Markets Update January 2026 - USA: Companies performing well – US dollar poses a return risk

In 2026, it seems that the same rule applies: with Donald Trump, things are never boring. Rarely has the start of a year been so turbulent. The risks that have dominated recently have been primarily geopolitical in nature – and strongly influenced by the actions and rhetoric of the US president. The US intervention in Venezuela, the protests in Iran accompanied by threats of military intervention by the US, and the dispute over Greenland – including short-lived tariff threats against Europe – caused considerable uncertainty on the markets.

How is the US dollar performing?

Looking at the bigger picture, US equities have been relatively weak compared to the global stock market since Trump took office, when the effects of the US dollar's depreciation are taken into account. The so-called “Sell America” trade therefore remains valid at a strategic level. However, this is less a vote of no confidence in US companies. On the contrary, when viewed in US currency, US stocks are likely to continue to perform solidly given their high management quality, structural competitive advantages, and above-average profitability. The growing question marks relate more to the currency side: the Trump administration makes no secret of its preference for a weaker US dollar and regularly undermines confidence in the greenback. Nevertheless, the US currency remains overvalued. This makes it vulnerable to a further loss of confidence among international investors. Active US dollar management therefore remains essential for global investors this year.

Is Japan facing a fiscal crisis?

In Japan, the rise in interest rates, fueled by the new government's propensity to spend, has reignited the debate about the sustainability of public finances. The backdrop to this is by far the highest level of government debt among industrialized countries: in Japan, it is well over 200 percent of economic output. In view of rising yields, concerns are growing that sharply increasing interest expenses will trigger a debt crisis in the future. However, these fears appear exaggerated in the short term. In recent decades, the Japanese government has been able to borrow at extremely low interest rates. As a result, a large part of the debt stock continues to be financed at very favorable terms. Accordingly, the share of interest payments in both the fiscal budget and economic output has so far remained within a sustainable range. Nevertheless, the current trend is not sustainable in the coming years. If the rise in interest rates continues, Japan's fiscal leeway would be noticeably restricted in the longer term and calls for massive intervention by the Bank of Japan would grow louder. Although an acute fiscal crisis is not foreseeable, the structural vulnerability of public finances is increasing.

Thanks to robust fundamentals: markets defy disruptive factors

Despite all the geopolitical turmoil, stock markets performed robustly overall at the beginning of the year. In addition to a certain habituation effect, the now widespread expectation of the so-called TACO phenomenon (“Trump Always Chickens Out”) played a role, according to which the US president ultimately backs down after making big threats. Furthermore, a sober look at the fundamentals justifies market stability: corporate earnings remain on track for growth, while there are currently few signs of recessionary risks. The US economy appears to have started the year with solid positive momentum. In Europe, the effects of fiscal stimulus should become noticeable in the coming quarters. It therefore makes sense to continue to focus on the fundamental conditions – and to remain relatively calm in the face of regular political headlines from Washington.