MARKET INSIGHT – February 2026

MARKET INSIGHT

Prime Partners’ monthly analysis of global economic and financial market news.

A good start, but vigilance is required

It is no overstatement to say that the first few weeks of the year have been anything but easy for investors. Admittedly, the major stock indices performed well, even if the US market ultimately delivered little, unlike its European and, above all, emerging market counterparts. But behind this rather encouraging picture for the start of 2026 lies a growing nervousness among investors. There are many reasons for this, but there is no doubt that President Trump’s hyperactivity has played a major role. In just four weeks, from Venezuela to Iran, Greenland and Davos, the US president has demonstrated his talent as agitator-in-chief of the world order and raised the spectre of an increasingly uncertain, even dangerous, geopolitical environment.

January was also marked by sharp reactions to certain Q4 2025 earnings reports, as evidenced by double-digit declines in the share prices of companies as solid as Microsoft and SAP. Conversely, it is by no means unreasonable to suggest that there has been a degree of overheating in certain AI-related stocks, particularly memory suppliers and ASML, the giant chip manufacturing equipment company. Finally, it is difficult to ignore the rollercoaster ride of precious metal prices, with gold and especially silver rising sharply over the month, but also experiencing a historic Black Friday to close it out.

“January is the month when we offer our best wishes to our friends. The other months are when they won’t come true.” The German philosopher and physicist Georg Christoph Lichtenberg had a taste for irony, but Goethe said of him that “where he laughs, there is a problem lurking.

The US president makes wishes and promises left, right, and center. Whether these are pipe dreams or end up taking a more concrete form, Donald Trump is more than ever in the spotlight in 2026. In economic terms, the results of his administration’s first year appear mixed, or at least hard to read. US growth is partly driven by huge investments in artificial intelligence by tech giants. This is rather fortunate, because outside this sector, momentum is weaker, with the job market still plagued by a “no hire/no fire” phenomenon.

US growth is partly driven by huge investments in artificial intelligence by tech giants

The repetition of destabilizing factors such as tariffs, international tensions, and challenges to the independence of the central bank are not without consequences and are making the environment less predictable for many companies, which are therefore opting for the status quo on certain projects, with all the repercussions that this entails.

The year 2026 is already a critical one for President Trump, who will face midterm elections in a few months. With current polls not looking in his favor, he cannot afford a significant deterioration in key parameters such as employment, purchasing power, or even a stock market crash, given the increasing importance of equities in Americans’ net worth. Donald Trump will therefore have to perform a balancing act over the coming months if he wants to retain the full support of his “MAGA” electoral base without alienating the less radical wing of the Republican Party.

Concrete economic results and a degree of overall stability appear to be prerequisites for the president if he wants to maintain a firm hand and considerable freedom of action at the helm of the world’s leading power.

In terms of financial markets, January presented a somewhat misleading picture, with, as mentioned above, stock indices rising but exhibiting significant differences between sectors and a clear increase in nervousness. Overall, the current earnings season is once again a good one, and not just in technology. However, expectations and valuations are now high, leaving no room for disappointment in either the actual results or the forward guidance.

The spectacular rise in the prices of many precious metals in January is not without significance. Gold prices maintained their strong momentum from 2025 amid legitimate mistrust of US debt levels and international tensions. There is little surprise or irrational behavior in this phenomenon. On the other hand, the surge in the price of silver, followed by the crash on January 29 (-31%), serves as a reminder of a market environment in which many assets are trading at historic highs and leverage is also substantial.

Europe, for its part, presents a much less turbulent picture, even though its cohesion has once again been tested by the Greenland episode in the face of Donald Trump’s thinly veiled threats regarding control of this vast territory. The EU is starting 2026 with a slight revival of confidence in its ability to present a united front in the face of the US president’s outlandish demands. The important trade agreement with India concluded at the end of the month demonstrates that the old continent is also capable of conducting commerce on a large scale and announcing it triumphantly, much like Donald Trump.

The start of the year may therefore see the needle move slightly (temporarily?) in Europe’s favor, with investors focusing less in January on the usual problems, which remain relevant, such as the crisis in the German automotive industry and political instability in France. However, it is important to note that despite the strong performance of the Stoxx 600, there are many disparities among the underlying stocks that make up the index. The difficult start to 2026 for heavyweights such as LVMH and SAP has so far been more than offset by the surge in ASML (Europe’s largest company by market capitalization) and the strong performance of Swiss pharmaceutical giants Roche and Novartis.

Finally, there are the emerging markets, which have been by far the most attractive in recent weeks. The momentum in South Korea and Taiwan (technology) enabled the emerging market index to hit the ground running with double-digit performance in January alone. Added to this was an excellent start to the year for Brazilian stocks, buoyed by soaring precious metal and commodity prices. But here again, we must be careful not to misinterpret these results. It is the strong individual performances of heavyweights such as TSMC, Samsung and even Alibaba that are responsible for this positive outcome. This is compounded by a dollar that remains weak and therefore provides natural tailwinds for emerging economies.

On the macroeconomic front, we must however bear in mind that there has been little improvement in the situation in China, where the latest statistics do not (yet?) indicate an acceleration in business activity towards pre-Covid levels.

The momentum in South Korea and Taiwan (technology) enabled the emerging market index to hit the ground running with double-digit performance in January alone

In light of these considerations, we felt it was appropriate in January not to be swayed by any temporary frenzy. We started the year with the same portfolio diversification as at the end of 2025. In this context, we would like to highlight our exposure to emerging market equities, which was reinforced twice last year. It is also worth mentioning that our equity allocation favors certain sectors that started the year very well, including energy, industrials, and consumer staples. Also noteworthy is that our technology-focused product contributed significantly during the month, despite a generally challenging start for the sector’s giants, led by Microsoft.

Bonds and alternative investments played their role as buffers against volatility in our portfolios, while also contributing to their performance. The appointment of the new Fed chair, Kevin Warsh, has not destabilized the bond market to date, although this will need to be assessed over the coming weeks, particularly when the future head of the US central bank makes his first statements. In any case, his credibility appears sufficient among market participants, whose fears about the institution losing its independence may be receding.

Finally, the weight of gold in our portfolios has not been reduced, despite its significant contribution to last year’s performance. In our view, the arguments in favor of the “barbarous relic” remain intact.

After this first month of 2026, we can only hope for a little less turmoil in the months to come, even if the markets showed more volatility than panic in January. Our allocations have consistently demonstrated their robustness during the multiple episodes of turbulence that have punctuated recent years. We therefore remain confident in the current composition of our portfolios and stand ready to adjust them if necessary or if opportunities arise.

Needless to say, we will do everything in our power to ensure that our January wishes for good performance are fulfilled over the next eleven months, regardless of what Georg Christoph Lichtenberg may think.