Executive Summary

Global financial markets began 2026 on a broadly positive footing, with equity gains extending beyond the largest US technology companies towards financials, industrials, materials, emerging markets and selected international markets. The S&P 500 gained approximately 1.5% during January, while its equal-weighted counterpart performed more strongly, signalling broader market participation.

The Federal Reserve maintained its federal funds target range at 3.50%-3.75% at its 27-28 January meeting. Policymakers noted that economic activity continued to expand at a solid pace, while job gains remained low and inflation remained somewhat elevated.

Markets increasingly interpreted the Federal Reserve's position as one of patience following several reductions during 2025. The US economy remained resilient enough to reduce the urgency of further easing, while inflation above target limited policymakers' willingness to cut pre-emptively.

The European Central Bank maintained its key rates, including a 2.00% deposit facility rate. Eurozone financial conditions remained substantially easier than a year earlier following the extensive easing cycle delivered during 2024 and 2025.

The Bank of Japan also maintained its policy rate at 0.75% following December's increase. Officials continued to consider additional tightening during 2026 if wages, inflation and currency conditions developed as expected.

The Bank of England did not hold a Monetary Policy Committee meeting during January, leaving Bank Rate at 3.75% following December's reduction. Its next scheduled decision was due in February.

Commodities were among January's strongest-performing assets. Gold surged as safe-haven demand, inflation concerns and geopolitical uncertainty intensified, while oil also advanced sharply. Emerging-market equities and commodity-producing markets generally benefited from the stronger resource environment.

Digital assets moved in the opposite direction. Cryptocurrency markets experienced a difficult start to the year, with heightened volatility and a meaningful retreat from late-2025 levels.

Key Themes During January

• The S&P 500 gained approximately 1.5%.
• Equity-market leadership broadened beyond mega-cap technology.
• The Federal Reserve held rates at 3.50%-3.75%.
• The ECB maintained its deposit rate at 2.00%.
• The Bank of Japan held its policy rate at 0.75%.
• Emerging-market equities generally performed strongly.
• Gold and broader commodities delivered significant gains.
• Oil prices rose as geopolitical and supply risks increased.
• Digital assets experienced renewed weakness.
• Investors entered 2026 favouring greater regional and sector diversification.

Global Economic Overview

The global economy entered 2026 with growth proving more resilient than had been anticipated during the tariff-related disruption of early 2025. Monetary conditions were less restrictive across most developed economies, although inflation remained sufficiently persistent to prevent central banks from declaring victory.

United States

The US economy continued expanding at a solid pace. Employment creation had slowed substantially, but unemployment remained comparatively low and household spending continued to support economic activity.

Inflation remained above the Federal Reserve's 2% objective. Tariffs, housing and services continued to complicate the price outlook, encouraging policymakers to assess further rate reductions cautiously.

Federal Reserve

The Federal Open Market Committee maintained its target range at 3.50%-3.75%. The statement emphasised that future adjustments would depend upon incoming data, the economic outlook and the evolving balance between employment and inflation risks.

The decision effectively paused the easing sequence delivered during the latter part of 2025. Markets increasingly expected policy to remain unchanged until clearer evidence emerged of either renewed disinflation or labour-market deterioration.

Eurozone

The ECB maintained the deposit facility rate at 2.00%, the main refinancing rate at 2.15% and the marginal lending rate at 2.40%.

European growth remained modest but was increasingly supported by lower financing costs, defence expenditure and major infrastructure programmes. Manufacturing conditions remained uneven, particularly within Germany.

United Kingdom

Bank Rate remained at 3.75% during January. UK inflation had risen to 3.4% in December, reinforcing expectations that further easing would proceed cautiously despite relatively weak underlying growth.

Japan

The Bank of Japan maintained its policy rate at 0.75%. Policymakers continued to monitor the effects of December's increase, wage growth and persistent weakness in the yen before considering another move.

China

China remained dependent upon manufacturing, technology investment and targeted fiscal support as property and household confidence continued to lag. Commodity demand and domestic technology development nevertheless provided stronger areas of economic activity.

Global Outlook

The principal macroeconomic debate shifted from whether recession could be avoided towards how long inflation would remain sufficiently elevated to constrain central-bank easing. This created a more balanced environment in which growth assets, commodities and defensive investments could all find periods of support.

