 2025 - although President Trump may have been disappointed that they left them unchanged at the end of January 2026. Things might get a little easier for the President going forward: At the end of January, the new Fed Chair was announced as Kevin Warsh, a former Federal Reserve governor.

Meanwhile, in Europe, interest rates have been much more stable for the last six months and inflation is under control. In December, the European Central Bank (ECB) left its key deposit rate unchanged at 2% for the fourth consecutive month. Inflation has hovered around the ECB’s 2% target for most of 2025 and into 2026.

Economic growth in the European Union (EU) has been muted though. The bigger issue for the region, is uncertainty about future trade relations, particularly with the US. In January, Germany announced it was looking for new trading partners as its relations with America deteriorated over difficult import tariffs. Although it will continue to work with the US, Germany is now looking to trade with other countries globally, such as South America and India.

Our view on markets moving forward

As investors, we continue to have concerns that some parts of the US stock market remain expensive (in particular tech stocks), despite US economic growth proving stronger than we have been expecting (mentioned earlier). Nonetheless, we see better valued opportunities, at the moment, in Europe and Asia (including sectors such as technology).

Technology companies, in particular, still dominate investment headlines but we continue to tread with caution. We know, for example, that technology shares are not all performing in the same way: IT hardware companies (such as Taiwan’s TSMC), for example, are performing far better than IT software companies (such as the US’s Microsoft).

Our Fund Managers and Investment Analyst continue to deeply analyse the companies we look to invest in, using their expertise and knowledge in their specialist sectors. This supports us in our decision-making process when looking for investment opportunities. These opportunities help us to generate healthy, long-term returns for our customers.