The first month of the year was characterised by volatility in markets, currencies and rising geopolitical risk.
January saw both global equities and bonds finish in positive territory. Precious metals stole the headlines as they rocketed to all-time highs, highlighting lingering geopolitical uncertainty across the globe.
UK
- The FTSE 100 rose +3.0% over the month, passing the 10,000 mark for the first time, and continuing to push through new all-time highs led by defensives and commodity-related names.
- The more domestically focussed FTSE 250 outperformed its large-cap counterpart finishing the month up 3.7%, following the Bank of England’s late December interest rate cut.
- The annual inflation rate in the UK was higher than expected in December at 3.4%. However, the figure was boosted by seasonal factors such as air fares over the Christmas period.
- UK GDP came in better than expected, increasing by 0.3% in November, higher than the 0.1% figure predicted by economists on the back of budget uncertainty.
Global
- The dollar weakened during the month as fears lingered over the potential weakening of central bank independence by the Trump administration, giving investors cause to rethink their currency exposure.
- Despite pressure from the White House to lower rates, the Fed held steady, with rates remaining unchanged in the 3.5%-3.75% range.
- However, currency weakness fed into US stock returns with the S&P 500 finishing the month down -0.6% in GBP terms.
- The Japanese PM proposed a snap election to secure a renewed mandate for an expansionary, pro-growth agenda. This has been welcomed by Japanese equity markets but viewed cautiously, as seen by a volatile yen.
- In emerging markets, Trump escalated pressure on South Korea by raising tariffs from 15% to 25%. Despite this the KOSPI finished up an astonishing 21.8% over the month in GBP terms.
Fixed interest
- UK Gilts ended the month broadly where they started, with the index finishing down -0.2%. however, yields did move around over the month as geopolitical tensions fed into markets.
- In credit markets, global high yield (+0.7%) outperformed investment grade (0.4%) over the month, as global economic data remained generally benign.
Other
- Global uncertainty saw the price of gold spike during January, hitting highs of $5,600, before sharply correcting to around $4,500 in the final few days of the month.
- Oil prices rose, with Brent Crude ending the month at $70 a barrel as major events took place in oil rich nations Venezuela and Iran, while a cold weather snap in the US saw natural gas prices rise.
- Bitcoin had a disappointing month, falling to $75,000, its lowest level since November 2024.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
