Multi-Asset Market Review

Market review

• Liontrust MA funds and portfolios well positioned in January for strength in non-US equities
• Global equities edge higher but US weighs
• Fixed income markets mostly positive; global high yield and corporate bonds among leaders

January continued the whirlwind of events and headlines seen in 2025. Gold and silver reached all-time highs and oil futures rose 13.6% ^[1] as Venezuela, Iran and Greenland took centre stage. It was also a month in which the inherent diversification embedded in the Liontrust Multi-Asset funds and portfolios meant they were well positioned for much of what unfolded as markets demonstrated their resilience.

A look through the geopolitical headlines reveals that non-US equities performed well, particularly in regions where we are tactically overweight. The momentum of emerging market and Asia ex-Japan equities from 2025 continued and they led their regional peers, delivering 6.8% and 6.0% in sterling terms over January. Japanese equities were close behind with a return of 4.5% in sterling terms, while UK equities returned 3.1% ^[1].

January is a testament to the fact that major political developments do not necessarily drive markets. Much of January’s market performances was in many ways a continuation of fundamental themes over the last year, including some investors beginning to rotate away from the US.

Emerging markets and Asia ex-Japan have been benefiting from the weaker greenback, which eases their dollar-denominated debts, although they have encountered headwinds due to tariffs. We retain a positive tactical outlook on these regions, supported by favourable demographics, productivity trends and corporate earnings momentum.

We also assign positive tactical ratings to Japanese and UK equities. In Japan, ongoing corporate governance reforms and supportive policies continue to boost investor confidence. In the UK, where the FTSE 100 hit record highs in January, we see a stock market that has benefited from relative cheap valuations and growing investor confidence despite domestic economic challenges.

Our relatively circumspect stance on US equities, especially towards the mega caps, proved to be prudent in January. The stock market lagged its peers, declining -0.6% in sterling terms and weighing on global equities, which delivered a marginally positive 0.3% in sterling terms.

In January, the earnings season gave another insight into the US market’s fundamentals, with large parts of the US market, especially software and technology, experiencing selloffs as investors became more discerning about AI’s potential winners. Microsoft’s disappointing results and subsequent10% one-day share price fall were among the more impactful developments given its multi-trillion-dollar capitalization. Microsoft did not change materially that day; what shifted was the market perception of the future value of its profitability. 

At present, the market’s discernment regarding AI is welcome. But the impact of volatility from certain stocks such as Microsoft on the market is being cushioned by a broader range of stocks performing well. This dispersion of performance was absent in recent years as investors bought AI en masse. If this dispersion falters, then it could be painful for markets. This is why we continue to view the US stock market as unusually concentrated and expensive, which is a potentially dangerous combination. Strong flows into passive vehicles only add momentum to this concentration and amplify the risks. 

Fixed income markets mixed

Commodities were the best performing asset class in January, rising 10.0% in USD terms. Much of this was driven by precious metals (gold rose 8.6%) and oil futures.

Fixed income markets were mixed but mostly positive. Global government bonds softened and both US Treasuries and UK gilts fell -0.1% in terms of their respective currencies. Markets reacted poorly to Federal Reserve Chairman Jerome Powell admitting that he was being investigated for criminal activity, perhaps illustrating the political pressures being placed on the world’s leading central bank. There was some clarity on the Fed’s future, however, with President Trump’s nomination of Kevin Warsh for its next chair. Analysts broadly view Warsh as credible, although they have some reservations about his hawkish credentials^[2] .

Global high yield and corporate bonds were notable performers, each returning 1.2% in USD terms over January. Global high yield bonds were a standout performer in 2025, returning 14.8% in USD terms. We are overweight the sub-asset class and assign it a positive four out of five tactical rating. The nominal yields it offers are attractive at close to 7.0%, offering long-term yield potential comparable to equities. Active credit selection remains preferable in this sub-asset class because of the ample scope it offers for this.

[1] Source: Bloomberg, 3 January 2026

[2] Source: Financial Times, 30 January 2026