UK small-caps outlook could deliver double-digit gains if outflows reverse
Outflows threaten a valuation-driven reset in AIM and UK smaller companies, but a re-rating could unlock materially higher returns if domestic money flows rebound.
A prominent UK equity manager argues that the UK smaller company complex is poised for significant upside if the tide of investor outflows turns. The assessment rests on relative valuations that look inexpensive by historical standards, with AIM trading on about six times EV/EBITDA and small-caps around five times. The thesis is that a re-rating could crystallise substantial upside as earnings growth momentum and multiple expansion align, particularly if pension reform measures steer domestic capital back into the sector. The timing of any policy action remains uncertain, but the signal from the policy frontier could be a decisive near-term driver.
Market observers emphasise that any revival in domestic allocations would need to contend with macro volatility and regime shifts in interest rates. A stronger pound or stabilising inflation could be supportive for UK SMID names, but only if accompanied by improving balance sheets and a clearer path to dividend sustainability. Analysts note that UK smaller companies historically exhibit high sensitivity to rates and fiscal policy, which complicates the path to a clean re-rating. Yet the potential for catch-up gains remains, given the historically muted outflows and the relative price discipline shown by many AIM constituents.
Industry voices also highlight corporate activity as a potential enabler of upside. Mergers, acquisitions and buybacks could lift sentiment and re-rate the sector, particularly among companies with robust balance sheets and clear free cash flow profiles. Investors should, however, guard against a renewed energy-price shock or a renewed spike in financing costs, which could compress earnings multiples and weigh on the upside. The combination of cheap valuations and a possible inflow of domestic capital makes the story appealing, but timing remains contingent on policy moves and investor appetite for UK risk assets.
In summary, the UK small-cap universe looks attractively priced relative to peers, with a potential catalyst in pension reform that could draw domestic funds back into the market. If outflows reverse and policy measures land in a supportive form, the sector could deliver material upside over the medium term. Still, the risk of policy missteps and external shocks looms, meaning investors should approach with a disciplined, stock-specific lens and a conservative hedging stance where appropriate.
Market fragility: 40 per cent odds of a sharp market collapse within 12 months
Hedging in stressed markets and quality-focused, nimble investing could mitigate downside risks amid political, monetary and policy tensions, say two fund managers.
A cautionary assessment from a UK equity manager raises the spectre of a sharp market break within the next year. He does not offer a precise forecast, but assigns a 40 per cent probability to a damaging dislocation driven by the interaction of political dynamics, monetary policy and market structure. The analysis reflects concerns about crowded trades and the risk of complacency as investors seek shelter in perceived havens that may not live up to expectations when volatility spikes.
The argument for hedging and a focus on high-quality, adaptable strategies rests on the premise that traditional playbooks could break down if rates remain structurally misaligned with inflation or if fiscal stimulus interacts with fragile market dynamics. The case for liquid hedges and rule-based risk controls is therefore strengthened, especially in portfolios with high exposure to crowded trades or leverage. Observers note that even traditional hedges such as gold have shown cyclical fragility in past stress episodes, underscoring the need for disciplined risk management.
Volatility metrics and hedging discipline will be the near-term watchpoints. Fund managers emphasise watching for shifts in the VIX, option-implied volatility, and other market signals that could trigger defensive adjustments in exposure and hedging rules. The commentary suggests that while the macro backdrop remains uncertain, a measured, risk-controlled stance could be essential for weathering a potential discontinuity in asset prices.
JPM UK Equity Core Active UCITS ETF leads among three-year UK funds
Active UK ETFs and ESG-screened strategies show divergent performance, with the JPM fund leading in three-year returns while ESG-labeled variants lag in 2025.
The three-year performance sweep for UK funds launched in 2022 has highlighted the JPM UK Equity Core Active UCITS ETF as a standout performer, delivering almost 48 per cent total return from 2023 to 2025 across a diversified 145-holding portfolio. Major positions included HSBC and AstraZeneca, each around 7.5 per cent of the portfolio, while the ESG-screened version posted a slightly lower return of about 44 per cent over the same window. The success of this active approach is framed against the broader sector trend where ESG-labeled strategies underperformed in the year to 2025.
