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• Japanese equities advanced +2.5% in sterling terms as markets anticipated an LDP election victory
• Gold ended +1.4% up in dollar terms, amidst continued volatility 

• Asia ex-Japan and emerging markets slid -1.1% and -0.7% respectively, in sterling terms
• Brent crude oil slipped -3.7% in dollar terms

Investor concerns about the disruptive potential of artificial intelligence, along with growing unease over potential overinvestment in related technology, hit some high-growth equities last week. Stock markets were volatile, driven by a sharp tech-led sell-off from Tuesday through Thursday, followed by a strong rebound on Friday. Despite the late recovery, the Nasdaq Composite finished the week down -1.84%, while the S&P 500 ended broadly flat. 

In contrast, small-cap and value-oriented stocks outperformed last week. The Dow Jones Industrial Average rose +2.5%, closing above 50,000 points for the first time – a notable milestone reflecting strength outside the mega-cap tech stocks. European equities posted mixed but resilient gains, with the FTSE 100 up +1.43%. Japanese equities continued their strong start to the year, with the Nikkei 225 Index advancing +1.75%, hitting an all-time high as investors responded positively to the government’s pro-growth policies.

Cryptocurrencies yo-yoed. Bitcoin fell sharply to ~$61,000, before stabilising and rebounding to ~$70,000 by Friday. But Bitcoin remains down roughly -20% year-to-date. Precious metals also saw heightened volatility. Gold rebounded modestly after the previous week’s decline, while silver retreated sharply, closing Friday near $77 per ounce – well below its recent record high of $121 reached on 29 January.

In an unexpectedly close decision, rate-setters at the Bank of England (BoE) voted 5-4 to hold interest rates at 3.75% last week. Before the decision, markets had not expected another cut until the summer, but they quickly brought that expectation forward to April – with an earlier move in March still possible. Two of the committee members voting for no change, including BoE Governor Andrew Bailey, signalled their readiness to cut soon. Until now, inflation has troubled them, but their concerns are fading, given a deteriorating growth outlook and a softening labour market. The Bank now forecasts economic growth in 2026 will drop to 0.9%, from the 1.2% forecast last November, and unemployment to peak at 5.3%, up from 5.1%. This may drag inflation down. However, in the near-term, Bailey reckons that measures announced in the recent Budget – including cuts to utility bills and a freeze to rail fares coming into effect in April – may cause inflation to fall “much more than expected” to 2.1% by Q2 this year. 

It is worth noting that the BoE’s growth forecasts are a little at odds with other forecasters, such as the International Monetary Fund (IMF), which in January reiterated its 2026 and 2027 UK growth projections of 1.3% and 1.5%, respectively. This may relate to differing views about the relative strength of the public and private sectors of the economy.

2026 is shaping up for what could be the most valuable wave of public listings in history. The latest signal is news that Elon Musk’s SpaceX might push for a $1.5trn IPO in June. With some private tech giants – including SpaceX, OpenAI, ByteDance, Anthropic, Databricks and Revolut – collectively valued at more than $3trn, US stock exchanges are preparing for a landmark year that could boost and reset expectations for public markets. Any of these possible deals could be the biggest IPO since Saudi Aramco, the world’s biggest oil company, raised nearly $30bn in 2019.

The main reason for companies considering an IPO is to access even more capital. And some experts are starting to see a limit to just how much capital can be raised and invested via private markets. For example, the latest funding round for OpenAI came in at $40bn, bigger than any IPO ever. Only a public equity market will likely be able to offer a far larger investor base and source of capital. 

For the last 15 years, private markets have skyrocketed, and the number of US business backed by private investors is now more than double the number of public companies, as many companies have preferred to stay private for longer, than to IPO. Low interest rates, making funding relatively easier and inexpensive, explains part of this trend. Private companies also face far less scrutiny and lower regulatory reporting standards than their public peers.

• Reserve Bank of Australia – raised interest rates by 0.25% to 3.85% – their first hike in over 2 years – fearing inflation may remain above their 2-3% target range
• US labour market – job openings fell to their lowest level in more than five years in December’s JOLTS report, falling by 386,000 to 6.542 million – well below expectations of 7.2million. Attention now turns to the Non-Farm Payrolls report, delayed by the partial government shutdown last week
• Cocoa – prices have fallen to near 2-year lows, sliding -30% in the last month alone and -58% over the past year. Changing eating habits and shrinkflation have driven weaker demand, while production has recovered in West Africa, increasing supply
• European inflation – flash results showed inflation falling to 1.7% in January from 2% previously. It marked the twelfth consecutive month of being at-or-close to the European Central Bank’s target of 2%
• Walmart – shares of the retail giant have risen ~13% since the beginning of 2026, making it the world’s first retailer to have a market capitalisation of $1trn
• US/India trade deal – President Donald Trump announced last Monday that the US will be cutting tariffs on Indian goods to 18% from 50%. In response, Indian Prime Minister Narendra Modi agreed to cut tariffs on US goods to 0% while also agreeing to replace Russian oil with US supply
• Japan’s snap election – Japanese Prime Minister Sanae Takaichi led the Liberal Democratic Party (LDP) to a historic election victory. The party achieved a two-thirds lower house ‘super-majority’, the first in the history of the parliament, paving the way to more expansionary fiscal policies

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Past performance is not a reliable indicator of future returns. Nothing herein should be construed as a recommendation to hold, buy or sell any security or encourage any investment decision. The mention of any particular asset class, sub-asset class or company does not imply that it is held, or may ever be held, in any product or service.