Market Report: US and UK hit record highs but geopolitical discord mutes market open
Emma Wall, chief investment strategist, Hargreaves Lansdown: “US and UK stock markets hit record highs yesterday – though the FTSE has opened down today as geopolitical concerns bubble. Oil majors and defence stocks, buoyed by the US operation in Venezuela on Monday, helped boost the FTSE 100 and the S&P 500 markets – with the FTSE 100 posting its best day in six months.
This morning paints a more muted picture, as the dust settles and expectations on tailwinds clarify. The market is additionally digesting alarmist threats from the White House overnight – with US President, Donald Trump, emboldened by his success in Venezuela now setting his sights on Greenland. Time will tell if this is just rhetoric, but today’s political focus will be a search for certainty among Europe and NATO members as to what this means for global discord.
Asia markets are down today after a strong start to the year, and European markets have opened down too – including the FTSE 100. Some of this will be profit taking, Asian markets had benefited from their best ever start to a year and UK and European stocks have had strong momentum. Gold and silver – both of which hit new record highs at the end of last year – have also fallen, having started the week strong following Monday’s events.
Trump’s erratic approach to tariffs and global diplomacy, and the threat of Russia having its assets seized by global players supportive of Ukraine, has made gold a more attractive neutral reserve for many global central banks. Goldman Sachs estimates that central banks will target around 20% of reserves in the precious metal, and China is currently at around 8%, which – alongside continued geopolitical uncertainty – should prop up the gold price, though we do not expect the returns of 2024 and 2025 to follow this year.
Following the US operation in Venezuela on Monday, HL clients bought into oil and gas and defence stocks in greater volumes than the previous month average. Oil and gas buys were four times higher on Monday 5th compared to the average trading day in December 2025. While it is true that oil majors saw share prices benefit – boosting the wider market, analysts are cautious on how quickly these companies may see the benefits of increased supply. It will take significant investment – millions if not billions of dollars – which is a dicey bet to make in a country that still faces significant political uncertainty. President Trump’s comments overnight that the US would primarily benefit from supply – with 50 million barrels expected to be bound for America – have muted expectations for both the oil price, which has fallen, and UK listed BP and Shell, both down around 2% in open trading.
Aerospace and defence trades were also up on Monday 5th on the HL platform, three times higher compared to the average trading day in December 2025. Uplift in trading levels was primarily in Rolls Royce and BAE Systems – though it is worth noting that both of these names have been popular with investors over the past year, following strong performance through 2025. Defence stocks benefited from the government policy to commit a larger proportion of GDP on military spending following pressure from the US government over the war in Ukraine. A pledge in March 2025 led to the largest one-day rally for the sector since 2020 but it ended the year softer. The military operation has seen the sector rally on global demand however, with the sector looking fair-to-fully valued, investors should be cautious about upside expectations.”