Executive Summary
As mentioned in our Q1 2026 quarterly report, markets entered this year amid intensifying data sensitivity, evolving monetary policy expectations, and geopolitical risk buffeting cycles of optimism and caution. January delivered exactly that: mixed macro signals, elevated volatility, and fresh positioning around monetary and credit expectations.
Equity markups at the start of the year slowed late in January as risk appetite waned amid precious-metals drawdowns and macro uncertainty. Treasury yields drifted unevenly as investors parsed inflation data and labor market signals. Crypto and risk assets held varying reactions, reflecting shifting forecast assumptions around policy, growth, and global risk.
Recent IMF projections forecast a slightly stronger global growth outlook for 2026, though inflation should steadily decelerate through the year, providing a backdrop that supports both risk assets and income strategies if executed selectively.
In this context, January reinforced three core narratives:
The market remains data-driven, not narrative-driven.
Monetary policy expectations are shifting from anticipated cuts to timing uncertainty.
Geopolitical dynamics are materially influencing cross-asset flows.
Global Signals
The IMF’s January World Economic Outlook now projects global GDP growth at 3.3% in 2026 and 3.2% in 2027, slightly improved from prior forecasts on strength in technology investment and resilient private sectors. At the same time, inflation is expected to ease over the year, even as core price pressures persist.
Simultaneously, global factory activity showed improvement in January 2026, led by export demand pick-ups in Japan, South Korea, and China, while parts of Europe also moved back into expansion territory.
Market interpretation: Global growth remains intact but uneven, not signaling recession, yet not robust enough to discount policy risk.
Regional Focus
United States
Labor market & confidence: December U.S. employment data showed surprisingly weak job gains, with nonfarm payrolls up only +50,000, far below expectations, highlighting a cooling trend in labor momentum. Compounding this, consumer confidence plunged to its lowest in over a decade in late January, reflecting broader concerns about inflation, jobs, and economic direction.
Inflation & Fed policy: January’s Federal Reserve meeting (the first of 2026) held the policy rate steady, keeping it in the 3.50%–3.75% range as inflation remains above target but trending lower. Goldman Sachs and other major forecasters still expect at least two rate cuts in 2026, though timing continues to be uncertain and data-dependent.
U.S. macro summary: Growth and labor are moderating; inflation remains sticky; policy expectations are shifting but not fully aligned.
Europe & UK
Data late in January revealed manufacturing resurgent in parts of Europe, including Germany and France, even as other countries lag. This divergence suggests a tentative stabilization in external demand but lingering domestic weakness.
Eurozone inflation expectations show a gradual deceleration, which could ease pressure on the ECB to maintain tight policy over the first half of 2026.
Asia & Emerging Markets
Asia’s manufacturing resurgence (including in China, Japan, and South Korea) is notable. Taiwan, Indonesia, and India also recorded growth, reinforcing broad demand across export-oriented economies.
India’s economy continues robust expansion with an anticipated 6.5% growth in 2026, backed by domestic consumption and infrastructure investment.
Inflation Persistence vs. Cooling Forecasts: Economists generally expect inflation to decline through 2026, though core services inflation remains sticky.
Mixed Labor Data: Weak job creation, combined with falling consumer confidence, has added caution to the early 2026 economic narrative.
Commodity Volatility: Brent crude briefly rose above $70/bbl amid geopolitical concerns, while precious metals saw large technical swings, underscoring risk repricing across markets.
Geopolitical Risk Drivers: Escalating tensions in the Middle East and evolving tariff policy rhetoric have created episodic volatility in energy, FX, and risk assets.
Top Upcoming Catalysts
January Non farm Payrolls (NFP) & Unemployment Rate: Markets will watch the NFP reading and wage data for signs of labor momentum or further cooling.
January CPI (YoY & MoM): A critical inflation release that will test the narrative of slowing price pressures versus the stickiness of core inflation.
FOMC Meeting Minutes (Jan): Offers insight into Fed deliberations post-policy meeting; markets use this to update expectations on timing & scale of rate cuts.
Technical Corner
Gold (XAU/USD)
Holding long-term support zone near $3,800-$4,100
Holding medium-term support zone near $4,400
Resistance around the all-time-high of $5,600
Trend-following systems still show sustained bullish bias.
Targeting $6,000/Oz by year-end
Outlook: After brief record highs and extreme volatility, gold retreated sharply late in January, a sign that safe-haven positioning is adjusting to shifting Fed expectations and dollar strength.
There’s a 50% chance of retesting the long-term support zone mentioned above, but even if that occurs, our outlook remains bullish on Gold, and we continue to view those corrections as buying opportunities.
Support levels are as follows: $4,650, $4,400, $4,100, and $3,800.
Silver (XAG/USD)
Silver experienced significant volatility, amplifying metals sell-offs and leverage unwinds across global markets, mainly due to a lack of supply and heavy industrial use.
Outlook: The uptrend in Silver remains intact, and our target from the quarterly report got achieved ($100) before the recent meltdown, and any further drops should be viewed as long-term/swing buying opportunities.
Support levels are as follows: $81, $70, $65, $56.50, $53
USD/JPY
The pair traded with broad range pressure as U.S. yield dynamics and BoJ move expectations offset each other
Outlook: In January, persistent market chatter suggested that the Bank of Japan (BoJ), potentially coordinated with U.S. authorities, was considering direct currency intervention to support the weakening Japanese yen. The objective would have been to alleviate mounting pressure on Japan’s trade balance as the JPY weakened sharply against the U.S. dollar.
This speculation coincided with a significant decline in USD/JPY, which retraced toward the key 152.00 support zone before finding footing and stabilizing in the 155–156 area. Despite this pullback, the overall uptrend in USD/JPY remains intact, with buyers defending higher lows and maintaining a bullish structure.
Given the underlying policy divergence (where the BoJ maintains a relatively accommodative stance and the Federal Reserve has signaled a more cautious easing path) the broad bias continues to favor JPY weakness and USD strength over the medium term.
Support levels are as follows: 154.00, 153.40, 152.10, 150.00
Rotation Back into Liquidity & Quality: As real yields and policy uncertainty rise, high-quality stocks and bonds show defensive appeal
Carry Over Conviction: In times like these, strategies blending carry and safety (e.g., vanilla yield instruments + hedges) outperform binary directional trades.
Geopolitical Hedging: Energy and FX strategies should incorporate risk premia for geopolitical shocks.
Behavioral Insight
“Markets Don’t Make Straight Lines, Anticipation Does.”
January showed how swiftly markets can overprice expectations, then realign when data fails to confirm narratives.
Staying disciplined through noise is paramount
Conclusion & Strategic Guidance
January underscored a familiar but crucial truth: policymakers are data-dependent, and markets are forward-looking. The disconnect between soft labor data, inflation persistence, and policy expectations highlighted the need for disciplined positioning rather than broad themes.
Strategic priorities:
Elevate defensive exposures when macro uncertainty rises.
Maintain flexible duration positioning ahead of data releases.
When investing/swing trading, use precious metals and FX hedges prudently, not as conviction plays.