1) 📊 Last Week in Review (Week ending 16 January 2026)
Performance snapshot (levels + weekly % + YTD):
- FTSE 100: 8,420 | +0.4% (YTD +1.2%)
- S&P 500: 6,150 | +0.1% (YTD +2.4%)
- MSCI World: 3,890 | -0.2% (YTD +1.8%)
- UK 10y gilt yield: 4.05% (+8 bp) | US 10y: 4.25% (+12 bp)
- GBP/USD: 1.2850 (-0.6%) | Brent: $63.70 (-0.7%)
What moved markets:
- US Inflation Resilience: December CPI came in at +0.3% MoM, confirming the “last mile” of inflation is sticky; core services remain elevated, tempering immediate rate cut hopes.
- Tariff Tantrum 2.0: President Trump’s Friday threat of 10% tariffs on select European nations (linked to Greenland negotiations) rattled EU equities and pushed the Euro lower.
- Fed Chair Speculation: Yields spiked late-week as reports suggested dovish favourite Kevin Hassett is less likely to replace Powell, repricing the bond market for a “higher for longer” path.
Sector & style :
- Best/Worst sector: Energy (+2.1%) led on geopolitical risk; Tech (-1.5%) lagged on rate fears.
- Growth vs Value: Value outperformed Growth by 0.8% as investors rotated out of expensive software names.
- Large vs Small: Large Caps held up; Small Caps (Russell 2000) dropped -1.2% on higher yield sensitivity.
So what? :
- The “Goldilocks” soft-landing narrative is being tested by sticky inflation and renewed trade war rhetoric. Volatility is back on the menu.
2) 🌟 The Defining Narrative
A rotation in the stock market
Why it matters:
Watch out for a futher rotation across stock markets with the long term winners of tech being replaced by some of the more value oriented names. Over the last few monmths we have seen Materials, Healthcare and energy leading the way.
Whilst we may watch the index headlines what is happening underneath the market is a different story.
3) 🏦 Central Bank Watch
BoJ / ECB focus this week. (Fed is in blackout).
- Bank of Japan (Fri 23 Jan):
- What’s scheduled: Rate Decision + Outlook Report (Friday morning UK time).
- Market pricing: Hold expected (0.75%), but 20% chance of a surprise hike.
- Key thing to listen for: Comments on the “virtuous wage-price cycle” and Yen weakness.
- UK implications: A hawkish BoJ could trigger a Yen carry trade unwind, spiking global bond yields (including Gilts).
- European Central Bank (Thu 22 Jan):
- What’s scheduled: Account of Monetary Policy Meeting (Minutes).
- Key thing to listen for: Any dissent on the timing of the next cut amid new Trump tariff threats.
- UK implications: Divergence between ECB (dovish/scared of tariffs) and BoE (sticky services inflation) supports GBP/EUR.
4) 🌍 Macro Calendar
| Day (UK) | Region | Event | Consensus vs Prior | Why it matters | Most sensitive asset |
| Mon | 🇨🇳 CN | Q4 GDP (YoY) | 4.6% vs 4.8% | Tests the “China recovery” thesis; affects mining/luxury stocks. | FTSE 100 / AUD |
| Mon | 🇺🇸 US | Empire State Manuf. | -4.0 vs -5.0 | Early signal for Jan US factory activity. | USD Pairs |
| Tue | 🇬🇧 UK | Unemployment Rate | 4.2% vs 4.2% | BoE needs wage growth to cool before cutting further. | GBP/USD |
| Tue | 🇩🇪 DE | ZEW Sentiment | 18.5 vs 15.0 | Leading indicator for Europe’s largest economy. | EUR/GBP |
| Wed | 🇬🇧 UK | CPI Inflation (YoY) | 2.6% vs 2.7% | The big one for the UK. Services inflation stickiness is key. | UK Gilts / GBP |
| Thu | 🇺🇸 US | Q4 GDP (Adv) | 2.2% vs 2.5% | Is the US consumer finally slowing down? | S&P 500 |
| Thu | 🇺🇸 US | Core PCE (MoM) | 0.2% vs 0.3% | Fed’s preferred inflation gauge; dictates the “pivot” timing. | US Treasuries |
| Fri | 🇬🇧 UK | Retail Sales (MoM) | -0.2% vs +1.1% | Post-Christmas hangover check for UK high street. | FTSE 250 |
| Fri | 🇯🇵 JP | BoJ Rate Decision | 0.75% (Hold) | Risk of hawkish surprise to defend the Yen. | JPY Pairs |
5) 📊 Earnings Watch
Q4 2025 Earnings Season kicks off properly. Focus on Guidance vs Reality.
