Insights
Market Review for January 2026
Welcome to our first market update of 2026
Go figure: Erratic decision-making from the US, again
T.A.C.O returns: Trump backs down over Greenland
Anxious times: Gold soars and US dollar falls
Shakey bonds: Japanese snap election spooks debt markets
How much?: Price pressures rise in NZ and Australia
Strewth: Floods and heatwaves test Aussie resolve
2026 begins
Welcome to our first market update of 2026, in which we take a whistle-stop tour of global markets and trends for the month that was.
It’s been a breathless start to the year, mainly due to the decision-making of Donald Trump. In January, there were also more extreme weather events across the ditch, with Australia again in the firing line. Meanwhile, the decision to call a snap election in Japan sent chills through bond markets.
America’s loud start to 2026
Let’s start with the US.
First came the military extraction of Venezuela President, Nicholas Maduro. Charges of drug-trafficking remains the official line from the White House, with sceptics quick to label them a Trojan horse. Following his extraction, discussions quickly moved to the future control of Venezuela’s vast oil reserves, which are believed to equate to one fifth of the world’s total[1].
Then came the launching of criminal proceedings against US Federal Reserve (Fed) boss, Jerome Powell. Remember that Powell, and the Fed, are supposed to operate independently of political opinion and intervention. Trump’s long-running beef has been centred on the Fed’s refusal to lower interest rates at his preferred (faster) pace. He wants lower rates because they encourage more spending and investment, and as such could boost the US economy. They would also help to offset criticism of his tariff policies, which add inflationary pressures to the economy. Remember, the US mid-term elections are in November and he needs to sell a good story to voters.
Despite all of the external pressure, at the end of the month the Fed voted against a rate cut, instead keeping US interest rates on hold until it meets again in March[2]. They assessed the US economy to be in good shape and felt that a rate cut would risk re-energising inflation.
And to cap it all, Trump later went on the verbal offensive regarding Greenland and his insistence that it would soon belong to the US. When met with objections, he resorted to his 2025 playbook of trade tariffs and threats.
In response, the European Union said it would place its own tariffs on goods from America. Ultimately, Trump backed down. The phrase T.A.C.O, short for “Trump Always Chickens Out”, has re-entered the chat.
From an investor perspective, these events were relevant. The price of gold reached another record high, breaching the $5,000 USD (per troy ounce) for the first time ever[3]. The popularity of precious metals typically goes up when market uncertainty and/or volatility spikes (and vice versa).
At one stage in the month, the value of the US dollar fell to a 4-year low[4]. It was indicative of rising investor angst, frustration with Trump’s erratic decision-making, and a creaking faith in the stability of the world’s most influential economy.
As a side note, we’d had a few more queries than usual about America and our view of conditions there. If you’d like more insights on the investment case for the US, as we currently see it, please visit here.
Japan’s pre-election nerves
News of a snap election in Japan spooked bond markets in January. Why? First, because investors prefer certainty, and the election abruptly brings the curtain down on what many had assumed would be a welcome period of stability. Prime Minister Sanae Takaichi only came to power in October 2025[5].
The added layer of tension came from the fact that Takaichi’s campaign is promising tax cuts but it’s unclear how they would be funded. This was a red flag for investors in Japanese bonds because it raises questions about the affordability of Japan’s debt, and therefore, the likelihood of bond investors being compensated.
Against this backdrop, the Bank of Japan decided not to implement a second consecutive rate rise in January. The headline rate was kept on hold at 0.75% - a 30-year high for the country.
Australasia remains pricey
Meanwhile, in New Zealand, the latest inflation data release brought some unwelcome news.
In a surprise turn of events, domestic inflation – as measured by the Consumer Price Index (CPI) - rose to 3.1%[6]. As well as being higher than expected, it means Kiwi wallets will be stretched for a bit longer, as the cost of goods and services refuses to fall at a faster rate than was expected.
Given the latest inflation rate remains above the 1%-3% target band of the Reserve Bank. markets are now pricing in an NZ rate hike sooner than expected, potentially Spring time. This would, in theory, keep a lid on inflation getting any worse.
A similar story played out over in Australia where the latest inflation data release showed hotter-than-expected numbers in December 2025. The headline rate rose from 3.4% to 3.8%, which was above the expected rate of 3.6%[7].
As a result, the path seems to have been cleared for the first rate hike of 2026 when the Reserve Bank of Australia reconvenes in February.
Too hot. Too wet. Predictable much?
Sticking with Australia, and January served up a troubling mix of alarming weather events. Parts of the country were hit with consecutive days of extreme heat, with temperatures getting dangerously close to 50 degrees Celsius[8]. This tinderbox backdrop inevitably led to bushfires.
Earlier in the month, floods hit parts of New South Wales following a period of intense rainfall[9]. All-in-all, it paints a worrying picture of extreme weather events causing, at best, disruption to everyday life, at worst, destruction and harm.
As an ethical investor, we view these events with a mixture of alarm and hope. Alarm, because the dangers to human life are clear, as are the role of emissions in rising temperatures that continue to take a terrible toll.
Hope, because it strengthens our mission to help investors play a tangible role in minimising the type of human-led activity that is leading to such harm.
Sadly, it wasn’t just Australia that experienced changing weather patterns last month. In North America, brutal snowstorms led to fatalities and widespread power outages. It was described by the National Weather Service as potentially being “the longest duration of cold in several decades[10]".
The wrap up
If January is anything to go by, 2026 has the potential to be very ‘noisy’ again. Therefore, investors should prepare themselves for periods of short-term volatility.
Trade tariff threats and geopolitical tension will overhang markets for the time being, but there will still be plenty of opportunities for active investment managers.
For all of its issues, the US is currently the world’s largest and most influential economy. For long-term investors, especially in growth-oriented funds, maintaining exposure to the US helps ensure diversification and access to innovative companies that drive global economic progress. While we watch developments closely, it’s important to remember that our investment decisions are not based on political endorsements or our views on any country’s leadership. Instead, we focus on financial stability, global market relevance, and alignment with our Ethical Investment Policy.
The important thing to remember is that diversification – whether its geographical, sectoral, or asset-class based - is designed to strengthen portfolios and funds. As an ethical investor with Pathfinder, you can also be confident that the active managers of your investments are aiming to avoid contributing to harm around the world.
It’s our role to steer Pathfinder’s fund/s on your behalf, and to keep you informed along the way. If you have any questions at any stage, please don’t hesitate to contact us.
Sources & further reading
[1] https://edition.cnn.com/2026/01/03/business/oil-gas-venezuela-maduro
[2] https://www.federalreserve.gov/monetarypolicy/files/monetary20260128a1.pdf
[3] https://edition.cnn.com/2026/01/25/business/gold-record-trump-global-concerns-intl-hnk
[4] https://www.reuters.com/business/dollar-sinks-four-year-low-trump-brushes-off-decline-2026-01-27/
[7] https://www.abs.gov.au/media-centre/media-releases/cpi-rose-38-year-december-2025
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Pathfinder recommends all investors receive financial advice before making an investment decision. Pathfinder Asset Management Limited is the issuer of the Pathfinder KiwiSaver Plan and Pathfinder Investment Funds. Product Disclosure Statements for the offers are available at pathfinder.kiwi. Learn more about how we invest ethically by reading our Ethical Investment Policy & Exceptions Register.
