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First issue of the year we aim to start as we mean to go on happy new year all thank you to all of you for sticking by UK Financier and the work we are doing we hope to provide you insights that you find valuable and insights that will make you sharper investors.
We started this newsletter to help you understand what moves the market on a weekly basis. As our newsletter grows, we hope to provide you with more insights and different angles. We have a lot of things planned to provide you with more value.
What’s in this issue;
2026 starts with volatility, shifting central-bank policy, and a market increasingly driven by selectivity. Inside, we unpack the week’s biggest market movers, the inflation “last mile,” AI’s evolving role, emerging market momentum, and where I’m positioning my own portfolio—plus the key events and trading updates that could shape the week ahead.
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What Moved Markets This Week
📈 Wall Street & US Equity Performance
Weekly losses dominated US markets with the first trading week of 2026 closing lower:
S&P 500 down ~1.1%
Nasdaq fell roughly ~1.6%
Dow Jones off ~0.7%
This reflected risk-off trading and profit-taking after a strong 2025 rally. AI stocks continued to be a focus, trading higher on some days but largely underperforming earlier in the rally this week.
Key drivers:
AI rotation: The tech sector saw mixed performance — some gains in selective AI names but broader technology selling pressure weighed on the Nasdaq.
Economy & labour data:
Chicago Fed’s real-time unemployment estimates showed labour market stable in Dec.
FHFA house price index rose modestly.
Initial jobless claims fell well below expectations, adding nuance to recession fears.
FOMC minutes signalled rising risks to labour markets with some relief in upside inflation pressures.
📊 Europe & UK
FTSE 100 ended the week mixed but managed to hold above 10,000, showing resilience in UK equities.
European markets broadly advanced through the first trading day of 2026, supported by positive macro sentiment and commodity stability.
🏦 Bank of Japan & Global Rate Dynamics
The Bank of Japan (BOJ) raised its policy rate to a 30-year high (to ~0.75%) and policy discussions flagged potential further hikes if inflation persists — marking a significant shift from decades of ultra-loose policy.
This rate pivot had global repercussions:
Global stocks responded, with Asia Pacific equities mixed (some gains, some weekly losses).
Bond yields climbed globally, led by Japan’s 10-year yield moving above levels not seen in years.
Currency markets moved — notably, the yen weakened against the US dollar as markets digested BOJ guidance.
S&P 500 futures ticked higher post-hike as the news was “no worse than feared” for risk assets.
🪙 Commodities & Safe Havens
Gold and silver saw volatile trading — precious metals had earlier strength owing to rate cut expectations from the Federal Reserve next year, though this week’s moves were choppy.
📅 Economic Signals & Next Week’s Setup
Central banks and macro data remain key:
FOMC minutes and labour market stats flagged uneven momentum in the US economy.
Markets will closely watch the December CPI and employment reports — any surprise inflation readings will likely drive rate-cut expectations and risk asset positioning going forward.
🔎 What This Means for Investors
Volatility is likely to persist
Mixed economic data and shifting central-bank signals mean markets may remain uneven in early 2026, with policy expectations driving short-term moves.
AI is evolving, not disappearing
The AI theme remains intact, but leadership is narrowing favouring companies with strong earnings and balance sheets over broad tech momentum.
Diversification matters again
With global central banks moving at different speeds, spreading exposure across regions and asset classes can help manage risk and uncover opportunities.
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Inflation Across Europe & US
As of January 2026, the global inflation narrative has shifted from "transitory" or "peaking" to "structural." For investors, the era of easy disinflation is over, and the "Last Mile" is proving to be a lag.
The divergence between the US and Europe is now a primary driver for currency and bond market volatility.
The Investor’s Pulse: Jan 2026
United States (2.7%): US inflation remains stubbornly above the 2% target. Driven by "Fiscal Dominance" and high shelter costs, the Fed is stuck. With debt-to-GDP at nearly 140%, the market is pricing in a "Higher for Longer" reality. Investors are rotating into Hard Assets (Gold near $4,350/oz) as a hedge against potential sovereign solvency risks.
Eurozone (2.1%): Europe is flirting with its target, but it’s a fragile victory. Services inflation is the "red flag" at 3.5%, fueled by wage growth. While headline numbers look good, the ECB is hesitant to cut further, fearing a re acceleration.
