The emerging markets story continues

2025 was the first year in a long while where emerging market equities and non-US DM equities (i.e. Europe and Japan) outperformed US equities. Much of the same phenomenon continued in January with EM equities rising a whopping 8.3%. Korean equities, in particular, rose 23% for the month.

By sector, energy, materials and industrials led the way while technology lagged. As such, the broadening out of leadership by region (from US) and by sector (from tech) continued in Jan 2026.

Within the AI related segment, hardware and semiconductors remained firm but software struggled among valuation concerns and the risk that AI may disrupt certain SaaS industries.

In fixed income, the 10 year treasury yield rose 7 basis points to 4.24%. This move was driven by a “cautious pause” from the Fed and the nomination of Kevin Warsh as the next Fed Chair whom some view as more hawkish than other Fed chair candidates.

As for commodities, oil prices snapped a five month losing streak, jumping over 13% due to Middle East tensions and cold winter weather. However, the real story of the month was Gold and Silver which fell 16% and 39% respectively from its peak towards the end of the month due to a massive “unwind” caused partly by the nomination of Kevin Warsh. Gold and Silver still managed to end Jan higher by 13% and 19% respectively compared to the beginning of the month. With Oil, Gold, and Silver strong, commodities had one of its strongest months in the last 15 years.

The USD started the year in weakness with the DXY Index falling 1.4% for Jan. However, it found some support following the nomination of Kevin Warsh as Fed chair. 

Global equity

By region, it was all about emerging markets with Korea (+23%), Brazil (+17%), Chile (+13%), and Taiwan (+11%) leading the charge. It was a mix of strength in semiconductors (Korea/Taiwan) and commodities in Latam markets that drove a big part of the strength.

Japan and EU markets were also strong, showing the broadening out of the equity rally into all major regions outside of the US market. Japan’s performance was helped by expectations of corporate reform and fiscal stimulus, thanks to the expected landslide victory at the early Feb snap elections (as of the time of writing, LDP had already won the election by a landslide and the Japanese equities market continued its strength in Feb).

In Europe, performance was spread across multiple sectors with Europe viewed as a “value” alternative to S&P500 and particularly US tech.

On a sector basis, the Energy sector was the best performing, driven by the surge in oil. Materials also continued their strength that started in 2025, driven by the performance of gold and other precious metals as well as the strength in copper. Industrials also performed well with sector leadership broadening out from technology. Even the consumer defensive sector which had been a big laggard in 2025 played catch up in Jan 2026.

Global fixed income

Global bonds saw muted performance during the month as better than expected economic data in the US led the Fed to keep its federal funds rate unchanged at the 3.5%-3.75% range, causing interest rates to rise. 

Global investment grade and high yield bonds did better than treasury bonds, however, as credit saw solid performance on the back of positive US economic data that tightened credit spreads further. EM debt also continues to post solid numbers following a strong 2025.

Commodities

The Commodities index rose by 10% in Jan 2026, its strongest monthly move since Dec 2010. Many parts of the commodities index were strong with Gold rising 13%, Brent 16%, Natural Gas 18%, Crude 14%, Copper 4% and Silver rising 19%. These 6 commodities alone make up more than 40% of the index.

There seems to be higher demand for real assets including commodities following the stellar performance of Gold despite the fact that different commodities have very different supply responses.

We believe commodities can augment client portfolios as a satellite, but we do not encourage viewing them as core positions due to its lack of cashflow.