🌟 Markets catching their breath after new highs
It was a week where markets took a breather rather than hit the brakes, as investors digested fresh economic data and the early wave of US bank earnings. UK shares stayed near record territory after stronger-than-expected GDP numbers, while global indices broadly held on to gains from the strong start to 2026. Under the surface, sentiment remains quietly optimistic, but not euphoric, with investors edging towards risk while keeping one eye on inflation and central banks.
📈 Weekly Scoreboard (as at 8:00pm)
| Index | Weekly Change (%) | Current Level |
|---|---|---|
| S&P 500 | -0.30% | 6,945.08 |
| Nasdaq Composite | -0.52% | 23,548.41 |
| EURO STOXX 50 | +0.48% | 6,026.15 |
| FTSE 100 | +1.09% | 10,235.29 |
| Nikkei 225 | +3.84% | 53,936.17 |
| MSCI Emerging Markets | +2.25% | 1,485.06 |
| China (SSE Composite) | -0.45% | 4,101.91 |
🌍 Global Drivers & Macro
- The AI Boom is Far From Over: Any fears that the artificial intelligence trade was running out of steam were put to rest by TSMC. The world’s most important chipmaker posted “blowout” earnings and forecasted massive capital spending for 2026, lighting a fire under the entire tech sector and dragging markets higher.
- US Banks Flex Muscles: The unofficial start of earnings season was a success. Giants like Goldman Sachs and Morgan Stanley beat profit expectations, suggesting that despite higher interest rates, the US economy—and the deal-making environment—remains resilient.
- Fed Chair Drama: Markets were briefly rattled by speculation over who President Trump will pick to lead the Federal Reserve. Rumours that he might cool on “dovish” candidates (those who prefer lower rates) caused bond yields to tick up, reminding us that politics will be a major driver this year.
- Jobless Claims Calm Nerves: US unemployment claims fell below 200,000 this week. While a strong labour market is good for the economy, it ironically dampens hopes for rapid interest rate cuts, as the Fed has “room to be patient” before easing policy.
🇬🇧 UK Corner (Focus for DIY Investors)
- FTSE’s Defence vs. Miners: The UK index had a solid week, breaking above the psychological 10,200 barrier. However, it was a tale of two sectors: Defence stocks (like BAE Systems) rallied hard on geopolitical tensions, while Miners dragged the index down as copper prices slumped.
- Wegovy Boost: It wasn’t just traditional sectors moving the needle; the UK health authority approved higher doses of Novo Nordisk’s weight-loss drug, Wegovy. While a Danish company, this lifted sentiment across the European healthcare sector, benefiting UK-listed pharma giants and sentiment.
- Stalled Growth Concerns: While stocks rose, the economic backdrop remains tricky. Chatter around UK GDP data suggests the economy effectively “stalled” in late 2025. This puts the Bank of England in a tough spot: cut rates to help growth, or hold them to kill stubborn inflation?
🏦 Asset Movers
- Commodities (Oil): Brent Crude had a rough week, sliding over 4%. Traders are pricing in ample supply and potentially softer demand from China, which is great news for UK motorists but a headwind for the energy-heavy FTSE 100.
- Precious Metals (Gold): Gold prices took a breather, dipping below $4,600/oz. With the US dollar strengthening and fears of an immediate crisis fading slightly, investors rotated money out of “safe havens” and back into stocks.
- FX (GBP/USD): The Pound struggled to make headway against a resurgent US Dollar, trading softer as the “greenback” benefited from strong US economic data. For UK investors holding US shares, this currency move actually boosted the value of those holdings in sterling terms.
📰 Key Headlines
- Reuters: TSMC forecasts 20% growth, sparking a global rally in semiconductor stocks and confirming robust AI demand. Impact: Tech portfolios saw a significant mid-week boost.
- BBC Business: Goldman Sachs & Morgan Stanley beat earnings estimates, driven by a rebound in investment banking fees. Impact: Restored confidence in the financial sector after a shaky end to 2025.
- Bloomberg: President Trump signals rethink on Fed Chair pick, moving away from dovish candidates. Impact: Caused US Treasury yields to rise, putting slight pressure on dividend stocks.
- Financial Times: UK approves higher Wegovy doses, expanding the weight-loss drug market. Impact: Boosted sentiment in European healthcare and pharma.
- CNBC: Oil prices tumble 4% as supply concerns ease. Impact: Good for inflation outlook, bad for oil majors like Shell and BP.
📑 Companies Reporting
- TSMC (Taiwan Semiconductor): The standout winner. They reported better-than-expected revenue and aggressive spending plans for US expansion. Market Move: Shares surged, lifting the entire Nasdaq.
- Goldman Sachs (GS): Posted strong Q4 earnings ($14.01/share vs $11.77 expected). Market Move: Stock rose ~4%, signalling Wall Street is “back to business.”
- Morgan Stanley (MS): Also beat expectations ($2.68/share), proving the investment banking recovery is broad-based. Market Move: Shares ticked higher, reinforcing the financial rally.
- BlackRock: The world’s largest asset manager reported massive inflows, confirming that investors are putting cash back to work in the markets.
⚖️ Investor Sentiment Dashboard
- The Vials: The VIX (Fear Gauge) dropped over 5% to sit comfortably around 15.8, a level that typically signals a calm, “business as usual” market.
- Mood: The AAII Bull-Bear Spread and CNN Fear & Greed Index have shifted firmly back towards “Greed.”
- Conclusion: Risk-On. The combination of low volatility, strong corporate earnings, and stable (if high) rates has emboldened investors. Money is flowing out of defensive assets (Gold, Bonds) and into growth sectors (Tech, Small Caps), suggesting high conviction that the bull market has legs.
📅 Next Week’s Radar
- Monday 19 Jan: US Markets Closed (Martin Luther King Jr. Day). Expect lower liquidity and a quiet start to the week globally.
- Tuesday 20 Jan: Netflix Earnings. The first of the major “streaming wars” updates—often a bellwether for consumer discretionary spending.
- Friday 23 Jan: UK Retail Sales (Dec). The crucial Christmas trading figures. Did Brits spend big, or did the cost of living bite? This will move the Pound.
- All Week: Davos World Economic Forum. Keep an eye out for soundbites from global leaders and CEOs on trade wars, AI regulation, and climate policy.
⚡ The Final Take
This week proved that corporate earnings matter more than macro noise. Despite political uncertainty in the US and sluggish growth in the UK, companies are making money—lots of it. For DIY investors, the lesson is clear: stay diversified. While tech is soaring again, the rotation into financials and the resilience of defence stocks highlights the importance of not having all your eggs in one basket. Enjoy the weekend!
© Clearly Investments Ltd. Educational information only. This is not investment advice.
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