Volatility Fades As Markets Refocus On Fundamentals

By Paul Eitelman of Russell Investments
Saturday, January 24, 2026 9:39 AM EST


Video Length: 00:03:18


Markets rebound as tariff fears ease

It was a volatile week in financial markets, largely driven by geopolitical developments. Last weekend, the U.S. administration proposed new tariffs on several European countries linked to tensions around Greenland. However, following discussions at the World Economic Forum in Davos, those tariffs were ultimately suspended, helping to calm investor nerves.

Markets reacted swiftly to the shifting headlines. At its low point earlier in the week, the S&P 500 was down nearly 2% before rebounding sharply and ending the week close to all-time highs. In our view, the speed of the recovery underscores that the underlying fundamentals—both for the global business cycle and corporate earnings—remain sound.


Signs of stability in U.S. labor market

Developments related to the U.S. business cycle were also in focus. First, U.S. real GDP (gross domestic product) growth for the third quarter was revised higher to an annualized pace of 4.4%, a notably strong number by historical standards.

More important, however, were fresh signals from the labor market. The U.S. has been operating in a “low-hire, low-fire” environment for several months, but this week both initial and continuing jobless claims surprised to the downside. This suggests labor market conditions may be stabilizing, which would be a positive sign for the broader economy.

We see these trends as consistent with our expectation of a healthy U.S. economy through 2026, with the potential for growth to reaccelerate over the coming quarters.


Japanese bond yields in focus

Japan has also remained in the spotlight. Expectations of additional fiscal stimulus have pushed long-term Japanese government bond yields higher, with yields reaching their highest levels since the late 1990s earlier this week.

By Thursday’s close, however, the situation appeared to stabilize after comments from Japan’s finance minister saying the government is taking active steps to stabilize the bond market. That reassurance helped to put a floor under sentiment—not only in Japan, but across global fixed-income markets more broadly.

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Disclosure: These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions ...

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