Saxo Market Compass
26 January 2026 (recap week of 19 to 23 January 2026)

Where markets have been — and where they’re heading.

Headlines & introduction

Markets navigated a volatile week shaped by geopolitics, shifting rate expectations, and sharp moves in currencies and commodities. Early risk-off sentiment tied to Greenland-related tariff threats and instability in Japanese government bonds gave way to calmer conditions as rhetoric softened and central banks reassured markets. Equities recovered into week-end, volatility eased, and attention turned decisively toward earnings and the Federal Reserve.
Market pulse: uncertainty remained elevated, but markets finished the week more focused on fundamentals than fear.

Equities

US equities rebounded as policy risks faded into earnings focus.
Wall Street endured a sharp sell-off early in the week as trade rhetoric and rising yields weighed on sentiment (January 21), before rebounding when tariff threats toward Europe were dialled back (January 22–23). Mega-cap technology led the recovery, with strength in Microsoft and Meta, while Intel’s sharp post-earnings decline highlighted how unforgiving the market remains on guidance and execution. By Friday, indices were higher on the week, supported by stabilising yields and macro data broadly meeting expectations.
Market pulse: earnings regained control of the narrative.

Europe and Asia showed dispersion beneath calmer headlines.
European equities lagged early as autos and luxury stocks reacted to trade threats, while defence, telecoms, and selective industrials provided offsetting strength. Local markets showed mixed dynamics: the UK remained sensitive to global risk sentiment, while Nordic, Benelux, French and Italian equities benefited from resilient earnings and stock-specific drivers (January 21–23). In Asia, Japan stabilised after bond-market stress eased, Hong Kong and South Korea recovered on tech and policy steadiness, and China remained range-bound amid selective support.
Market pulse: regional rotation reflected policy sensitivity rather than broad risk aversion.

Volatility

Volatility spiked, then eased as rhetoric cooled.
Implied volatility rose sharply at the start of the week, with the VIX briefly moving above 20 as equities sold off and bond markets reacted to Japanese yield instability (January 21). As trade rhetoric softened and the Bank of Japan avoided signalling imminent tightening, volatility retraced steadily. By the end of the week, the VIX had fallen back toward the mid-teens, although short-dated measures remained elevated, reflecting ongoing sensitivity to headlines and upcoming events.
Market pulse: calmer conditions returned, but caution lingered.

Market sentiment based on options flow data

Participation continues, but insurance stays in demand.
Options positioning over the past week points to investors staying invested, but not complacent. Across the broader market, activity consistently showed a preference for keeping downside protection in place, signalling that headline risk and event uncertainty were still being taken seriously even as equities held up. At the same time, positioning within large technology stocks was far from uniform, with investors expressing selective conviction rather than blanket exposure.

The combined message is not one of outright risk aversion, but of controlled risk-taking. Investors appear willing to pursue upside where earnings resilience is visible, yet they continue to pay for insurance at the index and portfolio level. Positioning suggests preparation for volatility rather than confidence in a smooth, one-directional rally.
Market pulse: selective risk-taking with protection still in place.

Digital assets

Crypto lagged equities as caution dominated flows.
Digital assets underperformed broader risk markets throughout the week. Bitcoin slipped below USD 90,000 during the risk-off phase before stabilising, while ethereum and major altcoins remained under pressure (January 21–23). Unlike equities, crypto failed to benefit meaningfully from easing geopolitical tensions, reflecting its continued sensitivity to macro risk rather than crypto-specific catalysts.

ETF flow data reinforced this caution. Both bitcoin and ethereum spot ETFs recorded net outflows, signalling that institutional investors were trimming exposure rather than adding on dips. Until flows stabilise, crypto is likely to remain reactive rather than leading.
Market pulse: stability without conviction.

Fixed income

Japan drove global rate volatility.
The week’s defining fixed income theme was the sharp move in Japanese government bonds. Long-dated JGB yields surged early on concerns over fiscal discipline and election-related spending promises (January 20), triggering spillover into global bond markets. Official reassurances helped stabilise the curve, but volatility remained elevated. In the US, Treasury yields briefly pushed higher before retracing, ending the week broadly stable as risk sentiment improved.
Market pulse: bond markets flagged discipline risks, not recession fears.

Commodities

Hard assets extended an exceptional rally.
Precious metals surged to fresh records as investors sought protection against geopolitical risk, currency volatility, and fiscal uncertainty, with gold breaking above USD 5,000 per ounce and silver hitting multi-year highs. Safe-haven demand intensified amid FX volatility and macro risk. Energy markets were mixed: crude held firm, but US natural gas spiked sharply on severe winter weather, underscoring how supply and headline risks can dominate pricing.
Market pulse: commodities reflected hedging demand more than growth optimism.

Currencies

Yen volatility reshaped global FX moves.
The Japanese yen weakened through most of the week before staging a sharp rally late Friday amid signs of coordinated US–Japan FX action following official “rate checks”. The move triggered broad US dollar weakness, lifting EURUSD to multi-month highs and supporting AUD on strong domestic data. Currency markets remained highly sensitive to policy signals rather than macro releases.
Market pulse: intervention risk, not fundamentals, drove FX.

Key takeaways

• Equities recovered as tariff rhetoric eased and earnings regained focus.
• Volatility fell back, but short-dated stress signals stayed elevated.
• Japan’s bond and currency markets were the key global risk drivers.
• Precious metals and natural gas extended outsized moves.
• Options positioning points to selective, risk-aware participation.

Looking ahead (week of 26 to 30 January 2026)

Policy decisions, FX risks and geopolitics converge.
The Federal Reserve is widely expected to hold rates steady, but markets will scrutinise Chair Powell’s press conference for any shift in tone, particularly amid political pressure and ongoing debate about the future policy path. A heavy earnings calendar led by Microsoft, Meta, Tesla and Apple will shape sentiment around AI investment, margins, and demand resilience, with guidance likely to matter more than headline results.

Beyond earnings, currency markets remain a key source of potential volatility. Recent yen swings and confirmed coordination between US and Japanese officials have raised the probability of further FX intervention, which could spill over into equities, bonds and commodities. At the same time, broad dollar pressure has been reinforced by renewed US fiscal uncertainty, with negotiations over government funding approaching a late-January deadline.

Geopolitics also remains an undercurrent. Middle East tensions, including ongoing pressure on Iran and the risk of further escalation, continue to underpin energy prices and safe-haven demand, even if no immediate military action is priced in.
Market pulse: volatility catalysts extend well beyond earnings.

Conclusion

Markets closed the week on firmer footing after absorbing a burst of geopolitical stress, bond-market volatility and sharp currency moves. While equities recovered and volatility eased, flows and positioning suggest investors remain selective and risk-aware rather than outright optimistic. With central bank communication, FX policy risk and mega-cap earnings ahead, the balance between participation and protection is likely to remain a defining feature of the market backdrop.