Written by Ashwin Gurung
The first week of 2026 has already brought major geopolitical headlines, including U.S. forces capturing Venezuelan President Nicolás Maduro and his wife, Cilia Flores, on drug trafficking charges, and President Trump asserting U.S. influence over Venezuela’s vast oil reserves.
Venezuela is often reported to hold about a fifth of the world’s known oil reserves, one of the largest anywhere. However, these estimates are widely questioned, and the actual economically recoverable oil is likely much lower. Nonetheless, the U.S. has announced plans to help rebuild Venezuela’s oil sector, given that the country currently produces less than 1 million barrels of oil per day, which is less than 1% of the total global supply due to various challenges. However, meaningful increases in production will require substantial investment, time, and clear policy support. With oil prices near multiyear lows and supply already exceeding demand, any additional output could add further pressure to prices. Additionally, long-term demand for traditional oil may be limited, as the growing adoption of electric vehicles reduces reliance on conventional fuels. [AG1.1]
Despite significant geopolitical headlines, the first full trading week of 2026 saw a rally in global equities, bonds, as well as commodities. Global equity markets, as measured by the MSCI All Country World Index, rose +2.1%, global bonds, as measured by the Bloomberg Global Aggregate Index, returned +0.4% in GBP‑hedged terms, and similarly, commodities, as measured by the BCOM Index, returned +2.5% in GBP‑hedged terms. [AG2.1]In the US, the S&P 500 climbed +2.2%, and smaller, domestically focused companies, as measured by the Russell 2000 Index, surged +5.3%.
The US non-farm payrolls, which tracks the number of jobs added or lost each month across most sectors of the economy in the U.S. (excluding farm workers, government employees, and a few other categories)[AG3.1], report surprised on the downside, with employers adding just 50,000 jobs in December, though the unemployment rate fell to 4.4% from a revised 4.5% the prior month. President Trump’s proposal to increase US military spending by more than 50% to $1.5 trillion a year also supported defence stocks.
In Europe, inflation slowed to 2% in December, in line with the European Central Bank’s target and market expectations, while the economy showed signs of picking up at the end of 2025. Industrial output in Germany, France, and Spain surpassed forecasts in November, helping the MSCI Europe Ex-UK index gain +2.0% over the week. Meanwhile, in the UK, the housing market continued to soften, with mortgage approvals for home purchases dropping to 64,530 in November from 65,010 in October, according to Bank of England data. Nonetheless, the broader UK market performed well, with the FTSE All Share rising +1.9%.
Elsewhere, Japanese equities performed strongly, with the MSCI Japan rising +2.9% over the week, despite ongoing geopolitical and trade tensions with China. However, concerns over Japan’s already stretched public finances have pushed long-term borrowing costs higher and continued to weigh on the yen. In contrast, Chinese equities saw a modest weekly gain of +0.9%.
While markets will continue to face geopolitical uncertainty, we remain confident that the best approach for achieving sustainable, long-term, risk-adjusted investment returns is through a multi-asset globally diversified portfolio.
All performance figures are stated in Sterling terms, unless otherwise specified.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 12th January 2026.
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