Market Snapshot

Market Snapshot is a weekly view from our portfolio managers, offering sharp, thematic insights into the trends shaping markets right now.

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This week in numbers

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The all-time high on Japan 40-year government bonds.

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The decline in the US dollar over the past year.

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The amount of time taken for the price of gold to double.

Past performance is not an indicator of future performance.

This week’s Market Snapshot

A cartwheel week for commodities, trade and currencies

Gold, silver and copper hit an all-time high.
The EU signs a landmark free trade deal with India.
Japanese long-dated bonds sell off.

Commodities, trade and currencies were front of mind for investors this week as a precious metals rally, an EU-India trade deal and a decline in long-dated Japanese government bonds all made headlines.

Gold hit a record high on Thursday, breaking through the US$5,300 per troy ounce mark for the first time on Wednesday (28 January) after a sustained rally that has seen the yellow metal surge in value by almost 30% month to date. Silver, copper and other metals have also taken wing over the past year (see Figure 1).

Figure 1: Metal shows its mettle

Thursday and Friday’s trading saw a sharp reversal of prices but for Louise Dudley, Portfolio Manager, Global Equities, the rally in precious and industrial metals is a symptom of a broader shift in the market.

“The rally has been striking, fuelled by bullish sell-side views, sustained central bank buying, and a sense among investors that they remain under-allocated to the asset,” she says. “At the same time, the traditional relationship between gold and industrial metals is less clearcut than it once was, raising questions about whether gold still acts as a reliable hedge in a risk-off environment.”

Dudley highlights how increased accessibility has broadened the investor base for gold, reinforced by the recent momentum. “While some worry that gold is now drifting into the broader risk-on trade, much of the enthusiasm reflects its strong performance and confidence that demand will persist,” she adds. “Geopolitical uncertainty adds another layer of support, with gold still regarded (at least in part) as a safe haven asset.”

We expect India’s labour-intensive industries to gain significantly, with tariffs of up to 10% set to be removed on nearly US$33bn worth of exports

A trade milestone

In other news, this week saw the signing of a landmark trade deal between India and the European Union. It is the bloc’s second major trade deal this month following an earlier agreement with South America’s Mercosur nations to create one of the world’s largest free trade zones after 25 years of negotiations.

Yasmin Chowdhury, Senior Investment Analyst for Global Emerging Market Equities, says the EU-India trade deal should eliminate or reduce tariffs on almost all goods traded between the union and the world’s fifth largest economy.

“We expect India’s labour-intensive industries to gain significantly, with tariffs of up to 10% set to be removed on nearly US$33bn worth of exports,” she says. “While the deal protects sensitive sectors in India, it will allow unprecedented access to its tightly protected auto industry, enabling up to 250,000 European-made vehicles to enter the country at preferential duty rates.”

According to Chowdhury, India’s textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and autos should all see improved competitiveness in European markets.

“The agreement could take a year to come into force, delaying any uplift to GDP – but it will provide a near-term tailwind to sentiment and has the added benefit of creating a hedge against US trade uncertainty,” she adds.

The yen/dollar question

A further twist in the week’s news came in the form of continued uncertainty in Japan’s bond and currency markets following Prime Minister Sanae Takaichi’s decision to call a snap general election on 8 February.

Following the announcement, the yield on Japan’s 40-year sovereign bond rose above 4% for the first time on fears that unfunded campaign promises could trigger higher inflation.

This, in turn, prompted speculation that Japanese investors could begin to repatriate capital in response to high domestic interest rates. Since Japanese investors are the largest foreign holders of US Treasuries, it sparked renewed concern around the long-term trajectory of the US dollar.

John Sidawi, Senior Portfolio Manager for Global Fixed Income, notes that the incessant selling of the US dollar from December into this year has had investors searching for an underlying motif. “But, while market participants have been quick to turn to a tired ‘Sell America’ refrain, recent data releases show no convincing evidence of any abrupt rotation out of US Treasuries or equities,” he says. “Instead, what foreign investors do appear to be doing is hedging their American holdings rather than selling them outright. This has been one of the cornerstone considerations for our ongoing bearish outlook on the US dollar.”

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This month’s Market Snapshot

New trade war fears unsettle markets

The ‘sell America’ trade made a comeback on Tuesday, as threats of a US takeover of Greenland intensified.

President Trump’s sabre-rattling sparked a sell-off in US assets.
The threat of a trade war with the world’s largest economy hit European stocks.
Markets rallied after the US president appeared to then walk back threats of military action and tariffs.

US President Donald Trump ramped up his demands for Greenland to become part of the US on Tuesday. The resulting volatility led to the S&P 500 closing down 2.1%, wiping out 2026 gains. The yield on 10-year US Treasuries rose to a four-month high of 4.29%¹.

Trump has previously said the US would acquire Greenland “one way or the other”² and refused to rule out using military force in a press conference on Tuesday³. The US dollar weakened 0.3% against a basket of major currencies in the wake of the escalation⁴.

