Market Snapshot is a weekly view from our portfolio managers, offering sharp, thematic insights into the trends shaping markets right now.
This week in numbers
US consumer prices rise year-over-year in December.
Venezuela’s share of the world’s proven crude oil reserves.
Gold’s recent all-time high.
Past performance is not an indicator of future performance.
This week’s Market Snapshot
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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This month’s Market Snapshot
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