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12th February 2026
Cappuccino Commentary
January 2026 Review
Global equities were slightly down in January. This was due to negative returns in the US markets which fell-1.3% in sterling terms. With the US making up 70% of the global benchmark it has a significant impact on the performance of the overall global index. However, once you take out the US, the story was much more positive in every other equity market. Our home market had a strong month posting positive returns of +3.1% but the standouts were Asia and emerging markets which delivered +4.8% and +6.8% respectively. The dollar continued to decline, helping both regions. European and Japanese markets also posted strong returns.
Looking at the UK equity market, it was pleasing to see small caps and the Alternative Investment Market (AIM) return far more than the broader market (+4.6% & +6.8% respectively). These smaller company stocks have been out of favour with investors for some time, but expectations of further interest rate cuts from the Bank of England (BoE) should help this part of the market which tends to be more sensitive to borrowing costs. Small cap businesses also tend to be more insulated from geopolitical noise which was rife over the month.
President Trump gave markets a lot to digest in January. Just two days into the year, the US launched airstrikes on military bases in Caracas and captured Venezuelan President Nicolás Maduro in a 2am raid. Within days the US intervention in Venezuela was knocked off the headlines when Trump stepped up his campaign to take “ownership” of Greenland and threatened to impose new tariffs on eight Nato allies over their opposition to his planned takeover of the country.
Domestically, protests erupted across the US following the murders of Renee Good and Alex Pretti by ICE and Border Patrol agents. Concerns about the independence of the Federal Reserve were heightened when the Department of Justice (DOJ) launched a criminal investigation into Fed Chair, Jerome Powell. In response, Powell said he was being threatened with criminal charges because the Fed had been setting interest rates, “based on our best assessment of what will serve the public, rather than following the preferences of the president.” Later in the month, Trump nominated Kevin Warsh to replace Powell when he leaves his post in May. Warsh has backed maintaining higher interest rates in the past and markets reacted positively to what many perceive to be a safer choice than some of the other rumoured candidates. However, Warsh’s ties to Trump allies like Ronald Lauder, and the DoJ’s investigation into Powell could hold up the confirmation process.
Although most equity regions brushed off all the political drama, gold rallied extremely hard on these tensions with the asset class +13.5% over January. More broadly, commodities had a strong month delivering a return of +7.3%. Oil and gas prices rallied over double digits on the back of colder winter weather and an associated fall in storage levels.
With this general risk-on environment (despite all the geopolitical risks), fixed income markets were mainly negative with global and emerging market bonds declining slightly (around -1.8%). UK government bonds were flat.
We’ve been talking about diversifying outside of the US equity markets for a while now, seeing cheaper valuations in other regions. This also helps move us away from the concentration on technology and AI that currently dominates the US market. Generally, it’s been a strong start to the year, and while we have warned over recent months that there will be bumps in the road, already this year “avoiding the noise” seems to be a key message.
Please note:
For regulated financial advisers and investment professionals only. Copia does not provide financial advice, and the contents of this document should not be taken as such. The value of investments can increase and decrease, past performance and historical data cannot guarantee future success, and any references to individual stocks or asset classes are made purely for illustrative purposes.
The performance of each asset class is represented by certain Exchange Traded Funds and Passive Funds available to UK investors and expressed in GBP terms selected by Copia Capital Management to represent that asset class, as reported at last UK market close before the end of the calendar month. Reference to a particular asset class does not represent a recommendation to seek exposure to that asset class. This information is included for comparison purposes for the period stated but is not an indicator of potential maximum loss for other periods or in the future.