Equity Markets

Global equities advanced during January, with emerging markets and more cyclical sectors performing particularly well. US large-cap equities remained positive, but market participation broadened considerably.

United States

The S&P 500 gained approximately 1.5%. The equal-weighted S&P 500 rose approximately 3.4%, demonstrating stronger participation from companies outside the largest technology names.

Financials, industrials, materials and selected smaller companies benefited from resilient economic activity and greater confidence that monetary policy was no longer becoming more restrictive.

Technology

Technology remained a powerful long-term growth area, but investor enthusiasm was increasingly selective. Markets demanded stronger evidence that extraordinary AI infrastructure expenditure could generate sustainable revenue and cash flow.

Europe

European equities continued benefiting from comparatively attractive valuations, lower policy rates and increased defence and infrastructure expenditure. Financial and industrial shares were particularly well positioned for broader economic participation.

United Kingdom

UK equities remained supported by banks, mining companies, energy businesses and internationally diversified companies. The commodity rally improved the relative attractiveness of the resource-heavy FTSE 100.

Japan

Japanese equities remained supported by corporate-governance reform and fiscal investment, although higher domestic interest rates and currency volatility created a more balanced outlook than during late 2025.

China and Emerging Markets

Emerging-market equities were among January's stronger performers. Commodity exposure, lower US policy rates and improving capital flows contributed to relative strength, while China continued to attract selective interest in technology and advanced manufacturing.

Indicative January Performance

Fixed Income Markets

Government-bond markets remained sensitive to the tension between stable or declining short-term policy rates and persistent inflation, fiscal borrowing and commodity-price pressure.

US Treasuries

The Federal Reserve's decision to maintain rates supported stability at the front of the Treasury curve, while longer maturities remained influenced by inflation expectations and substantial federal borrowing.

European Government Bonds

European government debt remained supported by the ECB's relatively low 2.00% deposit rate, although planned infrastructure and defence issuance continued to influence longer-term yields.

UK Gilts

UK bonds remained sensitive to inflation remaining above target. Markets continued to expect additional Bank of England easing during 2026, but the timing depended upon services inflation and wage growth.

Japanese Government Bonds

Japanese yields remained elevated following December's Bank of Japan increase. Investors continued to price the possibility of another move later in 2026.

Corporate Credit

Investment-grade and high-yield credit remained supported by resilient economic activity and generally stable corporate fundamentals. Credit spreads remained relatively tight, leaving less protection against an unexpected slowdown.

Private Credit

Private-credit demand remained strong. Lower short-term rates compared with early 2025 improved interest coverage, although lenders faced increasing competition and narrower spreads for premium borrowers.

Foreign Exchange

Currency markets reflected divergent monetary-policy expectations and renewed commodity strength.

US Dollar

The dollar remained sensitive to expectations surrounding the next Federal Reserve move. Stable US rates offered yield support, while broader diversification away from US assets limited upside.

Euro

The euro remained relatively stable as ECB policy stayed unchanged and European fiscal investment improved the medium-term economic outlook.

Sterling

Sterling strengthened against the US dollar during January, supported partly by expectations that persistent UK inflation would limit the speed of Bank of England easing. One contemporary market review placed GBP/USD's monthly gain near 1.55%.

Japanese Yen

The yen remained volatile as markets weighed the Bank of Japan's 0.75% policy rate against the still-substantial yield advantage available in other developed markets.

Emerging-Market Currencies

Several emerging-market currencies benefited from commodity strength and a less restrictive global monetary environment, although performance remained highly dependent upon domestic fiscal and inflation conditions.

Commodities

Commodities were among January's strongest-performing asset classes, supported by geopolitical uncertainty, supply risks and persistent demand for strategic raw materials.

Gold

Gold surged dramatically during January, reaching record territory above $5,000 per ounce during the final week and briefly exceeding $5,600 before a sharp correction. One monthly market review estimated a gain of approximately 12.5% for the month.

Safe-haven demand, inflation uncertainty, central-bank accumulation and concern about sovereign debt remained important structural supports.

Oil and Energy

Crude oil also advanced strongly, with one January review estimating a monthly gain approaching 14%. Geopolitical and supply-risk premiums contributed significantly to the increase.