United Kingdom (3.2%): The UK remains the outlier with the highest inflation in the G7, though it has cooled significantly. This keeps the Pound relatively strong but weighs on domestic growth.
Strategic Macro Shifts
The "Inflation Trade" is Structural: Investors are moving away from the traditional 60/40 portfolio. Persistent tariffs and high national debt have made inflation-linked bonds and commodities mandatory institutional holdings.
Policy Divergence: We are seeing a rare "decoupling." The Fed may be forced to pause or even hike if mid-term fiscal stimulus (like proposed "tariff rebates") hits the US economy, while the ECB is more likely to stay on hold to manage a sluggish recovery.
The AI Multiplier: Massive industrial demand for energy and metals to power AI infrastructure is creating a new floor for commodity prices, preventing inflation from hitting the old 2% floor.
Visual Impact: The "Last Mile" Bottleneck
Investor Takeaway: 2026 is the year of Selectivity. Passive index tracking is losing its edge to "hard asset" allocations and regional diversification.
Things I’m Paying Attention To
Microsoft is a solid play this 2026 and beyond. They have built a strong ecosystem I normally look at, at least 50% undervalued, but they are currently around 20%. I may dollar-cost average my way into this position this quarter for sure.
Portfolio Updates
I am on an aggressive mission to trim my holdings to less than 30 holdings from 100+ I’ll be selling my biggest losses then rebalancing my portfolio I will try to share my journey the best I can.
Hot Take 🔥
The market’s kicking off 2026 like a hangover after a wild 2025 party: cautious, wobbly, but still standing. Stocks posted modest gains on the first trading day (S&P 500 +0.19% to ~6,858, Dow +0.66%), snapping a four-day skid, but the Nasdaq dipped slightly amid bifurcation—chips and AI darlings rallied while broader sectors lagged. Valuations are sky-high (second-priciest in 155 years per Shiller P/E), and everyone’s betting on AI to keep trumping tariffs and sticky inflation.
Here’s the spice: if earnings don’t broaden beyond tech, or if Trump’s dovish Fed pick unleashes too much easy money, we could see volatility spike and a reality check pullback. Crypto’s already flexing (BTC >$90K), gold’s gleaming near records—risk-on is alive, but overbought signals scream “proceed with caution.” Bull market ain’t dead, but it’s maturing into something less explosive.
Overall Thoughts💭
Entering 2026, the bull market feels resilient yet stretched after three straight double-digit years (S&P 500 +16.4% in 2025 alone).
Consensus from Wall Street (Goldman, BofA, FactSet aggregates) points to another positive year—targets around 7,100–8,000 for the S&P (3–17% upside)—fueled by 13–15% earnings growth, potential Fed cuts (2 priced in vs. Fed’s 1), and AI capex boom. Rotation into cyclicals and value (e.g., industrials leading early) suggests broadening, a healthy sign after Mag7 dominance.
Key Positives:
AI remains the mega-theme: Nvidia, semis rallying; productivity gains could justify premiums.
Macro supportive: Resilient economy, softening labor data eyeing more easing.
Commodities hot: Gold ~$4,330 (safe-haven + rate cut bets), oil climbing on OPEC+.
Risks to Watch
High valuations + potential stagflation/tariff drags could trigger 10–20% correction (history rhymes with dot-com era).
Fed path uncertain: Upcoming jobs data (Jan 9) critical; dovish new chair speculation boosts risk assets but inflates bubbles.
Bifurcation persists: Tech winners vs. laggards; January barometer often sets yearly tone (84% accuracy historically).
Balanced view: Constructive for equities with lower returns expected (~8–10% avg post-strong years). Diversify beyond tech, favour quality earnings growers. Crypto strong (total cap >$3T, BTC/ETH reclaiming highs), bonds yielding ~4.2% (10-year) offer ballast if volatility hits. Solid setup, but buckle up—2026 won’t be another “all gas, no brakes.”
Emerging Markets Update: Momentum Building into 2026
Emerging markets (EM) are entering 2026 on a strong footing after a stellar 2025, where stocks outperformed developed markets for the first time in years.
The MSCI Emerging Markets Index posted double-digit gains, driven by resilient growth and a weaker US dollar.
Key Highlights:
EM economies are forecast to grow around 4% in 2026 (IMF/World Bank estimates), nearly triple the pace of advanced economies (~1.4%).
Attractive valuations persist—trading at significant discounts to developed markets—with double-digit earnings growth expected.