Analysts observe that the active structure provided flexibility to tilt toward high-conviction ideas, maintaining broad sector exposure to mirror the index while exploiting idiosyncratic stock drivers. The ESG-screened variant, which applied screens and weighting rules, delivered competitive returns but lagged the non-ESG strategy in the latest period. This performance dispersion underscores a broader question about the sustainability of ESG premia in 2025 and the degree to which screening reduces or enhances capture of alpha in a volatile market environment.
Investors are advised to monitor 2026 performance as market dynamics shift. The comparison between active and ESG-screened approaches will likely influence flows and fund selection going into the new year. For those evaluating UK equity tilts, the JPM Core Active ETF demonstrates that active stock selection, when grounded in fundamental conviction and risk controls, can translate into meaningful relative returns, even amid a market backdrop that rewards liquidity and scale.
Deep integration versus tariffs: a pathway to offset tariff losses
A CEPR analysis argues that deep economic integration could fully compensate for the welfare losses from US tariffs, with large gains for East Asian and intra-EU trade, provided non-tariff barriers are reduced.
A CEPR study, translated from a French briefing, expresses that deep preferential trade integration could offset or even exceed the welfare losses from US tariffs. The analysis uses a quantitative model across 74 countries and 25 sectors, contrasting shallow integration (tariff reductions only) with deep integration (tariff reductions plus lowered non-tariff barriers). Findings suggest tariffs reduce export volumes for the United States and its major partners, but deep integration can yield export gains for several regions, notably East Asia through RCEP and intra-EU trade, with more modest gains for other economies.
Key takeaway is that the impact hinges on non-tariff barrier reductions and the breadth of preferential agreements implemented. The deep integration scenario envisions a more efficient trading environment, where the cost of bilateral trade diminishes not just from lower duties but also from streamlined standards, regulatory alignment and smoother administrative processes. The implications extend to policy design, where negotiators may prioritise comprehensive tariff liberalisation paired with barrier reduction to bolster sectoral competitiveness.
Watchpoints include the pace of EU CPTPP alignment, UK alignment with CPTPP or other blocs, and the depth of RCEP commitments. Observers will want to see whether trade policy evolves in a way that sustains overall trade growth and does not fragment the global economy into competing blocs. If deep integration progresses as modelled, the net effect could be more robust international trade than tariff reductions alone would suggest.
Pricing cascades explain inflation spikes in a networked economy
ECB analysis highlights how production networks and state pricing can propagate price shocks, elevating inflation in response to supply constraints, particularly in energy.
An ECB column contends that price dynamics in a networked economy are shaped by production linkages and state-dependent pricing, which can trigger rapid inflation in response to supply shocks. The piece argues that inflation may respond more to supply constraints than to shifts in aggregate demand, underscoring the importance of considering sectoral linkages and network effects in shaping policy responses. The implication for central banks is a call to monitor systemic price linkages beyond headline inflation indicators.
Echoes of this framework appear in the energy domain, where disruptions in one segment of the supply chain can ripple across multiple sectors. The watchlist includes sectoral indicators of pricing, input-output linkages and the robustness of supply chains in energy, manufacturing and consumer goods. Policymakers could be prompted to consider non-traditional levers or targeted support measures to mitigate cascade effects, rather than relying solely on broad monetary stimulus or inflation-targeting steps.
Analysts emphasise the value of early-warning tools that quantify price cascades and sectoral interdependencies. If such indicators begin to signal heightened cascading risk, forecasters and policymakers may need to adjust macroprudential and energy-market interventions accordingly. In short, the narrative invites vigilance for network-linked inflation that could outpace simple demand-side explanations.
Hargreaves Lansdown adds Vanguard Global Small-Cap Index to Wealth Shortlist
A lower-cost, globally diversified small-cap exposure enters HL’s Wealth Shortlist, potentially enhancing long-run diversification and return potential.
Hargreaves Lansdown has added the Vanguard Global Small-Cap Index to its Wealth Shortlist, offering a broad, low-cost route to global small caps. The fund tracks the MSCI World Small Cap index with full physical replication and a fee of around 0.30 per cent, providing exposure to roughly 4,000 stocks. The development represents an accessible option for investors seeking diversification beyond their home market while maintaining a cost-efficient approach to small-cap allocation.
Industry observers will watch for fund flows and tracking error as rebalancing and securities lending arrangements influence costs and performance under this mandate. The addition could alter the appetite for passive and active exposures in the small-cap space, particularly as investors seek to balance growth potential with the typical volatility of smaller companies. The practical takeaway is that low-cost, broad exposure to global small caps may improve long-horizon diversification for many UK-based portfolios.
