15/02/26 Global Market Update: Steady Rates, Easing Inflation

The opening 6 weeks of 2026 brought encouraging signals: inflation continued to ease across major economies, central banks held policy steady with growing confidence in disinflation trends, and equity markets remained resilient despite pockets of volatility. In the US, headline inflation fell to 2.4% in January, below expectations, while Germany's inflation edged to 2.1% and the UK saw gradual cooling. For expats in Germany, this environment reinforces the importance of staying invested with discipline rather than reacting to short-term noise. The sections below review each major region and asset class, translating the latest data into calm, practical guidance for long-term financial planning.

United States: Inflation Cools, Fed Stays Patient 

US inflation came in slightly lower than expected in January at 2.4%, mainly because petrol and used car prices fell. Underlying inflation (excluding food and energy) stayed at 2.5%, exactly as forecasters expected. The labour market is still holding up well, with around 130,000 jobs added in January and unemployment edging down to 4.3%.

This steady backdrop strengthens the case for the Fed to start cutting interest rates later in 2026, and futures markets now put the chances of a June cut at roughly 80%. The Fed remains data-dependent, emphasising that policy is 'well positioned' to guide inflation back to target while supporting employment. Corporate earnings have been generally solid, though trade policy uncertainty and fiscal debates remain in the background. 

What this means for long-term investors: Easing inflation and a resilient job market support staying steady with US assets in diversified portfolios. For expats in Germany, short-term rate speculation shouldn't derail your carefully constructed long-term strategies. 

United Kingdom: Narrow Hold, March Cut Likely 

The Bank of England kept its key interest rate at 3.75% in early February. The Monetary Policy Committee (MPC) vote was close at 5-4, showing growing confidence that inflation is cooling. Four members wanted an immediate cut of 0.25 percentage points (25 basis points). Markets now see about a 50% chance of a March cut, with two cuts expected through the rest of 2026. 

UK inflation is expected to fall back toward the 2% target from April, aided by energy price measures introduced in the 2025 budget. Economic growth remains subdued, with increasing slack in the labour market and cautious business investment.

The residential property market shows early signs of stabilisation, though fiscal constraints and limited government spending after years of high deficit continue to shape the outlook. 

What this means for long-term investors: Expats with UK pensions or property should view this as an opportune moment to reassess retirement planning and tax efficiency. With rates likely to drift lower and inflation cooling, UK assets can remain a stable component of diversified portfolios, particularly for those with cross-border pension and property exposure. 

Eurozone and Germany: Inflation Near Target, Policy Stable 

The ECB held its deposit rate at 2.0% in early February, reaffirming that current policy is restrictive enough to guide inflation back to its 2% target. Germany's inflation rate ticked up to 2.1% in January from 1.8% in December, driven by higher food and industrial goods prices, though energy costs continued to decline and services inflation eased. The overall picture remains close to target, supporting the ECB's steady stance.

Industrial activity across the eurozone remains mixed, with manufacturers adjusting to weaker global trade and higher financing costs, but there are tentative signs that the worst of the slowdown may be behind Germany as fiscal measures and infrastructure investment feed through. Debates continue over allocating fiscal space to defence, green investment, and social spending amid evolving security concerns. 

What this means for long-term investors: For expats based in Germany, inflation near target and stable ECB policy support a measured, euro-denominated core in portfolios. Staying invested in quality assets rather than holding excessive cash remains sensible. 

China & APAC: Growth Steady, Domestic Demand Remains Soft 

China ended 2025 meeting its full-year growth target of around 5%, with Q4 GDP expanding 4.5% year-on-year, the slowest pace in nearly three years. Growth forecasts for 2026 range from 4.4% to 4.8%, with Goldman Sachs projecting above-consensus 4.8% supported by stronger exports and policy stimulus, while the World Bank and IMF project 4.4-4.5%. The pattern remains familiar: exports and manufacturing contribute positively, while domestic consumption and the property sector remain subdued.  

Beijing is using targeted stimulus to support key industries while managing financial risks. Elsewhere in Asia, India, ASEAN countries, and parts of the Middle East continue benefiting from young populations, infrastructure investment, and companies shifting supply chains away from China, though growth is easing slightly across the region. 

