Please see below, an article from Tatton Investment Management, analysing the key factors currently affecting global investment markets. Received this morning – 05/01/2026
A quiet break from the new normal
The US actions in Venezuela have – as of now – had no negative impact on equity markets. In commodities, metals are stronger again, while oil is slightly lower. US bond markets are a bit weaker in price terms, so yields are marginally higher. Lastly, the US Dollar has risen, with the Japanese Yen being the weakest counterpart.
The consequences of the action may only become apparent over the coming weeks. Still, the opening of US markets will be important, and possibly the area most at risk may be the US bond market. Yields will rise if fiscal discipline is challenged. The Trump administration will have to avoid a policy which requires significant or extended military involvement and that means working with the Venezuelan people to achieve a politically acceptable and stable path back to democracy. Trump’s hard posture in the immediate aftermath probably needs to soften if he is to achieve that.
Before all that, we had crossed over the holiday period with cautious optimism. While US equity markets held steady, Europe’s broad market reached a new high, and the FTSE 100 traded above 10,000 for the first time on Friday. China meanwhile opened 2026 with a 2% gain.
For much of 2025, holidays were tense for investors amid the Trump administration’s unpredictability. Toward year-end, however, the tone shifted. This may have been because of a policy refocus towards South America, although there was talk of an apparent waning in the President’s energy levels. Either way, markets welcomed the calm. After November’s volatility and institutional profit-taking, portfolios were largely set before liquidity dried up. Steady savings flows helped equities recover toward annual highs, with institutional investors adding funds daily, reflected in today’s strong lift.
Bond markets were similarly quiet after absorbing the surge in US data-centre financing bond issuance late last year. Volatility eased, though long-term yields remain elevated. Growth optimism, especially in the UK and Europe, would typically push yields higher, but falling inflation expectations offset this. In the UK, 10-year inflation forecasts dropped from 3.1% to 2.6%.
Precious metals surged into December but saw sharp swings over the holidays amid thin liquidity and repositioning. Platinum and palladium corrected, silver held gains, and gold posted mild increases, supported by safe-haven demand. Industrial metals outperformed, with copper hitting record highs in dollar terms – though still cheap relative to precious metals. Oil remains even cheaper. Analysts remain cautious on energy, but stronger growth could lift industrial commodities in 2026.
The “new normal” of 2025 looks set to continue, with US policy shocks still likely – but also generally expected.
Geopolitically, prospects for peace in Ukraine have improved slightly – not through diplomacy but due to Russia’s weakening economy and strained finances. Oil price softness adds pressure, while Europe boosts defence spending, supporting industry despite Trump’s tariffs. European banks were standout performers in 2025, gaining over 60%, and JP Morgan sees further upside. The ECB expects growth driven by domestic demand, rising real wages, and a resilient labour market, keeping policy stable and lending strong.
In the UK, growth is strong enough to support equities and sterling yet slow enough to keep inflation near target and rates trending lower. Labour faces pressure ahead of May local elections and may pursue pro-growth deregulation, while Conservatives push welfare cuts. If politics shifts toward economics and away from culture wars, investors will welcome it.
The Q4 earnings season begins in two weeks with US banks reporting. Earnings growth drove 2025’s equity gains as tech valuations cooled, though AI remains the dominant theme, with major language-model releases expected soon.
Trump is set to name Jerome Powell’s successor, possibly this week, with Hassett the frontrunner. Markets price only a 20% chance of a rate cut at the January 28 meeting, pending more data. Trump could act to remove Powell before his term officially ends in May. Meanwhile, the Supreme Court will rule early this year on tariffs under emergency powers, with either outcome adding uncertainty. If struck down, alternative revenue measures could impact deficits and bond yields.
Congress returns today, 5th January, having adjourned with nine funding bills unresolved and a looming January 30 shutdown if progress stalls. The House must also vote on extending the Affordable Care Act, with no agreement yet between parties.
Wishing you all a very Happy New Year!
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Marcus Blenkinsop
5th January 2026