Market Movers so far in 2026
Market Drivers for 2026
Key Risks
Outlook for 2026
The positive momentum of global equities and bonds remains intact amid supportive, pro-growth policies and unprecedented investments in tech, AI, resources, and defense.
SystematicEdge has developed a series of investment strategies that give investors a diversified, cost-efficient exposure to Equity, Fixed Income, Commodities, and Crypto. Our strategies are based on three pillars:
The performance of our flagship strategies in 2025 and January 2026 is shown in the table and chart below.
February opens with the same themes that shaped markets at the start of the year: sharp volatility in metals, resilient equities, and renewed debate around the U.S. dollar. A late-January pullback in precious metals highlighted how quickly crowded positioning can unwind. Meanwhile, global equity markets finished January higher. In the U.S., Donald Trump’s nomination of Kevin Warsh as the next Chair of the Federal Reserve has led investors to reassess the outlook for rates, the dollar, and risky assets. In Europe, attention turns to policy meetings at the European Central Bank (ECB) and the Bank of England (BoE), where rates are widely expected to remain unchanged. In China, Xi Jinping has reiterated ambitions to expand the renminbi’s international role, positioning it as a stronger currency for trade and foreign exchange. Overall, the policy mix remains supportive of growth, with fiscal settings neutral to accommodative across major economies. AI investment is set to continue expanding. Against this backdrop, we remain constructive on global markets, while staying mindful that crowded trades, especially in commodities, can correct abruptly.
In the U.S.: Growth moderates at 2.3%, inflation eases at 2.7%, policy still supportive
Growth closed 2025 at a solid 2.3%, supported by consumption, even as labor markets showed gradual cooling. This softness keeps the Fed on track for at least two or three additional rate cuts. Inflation has eased to 2.7%, helped by temporary factors, while core goods prices remain contained for now. Looking ahead, tariffs are likely to weigh on core goods through 2026, with added uncertainty from a potential Supreme Court ruling on their legal basis.
In Europe: Steady Eurozone growth at 1.3% with inflation at 1.9% near target
Eurozone growth is expected to remain relatively stable in 2026, helped by a supportive policy mix in Germany and a broadly neutral monetary stance. Labor markets remain strong, services activity looks robust, and manufacturing appears to be stabilizing, supporting a 1.2% GDP growth outlook for 2026. Clearer progress on a U.S. trade agreement, elevated household savings, and low corporate leverage should further underpin demand. Inflation is expected to stay just below 2%, helped by lower energy prices and a stronger euro, while the ECB signals a high bar for further cuts, keeping rates around 2% for longer.
In China: Sustained growth at 4.5% with no inflation and pro-tech policy
China delivered 5% growth in 2025 on resilient exports and production. We expect moderation to around 4.5% in 2026, with some upside if easing proves effective. Domestic demand should stabilize gradually: retail sales near 3% YoY, investment recovering to low single digits, and export growth cooling to 3% YoY. Policy remains supportive with targeted monetary easing and likely further reserve requirement ratio (RRR) and policy rate cuts, while fiscal support stays reactive and focused on productivity and welfare. Inflation should rebound mildly in 2026 from 0% in 2025 as consumption support increases and measures reduce oversupply in selected sectors.
2026 has started on a strong note, with global equities posting a positive performance of 4% on average in January. Asian markets have been the primary driver of global equity performance, led by strong gains in Japan and South Korea. The U.S. dollar is likely to further weaken in early 2026 as rate differentials narrow, though strong U.S. fundamentals may limit the decline. Due to heightened geopolitical uncertainty in January, and despite the sell-off at the end of the month, commodities have delivered strong gains across oil, gold, and copper. In this environment, investors may consider adding a tactical commodities exposure through our Geopolitical Risk Mitigation (GRM) strategy.
Equity: In Asia, Korea’s KOSPI 200 was the standout performer (+26.8% MTD), followed by Japan’s Nikkei 225 (+5.9% MTD) and China’s Hang Seng China Enterprises (+4.5% MTD). U.S. equities started 2026 on a positive note, with the S&P 500 up 1.4% MTD and Nasdaq 100 up 1.2% MTD. Euro Stoxx 50 posted a solid gain as well, with 2.7% MTD.
Fixed Income: 10-year yields showed a mixed picture in January, with the U.S. yield up 7 bps MTD to 4.24%, the German yield down 1 bp MTD to 2.85%, and the China yield down 4 bps MTD to 1.82%.
Currencies: The U.S. dollar weakened broadly in January with AUD/USD up 4.3% MTD to 0.6959, EUR/USD up 0.9% MTD to 1.1848, USD/JPY down 1.2% MTD to 154.76, and USD/RMB down 0.3% MTD to 6.9577.
Commodities: In January, gold surged 24% through Friday, January 30th, then dropped 15% over the next two trading days amid intense profit-taking following Trump’s announcement of the new Fed Chair. Meanwhile, WTI oil and copper rose 13.6% and 4.7% MTD to USD 65.21/bbl and USD 13,001/ton, respectively.
Crypto: Cryptocurrencies started 2026 on a weaker note, with Bitcoin at USD 84,223, down 4.0% MTD, Ether at USD 2,705, down 9.2% MTD, and Solana at USD 117.38, down 5.5% MTD.
Global equities gained 4% in January 2025, mirrored by our flagship Systematic Equity Portfolio (SEP) strategy, with performance broadening toward cyclical regions and sectors. Structural trends, especially tech and AI, remain supportive, and we favour diversified exposure across the full technology value chain as focus shifts to monetization. A cyclical recovery is underway, helped by easing tariffs, expected Fed rate cuts, and more supportive fiscal policy. Together, these macro and structural tailwinds support earnings, with close to 15% global EPS growth expected and broader performance extending through 2026.
