January proved to be a volatile start to the year, as heightened geopolitical tensions rattled stock markets and drove investors to gold (GC=F), as a so-called safe haven.
At the very start of the month, the US captured Venezuelan leader Nicolás Maduro, after president Donald Trump ordered the military to carry out strikes on the country.
Trump then turned his attention to Greenland, ramping up his push for the US to take over the semi-autonomous Danish territory. Stock markets sold off when Trump threatened to put new tariffs on a number of European countries over opposition to his proposed takeover of Greenland.
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However, markets recovered after Trump ruled out using force to acquire Greenland, in a speech at the World Economic Forum, and later walked back on his threat of further tariffs.
Gold prices (GC=F) continued to notch new highs throughout the month, as investors sought to take shelter from volatility. Gold’s rally came to an abrupt halt at the end of the month, as the dollar strengthened after Trump announced Kevin Warsh as his pick to be the next Federal Reserve chairman.
Towards the end of the month the spotlight also shifted back onto Big Tech, as the latest earnings season got into full swing. A major focus has continued to be how much these companies are spending on AI and whether these investments are paying off.
Despite volatility, major markets delivered a positive return in January, with the US S&P 500 (^GSPC) up 1.5%, according to JPMorgan Asset Management’s (JPM) latest monthly review.
The UK FTSE All Share (^FTAS) returned 3.1% in January and the MSCI Europe ex-UK advanced 2.4%. Meanwhile, the MSCI Asia ex-Japan delivered a total return of 8.2%, the Japan’s Topix returned 4.6% and the MSCI Emerging Markets index gained 8.9%.
Lilia Peytavin, global market strategist at JPMAM, said: “While January was volatile for financial markets, given heightened geopolitical tensions, investors’ appetite for risk increased.”
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“Equities benefited from rising growth expectations, and a preserved Goldilocks environment,” she said. “Indeed, activity data came in better than expected and inflation prints moderated, pointing towards real income gains for consumers.”
Peytavin said that “broadening” was the word that dominated stock markets in January.
“Diversification away from US large caps continued to play out,” she said. “Within the US, small caps had a strong start to the year, up 5%, while the ‘Magnificent 7’ stocks rose only 1% on the month.”
