Market Matters – The Bright Start Continues

Latest market insight by our own industry leader.

Markets have started the year calmly:

Despite headlines (including Venezuela and US political noise), equities have been steady, bond yields slightly lower, and volatility subdued. Oil and credit markets barely reacted, suggesting investors are still focused on growth, earnings and policy rather than geopolitics.

The US has retaken the lead:

Asia and emerging markets began strongly but cooled, leaving the US as the main driver. Europe and the UK have been steady, while falling yields point to expectations of slower growth and easier policy.

The FTSE looks resilient – in stark contrast to the UK domestic economy:

The FTSE 100 above 10,000 helps sentiment, but UK consumers still look pressured. Retail updates were mixed/weak (Tesco, ABF/Primark, Greggs, and even Next), and lower UK yields reflect weaker growth expectations and a more dovish policy outlook.

US jobs are soft, but productivity is strong:

Payrolls rose only 50,000, unemployment is 4.4% with participation down, and long-term unemployment increased in 2025 – supporting the case for further easing after the Fed’s three cuts late last year. Offsetting that, productivity rose 4.9% in Q3 2025 (after 4.1% in Q2) and unit labour costs fell – good for margins and lower inflation pressure.

AI may be spreading benefits beyond mega-caps:

It’s possible that AI gains are starting to show up across the wider market as seen in the “Impressive 493” (the lesser-known cousins of the Magnificent 7), so the AI speculation cycle might be able to cool without “bursting.” The next key test is US bank earnings and guidance on lending, consumers, credit quality, and capex; if that holds up, markets could make more new highs.

Tom McGrath

Chief Investment Officer & Portfolio Manager