Copper and Industrial Metals

Industrial metals remained supported by electricity-grid investment, data centres, defence, renewable generation and industrial automation. Commodity-producing emerging markets benefited from the stronger pricing environment.

Critical Minerals

Rare earths, copper and other strategic minerals remained increasingly linked to national-security and industrial-policy objectives, supporting investment in mining, refining, recycling and alternative supply chains.

Digital Assets

Digital assets experienced a difficult January, with elevated volatility and a meaningful retreat from the highs reached during 2025.

Bitcoin

Bitcoin remained under pressure as investors reduced speculative exposure and reassessed the relationship between digital assets, global liquidity and conventional risk markets.

Institutional ETF access continued to provide structural support, but the market demonstrated that greater institutional participation did not eliminate substantial drawdowns.

Ethereum

Ether and broader smart-contract-platform assets remained similarly volatile, with investors continuing to differentiate between blockchain infrastructure, tokenisation and speculative token exposure.

Tokenisation

Traditional financial institutions continued developing tokenised funds, securities, deposits and settlement systems despite weaker cryptocurrency prices.

Risk Considerations

• Digital assets began 2026 with elevated volatility.
• Institutional participation remained significant but did not prevent corrections.
• Tokenisation continued independently of speculative cryptocurrency prices.
• Leverage and concentrated ownership remained material risks.

Private Equity

Private-equity markets entered 2026 with a better financing environment than twelve months earlier, although elevated public valuations and increased competition required continued discipline.

Deal Activity

Healthcare, business services, infrastructure, industrial technology and financial services remained attractive areas. Investors increasingly sought businesses benefiting from economic growth without excessive dependence upon high equity multiples.

Financing

Policy rates were materially below their early-2025 levels, improving floating-rate debt affordability. Banks and syndicated markets continued competing strongly with private lenders for high-quality transactions.

Commodity and Infrastructure Exposure

The January commodity rally increased interest in mining services, energy infrastructure, critical minerals and specialist industrial businesses.

Exits

Strong public markets continued to provide a constructive environment for selected IPOs and strategic sales. Sponsors remained focused on delivering distributions after several difficult exit years.

Secondaries

Secondary markets remained an important source of liquidity and mature private-market exposure.

CE Global Private Equity Observations

• Financing conditions remained considerably better than in early 2025.
• Strong public markets supported exit preparation.
• Commodity and infrastructure themes gained importance.
• High valuations required disciplined entry pricing.
• Operational improvement remained central to long-term returns.

Artificial Intelligence & Technology

Artificial intelligence remained a powerful structural investment theme during January, although the broader equity rotation demonstrated that technology no longer represented the only source of attractive earnings growth.

Semiconductors

Demand remained significant for accelerators, memory, networking and specialist semiconductor equipment. Investors increasingly focused on utilisation and revenue generated from installed computing capacity.

Cloud Computing

Cloud providers continued expanding AI infrastructure, although greater scrutiny was applied to capital intensity and free-cash-flow generation.

Enterprise Adoption

Commercial AI adoption continued across software development, financial analysis, administration, customer support and marketing. Businesses increasingly required measurable productivity improvements before expanding deployments.

Power and Infrastructure

Electricity remained one of the principal constraints on new data-centre capacity. Grid investment, generation, storage and cooling therefore remained closely connected to the AI theme.

Technology Risks

• AI capital expenditure remained exceptionally large.
• Investors increasingly demanded evidence of monetisation.
• Model efficiency could change infrastructure requirements.
• Power availability continued to restrict development.
• Market leadership was broadening towards other sectors.

Sector Spotlight

Critical-Mineral Processing and Recycling

January's sector spotlight examines critical-mineral processing and recycling as commodity prices, geopolitical competition and electrification increase the strategic importance of secure raw-material supply.

Strategic Demand

Copper, rare earths, lithium, nickel and other specialist materials are required across electricity grids, batteries, defence systems, semiconductors and advanced manufacturing.

Processing Capacity

Mining alone does not provide supply security. Refining, separation and processing capacity remains highly concentrated geographically, creating strategic dependencies for Western economies.

Recycling

Recycling can reduce dependence upon newly mined material while recovering valuable metals from batteries, electronics, industrial equipment and permanent magnets.

