Global Markets: what’s driving the outlook this month?
In our latest update, we look at recent developments in global markets, where we see potential ahead, and what investors may want to keep in focus.
Key themes at a glance:
- A resilient global backdrop: Even with US tariffs still in place and signs that labour markets are cooling, the broader global economy remains in solid shape.
- US growth remains strong: The US economy continues to perform well, supported by fiscal stimulus, strong company results and ongoing investment in Artificial Intelligence (AI).
- Europe’s outlook improves: With inflation back at target, the European Central Bank appears to have paused its rate‑cutting cycle.
- Confidence in corporate resilience: Investors remain positive about the strength and innovation of US companies. While equity valuations are high in some areas, there are still pockets of value across regions and sectors.
- Our positioning: We continue to favour equities over bonds, with a preference for non‑US stocks. In fixed income, we see more value in UK gilts than in US Treasuries.
Market overview
As we entered 2026, equity markets were near record highs and investor confidence remained firm. Companies have maintained pricing power and expanded profit margins. Although we still expect US tariffs to affect economic activity, markets appear more comfortable with this backdrop. However, markets are also vulnerable to the unpredictability of US foreign policy, as illustrated by President Trump’s intervention in Venezuela and heightened rhetoric over Greenland.
US outlook
The outlook for US economic growth is still robust, especially in the first six months of this year, as the spending measures in President Trump’s One Big Beautiful Bill Act take effect. Strong corporate profits, rapid AI investment and the US’s productivity advantage are helping to offset the drag from trade policy. Companies are proving resilient and adaptable, although the labour market is cooling, and there are signs that consumers are growing more cautious. This November’s midterm elections incentivise the administration to address affordability concerns.
European outlook
The outlook for European growth has improved. Lower energy prices, excess Chinese goods, reduced interest rates and increased government spending have all helped to offset tariff effects. With inflation back at target, the European Central Bank appears to have paused its rate‑cutting cycle.
Equities and valuations
Equity valuations are elevated in some areas, but there are significant variations between regions and within markets – especially in the US. Non‑US markets generally offer better value, though US earnings have consistently exceeded expectations.
Our positioning
We remain modestly overweight in equities, with a preference for markets outside the US. We continue to monitor whether companies can deliver earnings that justify current valuations. Government and corporate bonds offer limited value at present, with UK gilts more attractive than US Treasuries. Given the risk of higher short-term inflation and larger fiscal deficits, careful selection is important in alternatives, where we hold a neutral stance. We maintain an underweight position in cash.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest.
This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors.
Opinions, interpretations and conclusions represent the views of True Potential Investments at the date of publication and are subject to change. Forecasts are not a reliable indicator of future results.
All data sourced from Bloomberg L.P. (23/01/2026)
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