Markets in January: Geopolitics and Corporate Earnings in Focus

The first month of the year stood out for a recalibration of expectations in global markets, as investors reacted to rising geopolitical tensions while corporate fundamentals remained resilient.

In this edition of International Markets, Marcio Brito, Head Investor at Banco Itaú International, analyzes the key events of the month — from trade policy discussions to strong earnings season results.

Monetary Policy and the U.S. Economy

January had the highest number of mentions of geopolitics in Bloomberg’s top news stories, with trade policy issues returning to the spotlight. Discussions involving Greenland and tariff matters generated volatility in sectors exposed to global trade.

In the U.S., the Federal Reserve maintained a cautious stance, with monetary policy still data-dependent; and the latest FOMC meeting left interest rates unchanged.

We were also introduced to the new Fed Chair. Appointed by Donald Trump, Kevin Warsh brings experience from the 2008 crisis and a balanced view that combines inflation vigilance with a pro-market perspective.

Fixed Income Markets and Earnings Season

The shift in expectations was reflected in interest rate markets, with global rates rising while U.S. Treasury yields remained relatively contained. The credit market remained stable, with spreads still tight and steady.

Earnings season was the main anchor for markets, with financial institutions in the spotlight. JPMorgan, Citigroup, Bank of America and PNC delivered strong results, showing resilient consumer activity and cost control. Some even posted record figures, reinforcing the health of the financial system.

TSMC surprised with a larger-than-expected investment plan, boosting companies like ASML and Applied Materials, and the infrastructure thesis for artificial intelligence remains very much alive. Cyclical sectors like transportation showed more weakness, while aerospace was positive, with Boeing improving its credit outlook and Embraer reporting a record backlog.

Structural Factors and Emerging Markets

U.S. economic productivity continues to be a positive driver, accelerating and outperforming other major economies. This backdrop supports corporate profits and household income without significantly pressuring long-term inflation.

In emerging markets, the tone was one of gradual improvement, although investors remain selective.

• Continuation of earnings season: focus on guidance updates, especially in tech and cyclical sectors;
• U.S. economic data: could influence expectations for Fed monetary policy;
• Geopolitical developments: a potential source of volatility, especially in trade-related topics;
• Semiconductor sector: developments in the AI infrastructure thesis;
• Flows into emerging markets: monitor investor selectivity.

February is likely to remain driven by earnings season, with guidance updates weighing more heavily than macro factors.

While volatility may return due to geopolitical issues, solid fundamentals remain the main support for markets, sustaining a constructive environment for investments.