In the U.S.: S&P 500 up 1.4% YTD, resilient growth, Fed easing, and broader AI-driven gains
U.S. equities still have upside in 2026, supported by resilient growth, an accommodative Federal Reserve, and continued AI adoption, despite recent policy noise. Fiscal stimulus under Donald Trump, fading tariff pressures, and lagged effects from 2025 rate cuts should lift household demand and corporate profits. AI leadership is broadening from infrastructure to applications, improving market breadth and favouring more diversified positioning, including consumer-facing sectors.
In Europe: Euro Stoxx 50 up 2.7% YTD, earnings recovery meets attractive valuations
European earnings are set to reaccelerate after three flat years, with profit growth expected at 8% in 2026 and 10% in 2027, supported by improving confidence and accommodative global policy. Valuations remain attractive, while exposure to power, resources, and healthier banks positions Europe well for rising capex, AI, energy transition, and defense spending. Tariff risks look manageable, and we stay positive on European equities.
In China: Hang Seng China Enterprises up 4.5% YTD, tech leadership, and early signs of macro recovery
China’s tech sector remains strong, backed by strong government support for AI, semiconductors, and digital platforms, reinforced by Xi Jinping’s push for AI self-sufficiency and industrial competitiveness by 2027. This tech momentum supports broader China equities, alongside improving liquidity and early signs of macro stabilization, with manufacturing back in expansion and GDP growth reaching 5% in 2025. Policy easing, consumption subsidies, and renewed investor inflows are lifting sentiment, pointing to accelerating technology adoption and earnings growth.
The nomination of Kevin Warsh as the next Federal Reserve Chair – seen as more independent and slightly more hawkish than expected – led markets to price “higher-for-longer” rates and a delayed next rate cut. That triggered a classic repricing: the U.S. dollar strengthened by about 2% on average year to date. Nonetheless, the dollar had been under pressure near a four-year low, while gold’s sharp rally reflects investor unease with the dollar amid heightened geopolitical risk.
In this highly unpredictable FX environment, active currency risk management and appropriate FX hedging are essential to protect capital and maximize growth.
EUR/USD nears a four-year high at 1.18 after breaking above 1.20 in January
The nomination of Kevin Warsh as new Fed Chair temporarily paused the EUR/USD upward momentum. With U.S. rate cuts delayed and the ECB on hold, markets are refocusing on fundamentals: soft European growth (around 1.3%) and a weakening trade balance versus stronger U.S. growth. However, U.S. fiscal deficits and geopolitical volatility under Donald Trump continue to weigh on the dollar, so EUR/USD looks capped around 1.20 but volatile through 2026, hence the importance of FX risk management.
USD/RMB has broken below 7.00: Downside risk in 2026 as Xi Jinping pushes for the RMB to gain global reserve currency status
First, the USD is drifting lower as the Fed cuts rates and investors rotate away from U.S. assets. This is reinforced by structural trade flows: the U.S. runs a ~USD 70bn/month deficit, while China runs a ~USD 100bn/month surplus.
Second, the People’s Bank of China (PBoC) allowed a monthly depreciation of ~0.5% per month since last April, taking USD/RMB from ~7.40 to ~6.95 (about -6% over the period).
We think this could be the start of a longer trend, with USD/RMB drifting toward ~6.30 over time (the next major support below 7.00).
USD/JPY near 40-year high (~156) as new Japan PM favours a competitive (weaker) yen
The Japanese yen weakened in end-January: USD/JPY rose ~2%, from ~152 to ~155, after Sanae Takaichi’s comments, which markets read as supportive of a more competitive currency. A Bank of Japan (BoJ) hike – initially expected in March – looks less urgent as inflation eased from 3.0% to 2.1%, although Governor Kazuo Ueda warns a weak yen raises import costs and fuels inflation. For 2026, policy divergence is key: if the Fed cuts while the BoJ hikes gradually, USD/JPY could drift toward ~140 (about 10% below spot), with higher FX volatility.
Major bank bonds remain attractive, supported by an asymmetric Federal Reserve outlook: markets debate the size of future cuts (50-100 bps) while rate hikes look unlikely, supporting total returns above cash yields. Bank bonds offer high-quality carry with near-zero default risk and yields of 4%+ in USD and GBP, and 3%+ in EUR, while we see tactical value in long duration. Long-end rates may stay slightly volatile due to fiscal and political pressures (as seen recently in Japanese markets), but we expect authorities to use policy tools and short-end issuance to contain instability and keep debt serviceable.
Gold: +15% YTD to ~USD 5,000/oz, after a 15% correction from January’s all-time high of ~USD 5,600/oz, bull case intact
Gold fell about 15% at the end of January, but we see it as a correction within an intact bull trend, supported by (1) lower-rate direction under Kevin Warsh, aligned with Donald Trump, (2) a more competitive (weaker) dollar over time, (3) elevated geopolitical risks (Iran, Venezuela, Russia-Ukraine, U.S.-China tensions), and (4) accelerating de-dollarization, with central banks shifting reserves from U.S. Treasuries toward gold. In the short term, forced deleveraging and margin calls may extend the pullback, but in the 2026 macro setup we expect gold to rebound and the rally to resume.
Oil: +10% YTD to USD 62/bbl, supported by geopolitical disruptions and a weaker USD
At its February 1st meeting, OPEC+ members confirmed a pause in production increases for 2026 Q1. In early 2026, prices were supported by temporary supply disruptions in the U.S. and Kazakhstan, a weaker U.S. dollar, and renewed tensions in the Middle East. If those disruptions fade, it should drive a modest pullback in oil prices over the coming weeks.
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