# Roundup of the week: 16 January 2026

_Geopolitics once again dominated the week, with unrest in Iran, renewed questions over energy supply, and growing concern about political interference in US monetary policy. Despite the noise, the underlying economic data in both the US and UK continues to surprise to the upside, reinforcing the case for lower inflation, falling interest rates, and stronger growth than most forecasters expect in 2026._

Neil Woodford · 16 January 2026 · 8 min read

![Roundup of the week: 16 January 2026](https://cdn.sanity.io/images/v3acfbvo/production/b712c521f5394b710aa7ea3d1175fb3faa9e0143-3840x2160.jpg?w=1600&fit=max&auto=format)

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In keeping with the relentless intensity of geopolitics and President Trump’s hyperactivity, this week has been a busy one once again. Venezuela’s relevance to markets proved somewhat ephemeral, quickly followed by the tragic events in Iran.

Initially triggered by the currency collapse in December and the consequent price increases on many basic essentials, street protests have rapidly developed into what appears to be a nationwide challenge to authoritarian clerical rule. How this ends is not clear, and how the US will ultimately respond is equally vague. Intense lobbying by governments in the region against US intervention has, for the time being, been successful. As a result, pressure on the oil price has diminished but could quickly return. Inevitably, the regime's long-term stability is once again being questioned. As a result, the impact of regime change on global energy prices is a live debate. Quite obviously, under this scenario, oil prices could be significantly lower in the medium term.

Elsewhere, the US Justice Department’s criminal probe into Fed chair Jerome Powell has rightly prompted protests not only from the chair himself but also from leading central bankers worldwide. Not only does this case potentially undermine the department's credibility and objectivity, but it also clearly undermines the Fed's long-established independence. Quite where this nonsense ends up is not at all clear, but it seems to me counter-productive from Trump’s point of view, given that the FOMC committee will be even keener now to appear independent of political pressure and so potentially more resistant to interest rate cuts—the opposite of what Trump had wanted, I suspect.

## Politics

### US

I have already mentioned the Iran crisis and the Fed chair nonsense and will not reprise them here, other than to highlight the fact that a number of global bond fund managers, including PIMCO, have suggested that their weightings to US Treasuries will be reduced following the political challenges Trump has unleashed against the Fed’s independence. My guess here is that the heat and light around this very important issue will diminish once Powell steps down in May and the new governor is announced. It will then be up to the new governor to re-establish the Fed’s independence credentials, which will be essential to ensure that the US optimises its long-run debt costs.

Having said that, I will reiterate what I alluded to in last week’s update: I am becoming increasingly confident that developed-economy central banks will be battling disinflationary, if not deflationary, forces in the years ahead, not inflationary ones. Lower long-term energy prices, despite what’s happening to US electricity prices in the short term, will be a dominant theme in the future, in my view, as will the deflationary impact of the widespread deployment of AI technology and the increasing use of robotics.

### UK

It's worth mentioning that there appears to be an increasing likelihood of a leadership challenge to Kier Starmer this year. What remained of his political credibility at the start of the year seems to be draining away with every U-turn and political misstep. If a challenge does emerge, there will be repercussions for financial markets depending on who emerges as the most likely candidate to either challenge or succeed him.

I am not a student of the Labour party’s internal politics, but the fact that no Labour prime minister has been ousted by the party nor faced a formal leadership challenge (unlike the Tories) means that there is a high bar to removing him. Nevertheless, the likelihood of a challenge has increased.

## Economics

### US

Financial markets are catching up on a lot of data from the US economy following the prolonged government shutdown last year. This week, perhaps the most important announcement was the US inflation data release. Although the headline rate at 2.7% in December was in line with expectations, a number of analysts and commentators had been suggesting that the data in November, which showed a surprising fall in inflation, was a product of the shutdown and had under-recorded the true rate, and so this community was expecting an increase in December. The outturn seems to confirm that those fears were misplaced. Indeed, the core rate, at 2.6%, was better than expectations.

In summary, towards the end of 2025, US growth accelerated, and inflation fell—good news for the economy and financial markets.

### UK

UK GDP data for November was released this week, and once again, the perma-bears on the economy, who appear to be in an overwhelming majority, will be very disappointed. This perhaps explains the lack of coverage of encouraging and better-than-expected data.

The details showed that the UK economy expanded by 0.3% in November, after contracting by 0.1% in October. The ONS also reported that the September data, which showed a contraction of 0.1%, had been revised to a 0.1% expansion. What this means for the provisional full year outcome will await the December data, but my guess is that the number will be very close to the 1.5% I was hoping for, which, although below my prediction from January last year, is substantially better than the 1% OBR forecast from the Spring statement released on the 26th of March.