The sell-off in US assets recalled the so-called ‘sell America’ trade observed last year. Global investors acted on concerns over exposure to US assets⁵ following the implementation of the “Liberation day” tariffs (Figure 1) in April 2025.

The escalation in rhetoric followed an announcement on 17 January that saw the US outline an extra 10% tariff on Denmark, the UK, Finland, France, Germany, the Netherlands, Norway and Sweden. Beginning on 1 February, the tariffs were set to increase to 25% on 1 June and apply until such time that the sale of Greenland was confirmed.

The prospect of another potential trade war hit European markets and investors sought out less volatile assets. The Stoxx Europe 600 index closed 0.7% down on Tuesday, while the Vix index – a measure of short-term volatility – leapt to its highest level since November. Gold – widely viewed as a safe haven asset – passed US$4,800 per troy ounce to hit a record high⁶

What we learned in 2025 is that the Trump administration often uses tariffs as a leveraging tool for negotiating

However, global markets rebounded on Wednesday after Trump announced he had reached the framework of an agreement with Nato Secretary General Mark Rutte and would drop the tariffs scheduled for 1 February. The S&P 500 added 1.2%⁷ on Wednesday, while the Stoxx Europe 600 index rose 1.1% in early trading on Thursday.

Damian McIntyre, Head of Multi Asset Group at Federated Hermes urged investors to not overreact to short-term market volatility and emphasised the importance of looking beyond headlines when assessing the longer-term impact of this week’s events.

“The tariff threats over the weekend created fear and confusion among investors. But what we learned in 2025 is that the Trump administration often uses tariffs as a leveraging tool for negotiating,” he says.

In the event that the US economy strengthens in 2026, and US companies deliver strong earnings reports, market volatility could create further buying opportunities for investors, McIntyre says.

Valuations remain quite stretched in the US and the likelihood of a sell-off is present, says Louise Dudley, Portfolio Manager at Federated Hermes. “The volatility we have seen this week won’t have helped the situation, but we are optimistic about the longer-term outlook,” she adds.

“We are focused on the stimulus measures – which include sweeping tax cuts – that are coming because of the ‘One Big Beautiful Bill’ signed last year. It should reinforce consumer confidence in the US and will likely sustain the 2026 outlook for companies.”

¹ Source: Bloomberg

² President Trump and Greenland: Frequently asked questions – House of Commons Library

³ Press Secretary Karoline Leavitt Briefs Members of the Media, Jan. 20, 2026 – The White House

⁴ Source: Bloomberg

⁵ Powell takes a stand | Federated Hermes Limited

⁶ Source: Bloomberg

⁷ Ibid

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Japanese PM gambles on snap poll to shore-up economy

The country’s first female prime minster, Sanae Takaichi, is looking to convert a high public approval rating into a parliamentary majority for her ruling LDP party.

The snap election in Japan follows a choppy start to 2026 that has seen the US capture Venezuelan leader Nicolás Maduro and violent unrest break out across Iran, amid further concerns about the independence of the US Federal Reserve.
However, the Vix index – Wall Street’s so-called fear gauge – has shown only a modest increase since the start of the year, suggesting investors remain optimistic.

Japanese Prime Minister Sanae Takaichi called a snap election this week as she seeks to convert her high public approval ratings into a parliamentary majority for the ruling Liberal Democratic Party (LDP). The vote is expected in February.

Takaichi – Japan’s first female prime minister – took office in October after winning an internal LDP leadership vote. The general election will be Japan’s second in less than 18 months after the LDP lost its majority in the lower house of parliament in 2024.

“The new prime minster wants to leverage her current sky-high approval rating – which stands at more than 75% – to gain seats for the LDP, regaining control in the lower house over an unprepared Democratic Party for the People opposition party,” says Martin Schulz, Group Head of International Equities at Federated Hermes.

Figure 1: Can the Nikkei maintain its rise?

The Nikkei 225 has risen 4% over the last week¹– driven by sectors such as aerospace, defence, and nuclear – amid speculation about a snap vote and expectations that Takaichi’s popularity might help the LDP to regain its majority and provide a mandate for further fiscal stimulus for the economy.

Japan’s 10-year government bond yield has climbed 4.7% since the start of the year, while the Japanese yen has fallen more than 6% against the US dollar over the last six months amid concerns about rising public spending².

Figure 2: Fiscal concerns loom large in Japan

“Uncertainty on the political front highlights the existing structural headwinds the country faces, including negative real yields and an already large debt burden,” says Schulz, adding that Chinese export restrictions, and increasing inflationary pressures could negatively affect Japanese households and business confidence in the near-term.

Uncertainty on the rise, do investors care?

The snap election in Japan follows a choppy start to 2026 that has seen the US capture Venezuelan leader Nicolás Maduro, the outbreak of violent unrest across Iran, and further concerns about the independence of the US Federal Reserve. However, the Vix index – Wall Street’s so-called fear gauge – has shown only a modest increase since the start of the year, suggesting investors remain unruffled.

