Headline inflation has cooled, but the last mile rarely runs in a straight line. US CPI slowed to 2.4% y/y in January 2026, down from 2.7% in December 2025; core CPI eased to 2.5% from 2.6%. These gains remain above target because the parts now doing the heavy lifting move slowly. The next phase is less about goods and more about services, wages, and supply frictions, which means prices tend to drift lower in steps rather than drop quickly.
In foreign exchange, the carry trade is a simple idea that can add steady returns when markets are calm. You borrow in a currency with a low interest rate and hold a currency with a higher rate, earning the difference while you own the position. When interest rates are predictable and markets aren’t jumping around, that interest “carry” can be a meaningful source of return. In those periods, money often flows from countries with very cheap borrowing to those that pay more, which is why carry can influence day‑to‑day FX moves.
Some market moments feel louder than others; not because of headlines alone, but because several signals arrive at once and prompt investors to rethink the bigger picture. The last week of January and the first week of February was one of those moments.
Japanese equities have attracted attention, with the Nikkei 225 returning to levels last seen in the late 1980s and the TOPIX moving higher. This rebound has prompted investors to revisit a market associated with slow growth. The tone around Japan has changed, and not just at the margin. The key question now is whether this strength reflects improvement in how companies are run, or whether it is being flattered by a weaker yen and overseas investors positioning for gains.
Europe has long traded at a valuation discount to the US, visible across simple headline metrics such as P/E and P/B. What is more striking is that, even in 2026 and even after periods of strong performance in European indices, the discount remains wide enough to keep resurfacing in allocation discussions. So, the question is not whether Europe is “cheap” in relative terms, but whether the discount is beginning to look excessive in relation to the region’s earnings outlook and balance-sheet resilience, or whether it still reflects deeper, structural differences that are unlikely to disappear.
