In the United States, although the release of fourth-quarter GDP – usually expected at the end of January – was delayed due to the unavailability of certain data following last autumn’s partial government shutdown, “the overall set of economic indicators points to robust momentum towards the end of the year,” says Guy Wagner, Chief Investment Officer (CIO) of BLI - Banque de Luxembourg Investments. “This was driven by strong investment activity, particularly in technologies related to artificial intelligence, as well as sustained consumer spending, mainly supported by higher-income households.” In the euro area, fourth-quarter Gross domestic product growth slightly exceeded expectations, reaching 0.3% quarter on quarter, bringing full-year growth in 2025 to 1.5%. While not spectacular, this performance nonetheless confirms a gradual improvement compared with the previous two years. In China, growth of 5% recorded in 2025, in line with the authorities’ target, was driven primarily by export momentum, while investment and domestic consumption remained subdued. Finally, in Japan, the Prime Minister’s shift towards a more expansionary fiscal policy — subject to confirmation following snap elections — is expected to support economic activity this year, albeit at the cost of increased pressure on already strained public finances.
Inflation is stabilising in the US and in the eurozone
Inflation has recently shown little variation, stabilising at levels slightly below 3% in the United States and around 2% in the eurozone. In the US, inflation remained unchanged in December, while core inflation – excluding energy and food – held steady. The personal consumption expenditures (PCE) deflator excluding energy and food, the Federal Reserve’s preferred inflation indicator, was not yet available for December. In the eurozone, inflation declined in December, and core inflation also eased.
Federal Reserve kept its policy rates unchanged
As expected, the Federal Reserve kept its policy rates unchanged following its late-January meeting. “Solid economic growth combined with inflation still slightly above target led the Federal Open Market Committee to adopt a wait-and-see stance,” believes the Luxembourgish economist. In the eurozone, the confirmation of the European Central Bank’s deposit rate at 2% at its early-February meeting appears virtually certain.
Bond markets were relatively calm during January
Bond markets were relatively calm during January. In the United States, signs of improving economic conditions led to a modest rise in long-term yields, while in the euro area yield spreads between Germany and peripheral countries narrowed moderately. In this context, the yield on 10-year government bonds rose in the US, while it edged down in Germany, France, Italy and Spain.
Equity markets got off to a strong start to the year
Equity markets got off to a strong start to the year, supported by broader participation in the rally and by expectations of an acceleration in global growth. Over the month, the MSCI All Country World Index Net Total Return, expressed in euros, rose by 1.7%, with performance partly dampened by the appreciation of the euro. From a geographical perspective, the US market was the weakest performer. By contrast, European and Japanese markets significantly outperformed, with the STOXX Europe 600 and the Topix rising firmly, “while emerging markets stood out with a strong increase of 8.8% in US dollars. At the sector level, energy, materials and industrials delivered the strongest performances, while financials, technology and consumer discretionary recorded the weakest trends”, concludes Guy Wagner.