Figure 3: The Vix Index has seen only a modest rise YTD

“Geopolitical headlines can often create short-term volatility in the market. While this can create fear and confusion for investors, it’s important to discern whether a headline could impact long-term economic growth, or if it’s merely noise,” says Damian McIntyre, Head of Multi-Asset Solutions Team at Federated Hermes. “The 2026 market has the potential for both a strong economy and strong earnings, therefore we look at periods of volatility as an opportunity to increase equity allocations,” he says.

It’s important to discern whether a headline could impact long-term economic growth, or if it’s merely noise

On Sunday, it was announced that the US Department of Justice had launched a criminal probe into Fed Chair Jerome Powell over testimony he gave to a Senate committee about renovations to Federal Reserve buildings. Powell and US President Donald Trump have endured a difficult relationship in the past year.

“The investigation into Chair Powell raises uncertainty for investors ahead of January’s Federal Open Market Committee (FOMC) meeting and, in our view, increases the probability that the next rate cut will not take place before Chair Powell’s term ends,” says RJ Gallo, Deputy CIO for Fixed Income at Federated Hermes.

¹ Bloomberg as at 15 January 2026

² Bloomberg as at 15 January 2026

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Venezuela shock puts oil in focus

US removal of Venezuelan leader Maduro raises concerns and hopes about country’s economic and political future.

Venezuela holds the world’s largest proven crude oil reserves, but exports a small amount of global supply.
The country’s crude oil sector is viewed as a strategic priority by the Trump administration, but any efforts to scale-up production will require extensive investment.
For some investors, the US intervention could represent the start of a viable long-term economic turnaround for the country.

Geopolitics dominated investor concerns at the start of the year, following the US’s brazen capture of Venezuelan leader Nicolás Maduro, which has thrown the oil-rich South American country into deep political uncertainty.

The pre-dawn raid in the nation’s capital, Caracas, on 3 January saw Maduro seized by US military forces and taken to the US, where the ousted leader now faces narco-terrorism charges.

The weekend’s intervention marked an aggressive escalation in tactics by the Trump administration as it seeks access to Venezuela’s vast oil wealth. On Wednesday, two Venezuelan-linked oil tankers were seized in the North Atlantic.

Market response

Investor concerns have focused on the implications for the energy sector as well as the potential knock-on impact on the wider region.

The price of Brent crude rose 5% following the operation to reach US$62.2 per barrel on 6 January before falling back¹.

“[The US operation] underscores how quickly politics can reset the investment landscape,” says Charles Curran, Senior Investment Analyst at Federated Hermes.

According to Michael Czekaj, Senior Investment Analyst at Federated Hermes, the turmoil in Venezuela goes beyond the implications for the South American country and signals a shift in global spheres of influence.

“The market takeaway is that global politics is becoming more regionalised… as great powers seek to shape outcomes close to home, and protect strategic supply chains, using tools that sit between diplomacy and open war,” he says.

Despite holding the world’s largest proven crude oil reserves – an estimated 303 billion barrels, or roughly 17% of the global total² – Venezuela exports a small amount of global supply, because of decades of underinvestment, crumbling infrastructure and sweeping international sanctions (see Figure 1).

However, any efforts to scale-up production will require extensive investment, as Venezuelan crude is very heavy, making it expensive to refine and transport.

Figure 1: The great dichotomy – big reserves, limited exports

“[The US operation] underscores how quickly politics can reset the investment landscape"

Jason DeVito, Senior Portfolio Manager, Emerging Market Debt, at Federated Hermes, argues the US intervention could spur a viable long-term economic turnaround for the country.

“Venezuela has enormous oil wealth and economic potential, yet decades of mismanagement and political turmoil have left the vast majority of its population in poverty,” he says, pointing to the fact that over 80% of Venezuelans live below the breadline³.

“The country’s challenges stem largely from domestic policy decisions that have left resources underutilised, rather than external interference. We believe that, over the long term, Venezuela can rebuild its economy in a way that benefits its population, creating economic growth and social progress.”

Fiorino: CoCo confusion – the new debt-equity duality

Where do we see opportunity in emerging markets debt in 2026?

Black Friday sale has come early for the stock market

¹ Trading Economics, as at 8 January 2026.

² 6 Countries with the Largest Crude Oil Reserves in the World

³ UN Report, February 2024.

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Ampia gamma di soluzioni

Stewardship di EOS

A cartwheel week for commodities, trade and currencies

This week in numbers

A cartwheel week for commodities, trade and currencies

We expect India’s labour-intensive industries to gain significantly, with tariffs of up to 10% set to be removed on nearly US$33bn worth of exports

A trade milestone

The yen/dollar question

New trade war fears unsettle markets

What we learned in 2025 is that the Trump administration often uses tariffs as a leveraging tool for negotiating

Japanese PM gambles on snap poll to shore-up economy

Uncertainty on the rise, do investors care?

It’s important to discern whether a headline could impact long-term economic growth, or if it’s merely noise

Venezuela shock puts oil in focus

Market response

“[The US operation] underscores how quickly politics can reset the investment landscape"

Fiorino: CoCo confusion – the new debt-equity duality

Where do we see opportunity in emerging markets debt in 2026?

Black Friday sale has come early for the stock market

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