Geopolitics returned to the spotlight in January, and the price of gold climbed above US$5,000 per ounce for the first time, driven up by intensifying concerns over the geopolitical and financial outlook.
- The S&P 500 Index breached 7,000 points for the first time
- Germany’s economy returned to growth
- Japan called a snap election
The Tariff Man strikes again: geopolitics returned to the spotlight in January, and the price of gold climbed above US$5,000 per ounce for the first time, driven up by intensifying concerns over the geopolitical and financial outlook. Early in the month, the US seized Venezuela’s President Nicolas Maduro in a controversial military operation. Later, President Trump announced that he intended to take ownership of Greenland, triggering tensions between the US and Europe and leading to threats of additional tariffs on eight European countries, including the UK. In a speech at the World Economic Forum, President Trump subsequently stated that he was dropping his plans. Despite market volatility, the S&P 500 Index breached 7,000 points for the first time and ended January 1.4% higher. In comparison, the Dow Jones Industrial Average Index rose by 1.7% over the month.
“The US Department of Justice launched a criminal investigation into Federal Reserve Chair Jerome Powell”
Fed up: the US Department of Justice launched a criminal investigation into Federal Reserve (Fed) Chair Jerome Powell, who responded: “This unprecedented action should be seen in the context of the (Trump) administration’s threats and ongoing pressure”. In a joint statement , the heads of eleven central banks backed Chair Powell and reiterated the importance of central bank independence. Towards the end of the month, however, concerns over the Fed’s future independence were alleviated somewhat by President Trump’s nomination of Kevin Warsh as the next Fed Chair.
Germany returns to growth: mounting speculation around Greenland provided a boost for European defence-related stocks. The euro rose against the US dollar to reach its highest level since 2021. The eurozone’s rate of consumer price inflation eased from 2.1% to 2% year on year in December, raising hopes of further monetary easing. Meanwhile, after two years of recession, Germany’s economy grew by 0.2% during 2025 as government and household spending helped to offset the impact of falling manufacturing output and lower export activity. The Dax Index rose by 0.2% over January.
General election for Japan: Japan’s Prime Minister Sanae Takaichi announced a snap election in a bid to gain a mandate for her economic and fiscal policies. During January, the Nikkei 225 Index reached a new all-time high, while the yen fell to its lowest level against the US dollar since July 2024, and reached its lowest-ever level against the euro. Over January as a whole, the Nikkei 225 Index rose by 5.9%.
To view the series of market updates through January, click here
