January was kind to the major asset classes, marking a strong rebound from a rough month in December. Across-the-board gains last month suggest the year is on a positive trajectory for markets. But the good news became irrelevant in a heartbeat after President Trump announced sweeping tariffs on Canada, Mexico and China – news that threatens to lift inflation, slow growth, upend the global trading system and roil markets.
One can only guess what the numbers for February will look like. For now, the start of what appears to be a global trade war ensures that uncertainty has spiked. In what may be a new world order for the global trading system, investors will need to adjust. “The market needs to structurally and significantly reprice the trade-war risk premium,” says George Saravelos, head of foreign-exchange research at Deutsche Bank.
Meanwhile, let’s review what may be a final snapshot of the old-world order through the prism of the major asset classes, based on a set of ETFs.
Last month’s top performer: foreign stock markets in developed nations ex-US (VEA), which rose 4.4%. All the main slices of global markets rose last month – the first month of across-the-board winners in nearly three years.
The Global Market Index (GMI) recovered in January after sinking in December, rising a strong 2.8% for 2025’s start. GMI is an unmanaged benchmark (maintained by CapitalSpectator.com) that holds all the major asset classes (except cash) in market-value weights via ETFs and represents a competitive benchmark for multi-asset-class portfolios.
Comparing GMI with US stocks (VTI) and bonds (BND) over the trailing one-year window continues to reflect a middling performance.
The rear-view mirror should always be viewed cautiously, especially for short-term windows. The caveat resonates far and wide as the world grapples with what a US-led tariff war means for markets, economies and beyond.
“Markets may now need to take the rest of Trump’s tariff agenda literally rather than just seriously,” writes Tobin Marcus, Wolfe Research head of U.S. policy and politics, in a research note. “If this new level of seriousness gets priced in suddenly, Monday could be a rough day for markets.”