- Netflix (NFLX) — Tue (Post-mkt):
- What matters: Ad-tier revenue growth + subscriber churn.
- The “tell” headline: “Guidance misses on content spend” = Sell off.
- Read-across: Sentiment bellwether for wider Tech/Consumer Discretionary.
- ASML (ASML) — Wed:
- What matters: Net bookings and China export restriction impacts.
- The “tell” headline: “Order intake below €2bn” signals chip cycle peak.
- Read-across: Critical for global AI/Semiconductor sentiment (Nvidia, ARM).
- Intel (INTC) — Thu:
- What matters: Foundry business margins and AI PC adoption.
- The “tell” headline: “Data centre share loss stabilises.”
- Read-across: Broader hardware demand signal.
- Procter & Gamble (PG) — Fri:
- What matters: Volume growth vs price hikes (consumer pushback?).
- The “tell” headline: “Volumes turn positive” = Bullish soft landing.
- Read-across: Proxy for Unilever/Reckitt (UK investor focus).
- BHP Group (BHP) — Q2 2026 operational review (Tue 20 Jan):
6) 💷 Fixed Income & Currency Outlook
UK Gilts / Rates
- Facts: 10y yield at 4.05%; back above the psychological 4% handle.
- View: Neutral/Bearish (Yields higher). Sticky US inflation is dragging UK yields up.
- Watchlist: Wednesday’s UK CPI. A beat on Services CPI (>5%) could send 10y yields to 4.20%.
- Portfolio angle: Avoid long-duration gilts. Short-dated (1-3y) currently offers better risk-adjusted income (~4.5%).
7) 🧠 Sentiment Check
- Current mood: Anxious Neutral. The “Buy the Dip” mentality is fading amid tariff headlines.
- Market gauges:
- VIX: around 15.9, still low by historical standards, signalling contained equity volatility despite recent rotation.
- Rates: Government‑bond yields have been choppy but without a decisive breakout, reflecting uncertainty on the exact rate‑cut path rather than a regime shift.
- Credit spreads: Directionally stable to slightly tighter, in line with the modestly risk‑on tone in equities and EM flows.
- Flows/surveys: Money‑market outflows and renewed EM/equity interest point to investors slowly adding risk, though without extreme positioning
- Implication:
- Good news is “priced in”; bad news (sticky inflation/tariffs) will be punished severely.
8) 📈 Valuations & Expectations
- Valuation snapshot:
- S&P 500 fwd P/E: 21.5x (Still historically expensive).
- FTSE 100 fwd P/E: 11.8x (Cheap, but a “value trap” without catalysts).
- Implication: US equities are priced for a “perfect disinflationary landing”. Any deviation hurts them more than the UK.
- Earnings expectations:
- Next-year EPS growth: US +11% | UK +6%.
- Revisions trend: Deteriorating slightly for Q1 2026.
- Beat-rate context: Early bank earnings were mixed; bar is high for Tech.
9) 🗳️ Geopolitics & Wildcards
- Event: Trump’s “Greenland” Tariff Threat (deadline looming).
- Impact channel: Direct tax on EU exports → Weaker Euro → Stronger USD.
- What to watch: Any retaliation announcements from Brussels (EU) this week.
- Most sensitive assets: DAX 40, EUR/USD, and UK exporters with EU exposure.
- Event: Iran / Middle East Tensions.
- Impact channel: Oil supply disruption risks.
- What to watch: Iranian response to recent rhetorical escalation.
- Most sensitive assets: Brent Crude, Shell/BP.
10) ⚡ The Bottom Line
Three scenarios for the week:
- If UK CPI surprises upside (>2.8%) AND US PCE is hot → Then yields rise globally.
- If China GDP misses (<4.5%) → Then commodity slump weighs on FTSE 100 → Watch Miners (Glencore/Rio) and AUD.
- If Tech Earnings (Netflix/Intel) guide weak → Then the “AI safety trade” is impacted.
© Clearly Investments Ltd. Educational information only. This is not investment advice.
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