Lower interest rates in many EM countries, healthier fiscal balances, and improving corporate governance are supportive tailwinds.
AI boom spillover: Demand for commodities (metals, energy) benefits resource-rich EM nations, while tech hubs like Taiwan and Korea ride the wave.
Standouts to Watch:
India: Strong domestic demand, reforms, and demographics fuel ~6.5% growth.
China: Green shoots in private sector and AI advancements; valuations deeply discounted after stabilisation.
Latin America (Mexico, Brazil): Nearshoring boosts Mexico; Brazil benefits from rate cuts and commodity demand (watch October elections).
Other bright spots: Indonesia, Vietnam for supply chain shifts; Poland in Eastern Europe.
What Subscribers Should Pay Attention To:
Opportunities in undervalued equities and local-currency debt for diversification and potential double-digit returns.
Risks: US policy shifts (tariffs, Fed moves), geopolitics, and a stronger dollar could spark volatility—though EM resilience has improved markedly.
Overall, many experts see EM extending outperformance in 2026, making selective exposure compelling for long-term portfolios. Stay diversified and monitor US developments closely.
Looking Forward: What We Anticipate Next Week
6 January: Next (Q4 Trading Statement) – Analysts anticipate continued strong performance, potentially another upgrade to full-year guidance.
8 January: Greggs, Marks & Spencer (Christmas Trading Statement), Tesco (Q3 Trading Statement).
9 January: J Sainsbury (Q3 Trading Statement), Unite Group (Q4 Trading Statement).
We are expecting optimism on supermarkets like Sainsbury’s (profit guidance seen as achievable due to market share gains and cost efficiencies) and Next (possible upgrade on overseas strength).
Marks & Spencer faces pressure to rebound from 2025 challenges (e.g., cyber-attack impacts).
Venezuela developments: Reports of U.S. forces capturing Nicolás Maduro on 3 January 2026, with President Trump stating the U.S. will temporarily “run” the country and involve American companies in rebuilding oil infrastructure, are not confirmed in reality.
Oil futures focus: Based on Venezuela story; monitor energy markets for geopolitical risks.
Economic data:
UK GDP YoY Q3: Actual was 1.3% (matching the “previous” cited).
US Durable Goods Orders MoM (Oct): Actual likely around previous trends, not the forecasted -0.3%.
US GDP QoQ Q3 (2nd estimate): Actual figures show strong growth.
Key Influences for FTSE 100/250 Next Week
Retail updates dominate: Christmas trading figures will drive sentiment in consumer stocks (e.g., Next, M&S, Tesco, Sainsbury’s, Greggs). Strong updates could boost the FTSE 250 (more UK-domestic exposure).
Macro backdrop: Any escalation in global energy/geopolitical news could impact oil majors (FTSE 100 heavyweights like Shell, BP).
Broader sentiment: First full week of 2026; watch for year-end portfolio rebalancing flows.
Overall, a quiet reporting week outside retail, with potential volatility from trading statements. Investors should focus on company-specific guidance amid ongoing cost pressures and consumer trends.
ICYMI
Bitcoin surged above $91K amid geopolitical headlines (U.S. actions in Venezuela), with crypto market cap stabilising near $3T—analysts eye institutional inflows and regulatory easing as 2026 tailwinds.
Upcoming: Key U.S. jobs data (Jan 9) and Q4 earnings season could set the tone.
Useful Links
Wall Street’s 2026 Outlook: Another Banner Year Ahead?
NYT Article
Why it matters: Bullish targets hinge on AI-driven productivity and resilient earnings; risks include high valuations and Fed pauses—core for equity allocation decisions.
AI Boom Continues: Chips Rally, Practical Applications Expected
NBC News on AI Stocks
Why it matters: Semiconductors and data storage led gains; shift to efficient AI tools could broaden market participation beyond Magnificent 7, benefiting tech investors.
Bitcoin Rebounds Amid Geopolitical Volatility
CoinDesk on BTC Surge
Why it matters: Crypto resilience signals growing “digital gold” narrative; potential for $150K BTC forecasts if institutional adoption accelerates—diversification play for portfolios.
Fed Divisions & Rate Path in Focus
Motley Fool on 2026 Risks
Why it matters: Internal Fed splits could limit cuts, impacting borrowing costs and growth stocks; monitor for bond yield signals.
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