Market Commentary 1st Quarter 2026
The first quarter of 2026 was marked by an unusually high concentration of trade-related and geopolitical events, which had a significant impact on the global economy and capital markets. At the very beginning of the year, the U.S. military operation in Venezuela, during which head of state Nicolás Maduro was arrested and transferred to the United States, marked a geopolitical turning point. As the quarter progressed, the political backdrop remained tense and ultimately culminated in an unpredictable escalation in the Middle East.
From a macroeconomic perspective, signs of a slowdown in the United States became increasingly evident. The labor market cooled more sharply than expected, with the unemployment rate rising to 4.4%. Companies grew more cautious in their hiring decisions, reflecting both uncertainties surrounding tariffs and ongoing developments in artificial intelligence. At the same time, trade policy remained highly unpredictable: announcements of new tariffs were reversed at short notice, existing tariffs were struck down by the courts and subsequently reintroduced under a different legal basis. For companies, this continued to result in low planning certainty, weighing on investment activity and overall economic momentum. Most recently, annualized GDP growth for the fourth quarter of 2025 was revised down from 1.4% to 0.5%.
In the euro area, GDP grew by 1.3% year-on-year in 2025, with Spain and Poland standing out in particular as key growth drivers. Switzerland also managed to post full-year growth of 1.4%, despite a weak third quarter. Private consumption and investment activity largely offset the continued weakness in export momentum. It is also worth noting that the industrial sector, which had previously been contracting, returned to moderate growth at the start of the new year in several European countries for the first time in months. Labor markets remained resilient, with unemployment in the euro area close to historic lows.
In Asia, China reported GDP growth of 5.0% for 2025, although momentum weakened over the course of the year, with the final quarter recording the weakest growth in three years. Weak domestic demand and declining investment, particularly in the real estate sector, continued to constrain economic activity.
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