Analysts caution that tracking risk and currency movements can affect outcomes, especially during periods of rapid dollar strength or weakness. Nevertheless, the seed of a more cost-efficient, globally diversified small-cap sleeve may appeal to discretionary and advised clients alike, seeking to broaden exposure beyond domestic equities.
Russia-India energy trade: Urals discount versus tariff commitments
Indian refiners weigh the appeal of cheap Urals crude against the tariff-related constraints of a US-India deal, with guidance awaited on Russian oil imports.
The market narrative around Urals crude in India reflects a delicate balance between price advantages and policy constraints. Urals is being offered at a widening discount to Brent, around $11 per barrel, as Indian refiners await government guidance on Russian purchases in the context of a US-India trade framework that links tariffs to Russian oil imports. With such a policy crossroads, refiners may pause purchases pending clarity on import guidelines and allowed volumes.
The broader geopolitics of energy flows come into focus as the US-India agreement sets out possible pathways to access alternative crude, including Venezuelan or potentially Iranian crude, subject to policy nuances. Observers stress that the decision will hinge on government guidance and actual import flows once clarity is provided. The near-term implication is a potential shift in Indian refinery sourcing, with sensitivity to tariff terms and the evolving energy diplomacy picture.
Market participants will monitor any official statements on import guidelines and the rate at which Russian crude purchases resume. The dynamic also has implications for risk management, pricing, and refinery strategies in India as it navigates policy expectations and global supply constraints.
LNG market balance in 2026: Eni and IEA signal a ramp in supply
European stocks remain stretched and Asian demand rebounds; a 10 per cent supply rise and >7 per cent global growth point to a shifting LNG balance in 2026.
Eni’s Cristi an Signoretto says LNG will be finely balanced in 2026 as European inventories stay depleted and Asian demand rebounds. He cites a 10 per cent rise in LNG supply this year and IEA projections of global supply growth exceeding 7 per cent, signalling a market moving from tight to balanced. The near-term implication is heightened price volatility for Europe and continued sensitivity to storage levels and seasonal demand.
The commentary aligns with concerns around European storage depletion and the need to refill inventories for the shoulder seasons and next winter. Investors and policymakers will watch European storage trajectories and the pace of new LNG supply coming online, as well as the broader implications for energy security and price dynamics across Asia and Europe. The narrative suggests that the LNG complex is undergoing a transition that could shape policy choices and investment decisions through 2026.
Analysts emphasise that the balance could tilt differently if storage draws persist longer than expected or if new capacity faces commissioning delays. The convergence of European stock levels and Asian demand strength could drive price volatility as the market eyes the pace of supply growth and inventory rebalancing. The overarching theme is a market that remains responsive to structural supply constraints even as new LNG projects come online.
Texas upstream employment rises: resilience in the face of headwinds
Texas energy jobs rise again, underscoring the sector’s resilience amid market headwinds and ongoing permitting and capex considerations.
New data indicate that Texas upstream oil and gas employment rose by 500 in November-December 2025, bringing total upstream employment to 203,400. Total U.S. crude production nears 13.6 million barrels per day with WTI trading around the mid-60s per barrel, reflecting tensions in supply and ongoing robust activity in the Permian Basin. The report emphasises that Texas remains a global energy powerhouse, sustaining high-wage employment even as market pressures tighten.
The industry body also notes logistical and policy factors that could support permitting and investment momentum, including broader federal policy priorities and state-level initiatives. The data point to a continued need for policy clarity on permitting timelines and regulatory certainty to sustain drilling and project development. The resilience of Texas energy jobs underscores the broader energy supply chain’s importance for domestic and international markets.
Analysts caution that the employment picture can swing with oil prices and macro conditions, but the signal remains that activity in Texas is not simply a relic of higher prices. Instead, it reflects an ecosystem with diverse future-facing opportunities, from Permian expansion to midstream and service sector growth. Policy signals on permitting, infrastructure, and labour mobility will help determine whether this momentum can be sustained into 2026.
US crude inventories forecast: Macquarie’s January read
Macquarie strategists forecast a 1.9 million barrel rise in U.S. crude inventories for the week to January 30, with SPR stocks up modestly.