What this means for long-term investors: China remains an important but complex component of global portfolios. For expats, especially more cautious investors, direct exposure is best kept modest and accessed via diversified funds. A thoughtful macro strategy that balances China's importance with its risks is preferable to either ignoring it or overcommitting. 

Emerging Markets: Growth Resilient, Selective Opportunities 

The global market update for emerging markets continue to outpace developed economies, with growth projected around 3.9-4.0% in 2026, up slightly from 2025. Key drivers include resilient exports, infrastructure investment, and demographic tailwinds in India, ASEAN, and parts of Latin America. Inflation is easing across most emerging markets, projected to fall from 4.2% in 2025 to around 3.5% in 2026, allowing several central banks to cut rates.  

However, economic dispersion remains high: some regions face elevated debt, fiscal consolidation challenges, and currency volatility risks. Sovereign bond valuations look stretched despite solid fundamentals, with spreads too tight and mean-reversion risks growing. Record Eurobond issuance of around $260 billion is expected, led by Turkey, Indonesia, Brazil, South Africa, and Egypt facing the largest refinancing needs. 

What this means for long-term investors: Emerging markets offer growth potential but require careful selection and risk management. For expats, selective exposure tailored to risk tolerance and time horizon is essential. Diversified EM funds can provide exposure without concentrating risk in any single country or theme. 

Asset News: Equities, Bonds, Property, Commodities 

Equities: 

• US and European equities remained resilient in early 2026, supported by cooling inflation, steady earnings, and expectations of gradual monetary easing. 

• Technology and high-quality growth sectors maintained momentum, while cyclical sectors responded to evolving trade and commodity dynamics. 

Bonds: 

• Sovereign yields fell modestly as investors priced in higher probability of central bank rate cuts later in 2026. 

• Ten-year US Treasury yields dropped around 20 basis points in mid-February, the largest weekly decline since August, following softer inflation data. 

• Investment-grade credit markets remained open, with spreads reflecting a cautious but stable environment. 

Property (Germany): 

• German residential property markets continue stabilising after adjustment to higher rates, supported by tight housing supply and steady demand. 

• Commercial real estate remains challenged, particularly offices and some retail segments, as financing costs and work patterns evolve. 

Commodities (gold and oil): 

• Gold surged to new highs in late January, fuelled by dollar weakness, flight from sovereign bonds, and persistent geopolitical tensions. 

• However, extreme volatility hit precious metals at month-end, with silver tumbling 26% on 30 January amid unwinding of speculative positions. 

• Oil prices remained range-bound, influenced by OPEC+ supply discipline and softer demand expectations as global trade moderates. 

What this means for long-term investors: A diversified mix of global equities, quality bonds, and property can help navigate shifting market conditions. For expats in Germany, pairing these portfolios with longer-term wealth building structures is recommended for greater resilience over time. 

Global Headlines: What You Might See in the News 

Key news this month: 

• US inflation falls to 2.4% in January, below forecasts, boosting rate cut expectations. 

• Bank of England's narrow 5-4 vote signals growing confidence in disinflation, March cut likely. 

• Germany's inflation edges to 2.1%, remains close to ECB's 2% target. 

• China's Q4 2025 growth at 4.5%, slowest in nearly three years, as domestic demand stays soft. 

• Gold hits new highs before extreme volatility triggers corrections in precious metals. 

These headlines reflect a world transitioning from crisis management toward more normal, if uneven, economic cycles. 

What this means for long-term investors: News cycles move quickly, but effective financial planning operates on a much longer timeframe. Rather than reacting to headlines, it's more productive to ensure your expat financial planning still aligns with your unique circumstances, risk tolerance, and long-term financial goals. 

Global Market Update: Looking Ahead with Confidence 

As February unfolds, global markets show cautious normalisation: inflation is easing, growth remains positive but moderate, and central banks are gaining confidence in disinflation trends. For expats in Germany, this is an ideal time to align your pensions, investments, and protections with steady, long-term growth. While markets shift, the key is keeping your financial course clear, consistent, and personalised.  

Book a free consultation to review your expat plan; helping you protect, preserve, and grow wealth for the future. Explore our services or contact us for a calm, no-pressure discussion. 

This commentary is intended for informational purposes only and does not constitute financial advice.