WeeklyWatch – Geopolitics take a swing at markets
27th January 2026
Stock Take
Are shake-ups the norm for markets now?
While Davos was at the centre of geopolitical ruptures and there was a brief threat of more tariffs, little had changed for the market by the end of last week.
The week began with a predictable play of events. President Trump’s tariff threats triggered investors into selling European shares and US stock futures (due to Monday being a US public holiday). But by Wednesday, some of these fears had subsided following Trump’s announcement of a vague framework deal concerning Greenland. Consequently, the markets were able to rebound in the middle of the week, with key indices on both sides of the Atlantic finishing the week off their lows. One significant casualty during the week was the dollar, suffering its steepest weekly decline since May 2025 against a variety of other currencies.
Since last year’s Liberation Day tariffs, investors have been more aware of the US possibly using tariffs in negotiations. The mid-week market rebound was seen as a reward for those who perceived this as a “Trump always chickens out” (TACO) opportunity. Even though investors faced uncertainty during the week, the VIX “fear index”, which is an indicator of US market sentiment, concluded the period at 16 – well under the 20 mark that’s usually an indicator of a stable market.
So why did markets recover so quickly during the week? Well, possibly because they’re already discounting the impact of geopolitical turmoil. What they do instead is to focus on the economic and corporate fundamentals as they’re easier to assess.
As the Fixed Income Strategist at St James’s Place, Greg Venizelos, put it:
“US administration policy has become so erratic domestically and internationally that investors may as well stay the course rather than try to react to each pronouncement by the President of the United States. Portfolio diversification and resilience is what will get portfolios through the next few years.”
This kind of approach offers a backdrop that’s more supportive. Data revealed during the week showed that the US economy grew at an annual rate of 4.4% in the last quarter of 2025 – a little ahead of expectations. Consumer and employment readings are showing to be benign.
Although the readings were encouraging, the core personal consumption expenditures (PCE) price index – the latest inflation measure favoured by the Federal Reserve (Fed) – reveals why inflation is still an issue.
On an annual basis, the November reading of 2.8% remains well above the Fed’s 2% target, meaning any upcoming interest-rate cuts are not a done deal!
Glinting gold
It was the strongest weekly return for the precious metal since 2008. Gold finished the period just below $5,000 per troy ounce – the price has doubled in the past 18 months. It’s benefiting from both the uncertainty in the geopolitical backdrop and the inflationary concerns mentioned above. The “debasement trade”, where investors perceive gold as a counter to unsustainable levels of government borrowings, is further boosting the price.
Poland’s central bank made an announcement during the week that they plan to purchase up to 150 tonnes of gold – adding to the 550 tonnes the nation already owns. Central banks don’t always report their gold purchases, but this is the largest one recently declared. No timescale was given to complete the transaction, but the bank’s Governor, Adam Glapiński, has stated that gold is “the only safe investment for state reserves [during] difficult times of global turmoil and search for a new financial order”.
Five times three for China
2025 was the third year in a row that China have achieved the government-mandated 5% annual economic growth rate. In the second half of the year, between quarters three and four, momentum slowed from an annual rate of 4.8% to 4.5%. Even though they faced additional US tariffs, China successfully managed to divert their exports elsewhere, reflecting the strength of their exporting prowess – reports show a 2025 trade surplus of $1.2 trillion.
The Chinese government haven’t set the annual growth target for this year, but reports currently suggest that China will set a range between 4.5% and 5%. This will be against an International Monetary Fund global growth projection of 3.3%.
However, if protectionism is taken up by more countries as part of their trade policy, then China – with their reliance on exports – are left increasingly vulnerable. As a result, numerous analysts expect the authorities to encourage a pivot to domestic consumption. But headwinds to achieving this include property market weakness as well as a weak job market.
UK navigate uncertainty
When it comes to data for the UK, there were some rather mixed results. It was another month of falling payrolls within the private sector and moderating wage growth, which increased at a sub-4% level for the first time in about three years. Which begs the question, is there now room for a rate cut?
The Chief Economist at St. James’s Place, Hetal Mehta, commented:
“As ever with the UK, the data is mixed. While wage growth has slowed, business sentiment data has picked up quite strongly, and we also had better than expected December retail sales. I think the Bank of England is likely to remain cautious on interest rate cuts, but with more of an easing bias, given the UK’s backdrop of subdued growth.”
Wealth Check
Deadline approaching for Self Assessment
There are only a few days left to file online Self Assessment tax returns and settle any tax due – failure to do so before the deadline of 31st January will result in a late-filing penalty from HMRC. And anyone who fails to pay any owed tax by the deadline will also receive a penalty.
HMRC reported that in early January, 5.65 million people still needed to submit their Self Assessment tax return. In contrast, 6.36 million people had made their submissions by then.1
The initial penalty for late tax returns is £100; this increases to £10 per day after three months. If the return still hasn’t been filed after 6 or 12 months, further charges of up to 5% are added.
If owed tax isn’t paid by 30 days after the 31st January deadline, a penalty of 5% of the unpaid tax is issued. If the tax remains unpaid, then a further 5% penalty will be levied at 6 months and a further 5% at 12 months – all in addition to interest accrued on unpaid tax.
The self-employed, people in business partnerships, individuals who need to pay capital gains tax on assets sold and those who have untaxed income, for example foreign income or from renting out a property, are the ones who usually need to complete a tax return.
How best to avoid the fines
If you need to submit an online tax return to HMRC, it’s advisable to set up a calendar reminder for the middle of January to make sure the return is filed and the balance is settled before the deadline. Paper returns must be submitted to HMRC by 31st October.
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