A January snapshot from Macquarie strategists suggests a near-term lift in U.S. crude inventories, contrasting with a prior week’s draw and a fall in domestic demand signals. The forecast notes a large implied domestic supply reduction in prior weeks, with a modest rise in strategic reserves. The near-term implication is potential price weakness in the face of improving supply versus an uncertain demand picture, particularly as winter weather dynamics and import runs evolve.
The EIA weekly petroleum status report will be the definitive test, with traders watching the official numbers for confirmation and any immediate price reactions. The report will also indicate movement in refinery runs, gasoline stocks, and other product inventories that can influence pricing at the margins. Markets will be sensitive to any surprises that could shift the balance of supply and demand in the short term.
Observers stress that inventory trajectories matter for timing risk and price path, particularly given winter demand cycles and geopolitical tensions that could alter crude flows. If inventories continue to build beyond expectations, near-term prices may press lower, but any upside surprise to demand or supply constraints could re-establish upside momentum. The coming data will help calibrate risk in energy-focused portfolios through early 2026.
Congo copper stakes: Glencore to sell 40 per cent stake in Mutanda and Kamoto to US-backed consortium
The sale reinforces US access to critical minerals and signals expanding US-DRC strategic collaboration, with due diligence and regulatory approvals to track toward 2026 closing.
Glencore has entered a non-binding agreement to sell 40 per cent of Mutanda Mining and Kamoto Copper Company to the Orion Critical Mineral Consortium for an enterprise value of about $9 billion. The deal is framed as a step in strengthening US-DRC strategic cooperation and expanding Western access to critical minerals. If the transaction progresses to binding terms, it could have ripple effects on supply chains and geopolitical alignments, with potential implications for downstream processing and refining arrangements.
Regulatory approvals and due diligence will shape the timeline for a possible closing in 2026. Observers will monitor governance considerations, non-executive director appointments, and the evolution of commercial terms that could affect project economics and regional investments. The scale of the deal underlines the strategic importance of Congo’s copper assets to Western supply resilience and the broader policy push to diversify away from single-sourcing risk.
Industry commentary highlights the central role of the Orion consortium in accelerating Western access to copper ore and concentrates, and to eventual materials manufacturing within a nearshore footprint. The transaction would situate Congolese copper assets within a North American-led value chain, potentially unlocking new collaboration models and beneficiation opportunities. While the deal remains non-binding at this stage, the market will be watching for the next milestones as due diligence proceeds.
JPMorgan sees gold price reaching 6300 by year-end
JPMorgan maintains a bullish outlook on gold with a year-end target of 6300 per ounce, citing central bank demand and real-asset outperformance.
JPMorgan has reaffirmed its bullish stance on gold, projecting a year-end price of $6,300 an ounce, with the potential to reach higher levels later in the decade. The bank emphasises sustained central bank demand and the relative resilience of real assets, suggesting that gold could outperform in uncertain policy environments. The caution remains that gold’s performance could be subject to shifts in real rates, inflation expectations, and the trajectory of other risk assets.
Analysts note a long-run context in which gold remains a cornerstone of diversified portfolios, particularly as a hedge against policy shifts and inflation surprises. The price path to $8,000 later this decade remains a scenario rather than a baseline, dependent on macro developments and the rate of real yield movements. Investors should monitor central bank purchases, geopolitical risk, and the relative performance of gold miners to gauge broader opportunities in the precious metals complex.
Market price paths will hinge on liquidity conditions and the direction of monetary policy. If inflation remains entrenched or if policy measures become more restrictive, gold could attract renewed interest as a defensive asset. Conversely, a sustained improvement in growth and risk-on sentiment could temper gold’s appeal. The year-end target signals a continued allocation to gold within diversified portfolios, subject to evolving macro signals.
Eldorado to buy Foran Mining for 2.8 billion amid copper push
Canadian copper ambitions rise as Eldorado Gold agrees to acquire Foran Mining, expanding near-term growth assets and copper exposure.
Eldorado Gold has entered into an agreement to acquire Foran Mining for approximately C$3.8 billion, a deal that broadens Eldorado’s copper footprint and adds near-term growth assets such as McIlvenna Bay. The merged group targets roughly 900,000 gold-equivalent ounces in 2027, with a Vancouver-based headquarters and a closing targeted for the second quarter of 2026. The transaction sits within a broader Copper push driven by electrification and the need to grow supply to meet rising demand.
