Market Update - Month Overview (January 2026)

Summarised by Shara Cox (Report via Zenith)

International Markets Summary

Global equities rose in January despite geopolitical tensions and policy uncertainty. Developed markets gained in USD terms, with performance broadening beyond mega-cap tech into small caps, emerging markets, energy and materials. Emerging markets were particularly strong, supported by AI demand, higher commodity prices and a weaker USD.

Bond yields moved higher as the US Federal Reserve shifted to a more neutral stance and resilient economic data reduced expectations of near-term rate cuts. Commodities rallied — especially gold, oil and copper — reflecting geopolitical risks and improving global growth. Valuations remain elevated in the US, while emerging markets trade at a discount to developed markets.

Australian Markets Summary

Australian equities began the year on a solid footing, with the ASX 200 rising 1.8% in January. Gains were driven by the materials sector, which benefited from strong rallies in gold and copper. Over the past year, resources have significantly outperformed financials. Small caps also continued to perform well, supported by their higher exposure to mining and commodity-linked businesses.

A key domestic development was the RBA’s decision to lift the cash rate to 3.85% — its first increase in two years — in response to persistent inflation pressures and stronger-than-expected economic activity. Core inflation remains above target, and the labour market is still tight, reinforcing the Bank’s concern that demand is running ahead of supply. Markets are now pricing in the possibility of further rate increases.

The AUD strengthened above 70 US cents, supported by widening interest rate differentials and firm commodity prices. While equity valuations remain above long-term averages, mining stocks continue to trade at a discount to the broader market despite strong earnings momentum.