WeeklyWatch – Are markets sailing into troubled waters?

20^th January 2026

Stock Take

Fast-flowing news unsettles markets

Unfolding news over the weekend once again demonstrated how quickly events can turn. One of the biggest headlines was President Trump threatening further tariffs, this time on countries that oppose his wish to purchase Greenland.

News started to emerge of a possible trade war and, unsurprisingly, European markets were down on Monday morning as a result, with the US outlook also looking negative.

Prior to this, the markets seemed to be holding up well going into the new year, despite facing several possible headwinds.

In addition to ongoing arguments regarding Greenland, news outlets were reporting on the continued volatility in Venezuela and the currency collapse, as well as mass protests in Iran. And that wasn’t all – further tensions continued in the Far East concerning China’s claims around Taiwan.

Over in the US, it’s also far from a happy picture. Federal Reserve Chair Jerome Powell has been put under investigation, a move perceived by many as an attempt to weaken the central bank’s power and ability to make decisions over interest rate policy.

Despite the volatility in the Fed, US equities reached record highs early last week, falling slightly as the week progressed. US Treasury bonds concluded the week near to where they started. On top of this, the FTSE 100 ventured further into record territory as the week went on. On the whole, since the big sell-off in April 2025, volatility has stayed amazingly low across the world.

Faith in the market

When it comes to explaining the market performance up until last Friday, it’s relatively simple: large, institutional investment houses didn’t anticipate that the rumbling tensions would end up causing actual geopolitical shocks.

Overall, the global markets indicated that investors believed that events would blow over or a compromise would be reached, like in the past.

The Fixed Income Strategist at St. James’s Place, Greg Venizelos, said:

“I think a lot of the market just didn’t believe a lot of what’s being talked about was going to happen. For example, if China were to invade Taiwan, that would obviously be really big. But talking to others around the industry, no one thinks China would be prepared to take such a risk for some time.”

Addressing the US situation, he notes:

“There is a general expectation that the November midterm elections will see the Democrats take control of the House. That should moderate the current administration’s actions somewhat. I think that is giving markets comfort.”

A surprise for UK GDP

It was relatively good news for our shores last week. The Office for National Statistics (ONS) announced that there was a 0.3% growth in UK GDP in November – above the 0.1% forecast.

Increased economic output was the reason cited by the ONS for the increase. The figures were supported by the return to production from Jaguar Land Rover that month, following the cyber-attack that meant they had to go offline for September and a large part of October. UK equities were helped by this, but as the FTSE 100 has been on an upward trend for a period of time, it seems unlikely that Jaguar Land Rover was the only influence.

Investors who have been looking to diversify their portfolio outside of US tech companies have helped UK shares over the last few months. The FTSE 100 is an index dominated by banks and mining companies and therefore acts as a great diversifier. Unsurprisingly, the index’s top 10 best-performing companies last year and in the year-to-date consist of mining, financials or defence.

Snap election on the horizon for Japan?

Reports have begun to circulate that the Japanese Prime Minister, Sanae Takaichi, is thinking about initiating a snap election, which could take place as early as February. Takaichi leads the current coalition government, but only with a tiny majority in the Japanese House of Representatives. Despite this, she’s polling very well. She’ll be hoping that personal popularity will turn into more votes and more seats for her party.

The Head of Asia and Middle East Investment Advisory and Comms at St. James’s Place, Martin Hennecke, gave his own warning:

“Takaichi still appears to have a high approval rating compared to a relatively fragmented opposition. That said, investors might want to pay more attention to economic and businesses’ fundamentals than political developments. The room to manoeuvre for whoever is in charge will be constrained by a combination of significant economic, demographic and sovereign debt challenges to deal with.”

Japanese shares have started well this year – building positively on strong returns in 2025. But Japanese government bond yields have been consistently rallying and are nearly double where they were at the start of 2025, which means the government will face increased interest payments in the future.

Wealth Check 

More homes facing the mansion tax?

Homes that currently cost £1.5 million or more could be in line to be hit with the new mansion tax as the government looks to expand the scope of their revaluation efforts.

It was confirmed by the government’s Valuation Office Agency that they were beginning a review of homes in England believed to be worth £1.5 million or more, to ensure valuations were accurate and didn’t exceed the £2 million mansion tax threshold.

This latest set of reviews will be the largest revaluation of homes for more than three decades and could cover up to 200,000 properties that had been previously valued at up to £5 million. Critics have warned that broadening the valuation criteria is likely to draw more homes into the mansion tax threshold.

The tax was announced in the 2025 Autumn Budget, with plans to put it into force in April 2028, when the levy will be charged in bands according to the value of homes. As an example: a house that’s worth between £2 million and £2.5 million will face an annual council tax surcharge of £2,500. This will rise to a maximum of £7,500 for properties worth over £5 million.

Overall, the mansion tax is expected to generate around £400 million for the government in the tax year 2029/30, according to the Office for Budget Responsibility.¹

Last week, the Scottish government revealed a similar plan – they’re looking to apply a mansion tax on houses worth over £1 million as part of their own Budget.

Economic trouble reduces financial ambition

Economic pressures and uncertainty are becoming big influences in putting households off long-term financial planning.

This is according to St. James’s Place’s Real Life Advice Report 2025, carried out by Opinium to find out how attitudes to money, financial advice and the future had changed over time. Opinium surveyed 8,000 UK adults nationwide between 22^nd July and 5^th August 2025 and refreshed shorter surveys of a further 2,050 UK adults between 28^th November and 6^th December 2025. Quantitative data is taken from these surveys. Quotas and post-weighting were applied to both samples to make the datasets representative of the UK adult population. In the final chapter of the 2025 Real Life Advice Report, it identifies that the number of adults that have no financial ambitions for the following year rose from approximately one in ten (13%) to one in five (21%) between July and December 2025.

One of the most significant factors for this is the focus on day-to-day spending as a result of the increase in the cost of living, which makes it more challenging for households to put long-term financial planning into place.

The Chief Executive Officer at St James’s Place Wealth Management, James Rainbow, said:

“This widening ‘ambition gap’ speaks to a deeper challenge: when financial pressure becomes the norm, confidence in the future erodes, making long-term planning feel less possible for many households.”

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Source   

¹Office for Budget Responsibility – November 2025

In the Picture 

It’s a two-way system when it comes to market volatility. For investors who have chosen to hold onto Venezuelan government bonds, or recent buyers, they have been able to benefit from the surgical strike conducted by the US.

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SJP Approved 19/01/2026