If we thought that the events of 2025 had desensitised us to President Trump, he proved us wrong in January. In one month, we had the military operation to remove the President of Venezuela, legal action against the Chair of the Federal Reserve, the threat of an invasion of Greenland, and the shootings by immigration agents in Minnesota. As always though, as investors, we try to focus on the economic impact and not political noise.

It was difficult to get a timely read on the United States economy in late 2025, as the government shutdown meant that a lot of data wasn’t published, or even collected, but the situation did improve in early January. Business surveys showed that inflation and jobs, two concerns among our otherwise positive outlook for 2026, were both turning in a more encouraging direction, as were new orders. Sure enough, later in the month, the consumer price inflation (CPI) index held steady, and the unemployment rate dropped slightly. At its month-end meeting, the Federal Reserve (the Fed) kept US interest rates steady at 3.75%, with Chair Jerome Powell citing the improved economic outlook. President Trump then announced Kevin Warsh as his nomination to be Powell’s replacement. The choice of Warsh, who previously served on the Fed board but has since been critical of their policies, was viewed as positive by economists and markets.

Figure 1: US business surveys show improvement in January

Source: ISM (Institute of Supply Management). We use a blend of 70% ISM Services data and 30% ISM Manufacturing data.

In Europe there were fewer headlines, but the news was generally positive. Eurozone GDP1 numbers showed 0.3% growth for the final quarter, and 1.3% for 2025, which is solid by European standards, especially considering the trade war. Notable countries were Spain, which led the way again, and Germany, which posted a positive quarter for only the third time in over three years. Inflation came in just below the 2% target, so we expect no rate action from the European Central Bank (ECB) next month. Data in the United Kingdom was mixed. Retail sales improved, but inflation also picked up to 3.4%. However, the deterioration in UK jobs data leads us to expect rate cuts from the Bank of England (BOE) in the coming months.

Over in Japan, Prime Minister Sanae Takaichi’s efforts to cut energy prices helped to slow consumer inflation, but by announcing a snap election and calling for tax cuts, she also fueled concerns of future inflation pressure, which led to increased volatility in the Japanese currency and bond market. Although the Bank of Japan held yen rates steady, they did lay the ground for more rate hikes by raising their growth and inflation forecasts.

Figure 2: Recent moves in Japanese currency and bond yields

Source: Bloomberg. Price returns are quoted in US dollars.

January was also a volatile month for commodities. At first, eyes were on the oil price, but the Trump administration’s actions in Venezuela made little difference. Only later in the month, when attention turned to Iran, did we see a noticeable pick-up in the price of crude oil. Industrial metals, including copper, rose over 5% on the positive cyclical outlook and supply concerns, but the real action was in precious metals. Here prices went parabolic2, as traders jumped on the bandwagon of dollar debasement and retail money piled in. However, once a more conventional figure was appointed to the Fed, sentiment shifted, and prices fell sharply over the last two days of the month. Gold, which had risen by 25% in a few weeks, breaking through the US$5,000 / oz barrier, dropped by 10%. Silver, which had jumped by 63% inside the month, fell by 26% in one day (in US dollars).

Figure 4. Extreme price movement in precious metals in January

Source: Bloomberg. All metal prices are quoted in US dollars.

1 GDP is gross domestic product, the standard measure of economic activity.

2 “parabolic” meaning rapid or exponential growth.