January 2026 marked a constructive start to the year for financial markets, although it was not without volatility. Global growth remains steady, inflation is moderating in most regions, and central banks are proceeding cautiously as they balance economic support with fiscal risks. Geopolitical tensions also remain elevated following a U.S. military operation in Venezuela to capture and extradite Venezuelan President Nicolás Maduro.
United States
Business activity in the US remained stable in January. The US ISM Manufacturing PMI rose to 52.6 in January — above the 50-point threshold signalling expansion — indicating continued growth in private-sector activity. However, momentum showed signs of cooling, with softer labour market conditions and ongoing concerns about import tariffs weighing on sentiment.
Headline US inflation remained at 2.7% YoY, while core inflation held near 2.6% YoY. The Federal Reserve kept interest rates unchanged at 3.50%–3.75% during its January meeting, following three cuts in 2025, signalling a data-dependent approach going forward. President Trump also announced the nomination of Kevin Warsh as the next Federal Reserve Chair.
China
China ended 2025 with GDP growth of 5.0%, meeting its official target. However, quarterly data showed that growth slowed toward year-end, reflecting weaker domestic demand and the fading impact of earlier stimulus measures. Services and high-tech manufacturing were key contributors, while household consumption remains subdued. Policymakers appear focused on stability as the country transitions into its 15th Five-Year Plan.
Europe and Japan
In Europe, economic growth remains positive but modest. Eurozone GDP increased by 1.5% in 2025, with inflation cooling to 1.7% YoY in December. UK inflation ticked higher to 3.4% YoY, suggesting a gradual monetary policy response.
Japan’s annual inflation slowed to 2.1% YoY in December, significantly down from 2.9% in November. The BoJ held interest rates steady at 0.75% — the highest level in three decades — while upgrading its economic growth outlook. Corporate governance reforms, continued AI investment and a weaker yen remain supportive of Japanese equities.
IMF Outlook
The IMF revised its global growth forecast for 2026 upward by 0.2 percentage points to 3.3%. Inflation is expected to continue moderating globally, while technology investment — particularly in artificial intelligence — remains a structural growth driver.
| GLOBAL MARKET PERFORMANCE |
Global equity markets delivered positive returns in January, with emerging markets significantly outperforming developed markets — driven by semiconductor stocks, improving macro conditions and a weaker US dollar.
| Asset Class / Index | Return (m/m) | Currency |
| MSCI World Index | +2.24% | USD |
| MSCI Emerging Markets | +8.86% | USD |
| S&P 500 | +1.40% | USD |
| Euro STOXX 50 | +2.80% | EUR |
| FTSE 100 (UK) | +3.00% | GBP |
| Nikkei 225 (Japan) | +5.90% | JPY |
| FTSE/JSE All Share Index | +3.70% | ZAR |
| JSE Resources Sector | +13.20% | ZAR |
| FTSE/JSE All Bond Index | +1.95% | ZAR |
| ZAR / USD | +3.20% | ZAR |
| SOUTH AFRICA |
South Africa’s economic picture continues to improve gradually. The IMF revised South Africa’s 2026 growth forecast upward by 0.2 percentage points to 1.4%. Inflation rose slightly to 3.6% YoY in December, with average inflation for 2025 at 3.2% — the lowest level in 21 years.
The SARB kept the repo rate unchanged at 6.75%. While the MPC views risks to the inflation outlook as balanced, food inflation poses upside risks related to the foot-and-mouth disease outbreak. The rand appreciated 3.2% m/m against the US dollar, ending January at R16.04.
The FTSE/JSE All Share Index gained 3.7% in January, extending its strong rally. Performance was again driven by the Resources sector (+13.2%), with precious metals and mining stocks gaining on the back of higher gold and platinum prices. The FTSE/JSE All Bond Index rose 1.95%. Longer-dated bonds performed particularly well, with the 10-year government bond yield falling approximately 16 basis points m/m to around 8.03%.
| FINAL THOUGHTS |
January 2026 demonstrated that markets remain resilient despite ongoing geopolitical risks and fiscal concerns. Inflation continues to moderate globally, central banks are proceeding cautiously, and emerging markets are benefiting from improving financial conditions and strong commodity prices.
For South African investors, progress on domestic reforms, lower inflation expectations, a stronger rand, supportive commodity prices and signs of fiscal consolidation provide a constructive backdrop for local assets.