This data release gives me further encouragement that my apparently ludicrously optimistic growth expectation for this year of 2% will be achieved. For the record, the OBR is forecasting growth of 1.4%, and the Bank of England is forecasting 1.2%. Consensus is somewhere close to the Bank’s number, I believe. Alongside my relatively upbeat growth forecast, I am also pretty confident that inflation will fall significantly this year. I expect a number close to 2% for April, and I bet the MPC will find it increasingly hard to hide behind its customary academic mumbo jumbo that has kept rates too high in the UK throughout 2025. My hope is that they will cut in February, once more in May after the inflation report, and possibly once or twice again in the second half of the year, which would take base rates to 3%, or 2.75% if we get two. To complete the picture, these cuts, just as the four reductions in 2025 did, will encourage less saving and more spending in the household sector, which will, in turn, drive faster growth. It really is that simple.

As an aside, if the Labour government was at all interested in liberating higher economic growth, it could, indeed should, overnight abolish stamp duty (on housing transactions). In total, this tax raises about £5bn (excluding the tax paid on additional dwellings). This would, I would like to bet, be generated rather rapidly by the additional tax (VAT) on spending associated with the additional transactions that would result from this abolition.

Here are some numbers to conjure with. The UK economy, in round numbers, has a GDP of £3 trillion. Household spending is about two-thirds of that, say £2trn. The tax share of GDP is about 40%. So if the abolition of stamp duty (on housing transactions, excluding additional homes) lifted GDP by just 0.4%, it would pay for itself immediately. My guess is that it would liberate far more GDP than that, given how constrained the housing market has been for many years.

Another way to look at it: between 1998 and 2007, there were about 1.75 million housing transactions per year. The ten-year average to 2019 was about 1.0mn. In other words, 750,000 per year lower for ten years, or 7.5 million missing transactions.

Finally, for those worried about affordability, the following chart might be of interest. What it shows is that real house prices are about the same as they were nearly twenty years ago. This is the longest period of real house price stagnation in over fifty years.

### China

China released its latest trade data earlier this week. In 2025, China’s trade surplus amounted to a record $1.2trn, following a 6.6% increase in exports in December. (YOY) This giant trade surplus is yet another indicator of China’s underlying economic imbalances. It will likely lead to yet more trade friction and not just with the US, to whom exports fell 20% following last year’s trade and tariff friction. In particular, it is the EU that should be most alarmed by this growing imbalance, not least because of its ongoing impact on the EU manufacturing industry.

## Markets

In general, developed-economy financial markets have responded positively to the better-than-expected economic data highlighted above. In equity land, the Nikkei up 7.5% and the Hang Seng up just over 5% are leading the way, followed by the Euro Stoxx (+ 4.3%) and the UK FTSE 100 (+ 3.1%). The S&P is up 1.8%.

Government bonds have performed reasonably well, with the UK gilt market leading the way; yields have fallen to below 4.4%, having been as high as 4.6% as recently as the end of November.

Clearly, it is way too early in the year to draw any meaningful conclusions from this brief period, but I will say that, despite the geopolitical headwinds posed by tensions in Venezuela and Iran, investors appear to be focusing on the data rather than the politics.

In the tech space, TSMC's recent very upbeat trading statement has once again beaten expectations and reinvigorated sentiment in the AI and semiconductor sectors. In particular, its guidance to capex spend of $56bn, up as much as 37% on last year’s figure, was a standout and has led to a robust increase in ASML's share price, whose largest customer is TSMC.

This announcement followed a similar one from SK Hynix earlier in the week, which said that it planned to spend just under $13bn on capex this year on a new advanced chip packaging facility to be based in S Korea. It also said it expected demand for its high-bandwidth memory chips (SK is the world’s leading supplier of these chips to Nvidia) to increase by an average of 33% pa from 2025 through to 2030.

In the US, encouraging trading updates from the big Wall Street banks have reassured the market and in the UK, solid trading updates from Persimmon and Taylor Wimpey in particular have banished concerns that the housing market finished 2025 on a downbeat note. In fact, housebuilder Boxing Day marketing campaigns saw enquiry levels significantly above expectations, as reflected in a much better-than-expected RICS survey published today.

Finally, the annual JPMorgan Healthcare conference finished today in San Francisco. The mood at the conference was generally upbeat, apparently reflecting, in part, the already visible increase in dealmaking in the sector. The scale of dealmaking doubled in 2025 and is expected to increase again this year. My sense is that the long-awaited recovery in the biotech sector, which started last year, will continue in 2026.

## What to look out for next week

I would expect the pace of geopolitical developments to continue next week, and I suspect that, despite apparent humanitarian “concessions” announced in Iran, some form of US intervention is almost inevitable. If so, that is likely to affect oil prices, but I wouldn’t expect it to last.

Elsewhere in economics and financial markets, we will get important labour market and inflation data from the UK, which will have a bearing on the MPC’s interest rate decision in February, as well as GDP, inflation and labour market data from the US.

It will also be another busy week of year-end trading statements from retailers and a range of building material and leisure companies I follow.