Government Support

Governments increasingly use grants, procurement guarantees, tax incentives and strategic stockpiles to encourage domestic and allied-country supply chains.

Private-Market Opportunities

• Rare-earth separation and processing
• Battery-material recycling
• Electronic-waste recovery
• Copper recycling
• Mining and processing technology
• Supply-chain traceability

Investment Perspective

Critical-mineral processing offers exposure to long-term electrification and geopolitical-security trends without relying entirely upon commodity-price appreciation. Technical execution, environmental permitting and long-term customer contracts remain central to investment quality.

Regulatory Update

January's regulatory environment focused on monetary-policy implementation, artificial intelligence, strategic supply chains and financial-market infrastructure.

Federal Reserve Policy

The Federal Reserve maintained rates at 3.50%-3.75%, reinforcing its data-dependent approach after the easing delivered during 2025.

ECB Monetary Framework

The ECB adopted amendments to the legal framework governing Eurosystem monetary-policy operations, including changes relating to collateral and access arrangements that would take effect from March 2026.

Artificial Intelligence

Businesses continued preparing for additional stages of the EU Artificial Intelligence Act, with governance, documentation, transparency and model-risk controls becoming increasingly operational rather than theoretical requirements.

Critical Minerals

Governments continued treating strategic minerals and processing capacity as national-security issues, creating growing compliance requirements around origin, subsidies and supply-chain documentation.

Private Markets

Managers needed to ensure that private valuations reflected the broader rotation visible in listed markets rather than relying solely upon technology-led benchmark performance.

Compliance Priorities

• Monitor Federal Reserve policy following the January pause.
• Review ECB monetary-framework changes where relevant.
• Continue staged EU AI Act implementation.
• Review critical-mineral sourcing and traceability.
• Stress-test portfolio companies against commodity-price volatility.
• Maintain independent private-market valuation governance.

Looking Ahead

Markets entered February with global equities near record levels, commodity prices substantially higher and major central banks increasingly differentiated in their policy direction.

Federal Reserve

The Federal Reserve's January pause placed greater importance on forthcoming inflation and employment data. Further cuts would require convincing evidence that inflation was moderating or that labour-market weakness had intensified.

Bank of England

The Bank of England's February meeting would provide the first UK policy decision of 2026. Persistent inflation around 3.4% reduced the likelihood of rapid easing even as domestic growth remained subdued.

European Central Bank

The ECB appeared comfortable maintaining its 2.00% deposit rate while inflation remained close to target. Future changes would depend upon whether regional growth weakened materially.

Bank of Japan

Japan remained the major developed economy considering additional policy tightening. Markets would monitor wages, inflation and the yen for evidence that another rate increase could occur later in 2026.

Equity-Market Breadth

January's stronger equal-weighted S&P 500 performance suggested that market leadership was broadening beyond a small group of mega-cap companies. A continuation of this trend could support financials, industrials, materials and smaller businesses.

Gold and Commodities

The extraordinary January rally increased both strategic interest and short-term correction risk. Investors would assess whether higher commodity prices reflected sustainable physical demand or increasingly crowded positioning.

Digital Assets

The weak start to the year would test whether institutional investors treated lower cryptocurrency prices as an accumulation opportunity or continued reducing speculative exposure.

Private Markets

Broader equity leadership and improved financing conditions could support transaction activity. Infrastructure, commodities and industrial businesses could attract greater attention if the rotation away from concentrated US technology exposure continued.

CE Global Private Equity Perspective

January highlighted an increasingly important change in global investment markets: attractive returns were becoming less dependent upon a narrow group of US technology companies. Broader equity participation, strong commodities and improving emerging-market performance created a more diversified opportunity set.

CE Global Private Equity believes that critical-mineral processing, infrastructure, healthcare, financial services, cybersecurity and AI-enabled business services remain attractive long-term areas. Businesses exposed to several independent structural drivers may offer particularly resilient growth.

Artificial intelligence remains transformative, but the next phase of the cycle is likely to reward commercial execution and measurable cash generation more heavily than infrastructure announcements alone.

Private-market investors should continue prioritising disciplined entry valuations, moderate leverage, diversified revenue and clear exit options as the economic and monetary cycle develops through 2026.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.