January proved unusually eventful, with Donald Trump’s return to the White House, a ceasefire in Gaza, and the emergence of DeepSeek, a Chinese AI firm claiming to rival established players at a fraction of the cost. The U.S. economy remained resilient, growing +2.3% in Q4, while the Federal Reserve kept rates steady. In Europe, the ECB cut rates by 0.25% as growth flatlined, while the UK Chancellor sought to counter worsening sentiment amid falling confidence, job cuts, and persistent stagflationary pressures.

Equity markets gained +3.8% globally, with value stocks outperforming growth for the first time in two years. In the U.S., midcaps led on expectations of tax and regulatory reform, though sentiment shifted sharply after a record $600bn single-day loss in Nvidia triggered weakness across the AI complex. Europe was the best performer (+6.9%), supported by a return to growth in services, while the UK rose on a weaker currency and Japan lagged following a Bank of Japan rate hike.

Fixed income experienced volatility, with bond yields spiking before stabilising on better economic data. UK gilts briefly touched levels not seen since 2008, reflecting concerns over fiscal credibility as Labour’s borrowing surged. Credit markets were steadier, while commodities advanced broadly. Gold rallied +6.9% in sterling terms, supported by geopolitical risks, tariff fears, and growing unease over fiat currency debasement.

Umbra MPS portfolios once again outperformed peer benchmarks, with January returns ranging from +1.6% in Defensive portfolios to more than +4% in higher-risk strategies. Strong contributions came from equity allocations in Europe and the UK, alongside resilience from credit and alternatives. The diversified positioning across asset classes helped portfolios navigate a month of sharp swings and political uncertainty, underscoring Umbra’s disciplined approach to risk-adjusted performance.