Shareholder votes and regulatory approvals will determine the pace of the deal, with April 14, 2026, a key date for a vote. The transaction’s implied synergies and cost discipline could unlock stronger cash flow and scale advantages, potentially shifting the competitive landscape for Canadian copper developers. Analysts will be watching for capital allocation plans, integration milestones, and the impact on Eldorado’s balance sheet and debt metrics.
Industry observers emphasise copper’s centrality to the energy transition and the broader global supply chain. The deal aligns with a trend toward consolidation in the copper space as major producers seek to de-risk exposure and accelerate project pipelines. If completed, the combination would place Eldorado and Foran among the more prominent copper diversified producers, potentially influencing project development timelines and producer responses to price cycles.
Glencore hints at 2027 closure for Horne smelter absent deal
Regulatory climate risk and emissions targets drive strategic reassessment for the CCR Montreal refinery and related assets.
Glencore has indicated that without a long-term viability agreement with Quebec, it would pause almost C$1 billion of emissions-reduction investments at the Horne smelter over five years, with up to C$300 million earmarked for emissions cuts. The move could prompt a re-evaluation of medium-term investment in the CCR Montreal refinery and related capacity, highlighting regulatory and policy risk in Canada’s copper supply chain. The decision underscores the intersection of environmental commitments and industrial economics in the mining sector.
Government frameworks and emission targets will be watched as the sector seeks to maintain competitiveness while meeting climate objectives. A renewed negotiation or a new deal could influence the region’s production outlook and employment prospects, as well as the broader strategic implications for Canada’s copper supply chain. The scenario raises questions about how regulators and industry players balance environmental ambitions with the need to maintain domestic refining and manufacturing capability.
Industry watchers will assess how Quebec’s policy environment evolves, what form any viability agreement takes, and how such arrangements could shape investment decisions across Canada’s mining and metallurgical sectors. The Horne plan serves as a bellwether for regulatory risk and its potential to influence asset allocation and project pipelines in the near term.
Skeena clears final permit for Eskay Creek mine restart
Regulatory approvals advance Skeena’s Eskay Creek restart, with a 2027 timeline and material regional revenue implications.
Skeena Resources has secured the final Environmental Management Act permit for the Eskay Creek gold-silver project, following Mines Act and Tahltan Central Government approvals. Restart is slated for the second quarter of 2027, with capex around C$713 million and projected provincial revenues of about C$1.2 billion. Eskay Creek, once a high-grade asset, would lift regional employment and fiscal upside while requiring ongoing Indigenous and regulatory collaboration.
Construction timelines will be a focus, along with ongoing environmental and community agreements. The project’s restart could reshape regional mining dynamics, with potential knock-on effects for supplier networks, infrastructure planning, and local employment. Stakeholders will look for milestones on permitting conditions, environmental commitments and engagement with Tahltan governance structures.
Industry participants emphasise the importance of navigated community partnerships and the quality of social licence to operate. The Eskay Creek restart sits within a broader Canadian mining revival narrative, where diversification of asset bases and the balance between heritage protections and new development are tested. The timing and execution of the build will matter for provincial revenue, local jobs, and supply-chain momentum in British Columbia.
Regis revives McPhillamys after gold rally, dam rethink
Heritage and permitting dynamics shape Regis Resources' McPhillamys project as it advances a tailings design revision amid a strong gold backdrop.
Regis Resources is seeking approval for an alternative tailings storage design at the McPhillamys project after a heritage ruling deemed the original plan unviable. The site hosts an estimated 2.26 million ounces of gold, with significant potential to capitalise on a gold rally if permitting proceeds smoothly. A redesigned tailings solution and water pipeline are central to unlocking near-term value and advancing project development.
Environmental approvals and heritage rulings will be pivotal in setting the project’s trajectory. The redesign raises questions about the compatibility of heritage conservation with mining expansion and the regulatory process’s efficiency. If the project secures the necessary approvals, Regis could move closer to realising substantial revenue potential and adding to a copper-gold growth story that is increasingly tied to commodity price dynamics.
Stakeholders will monitor the new tailings plan, water infrastructure, and any associated community engagement agreements. The decision could influence the company’s longer-term growth strategy and capital allocation priorities, as well as broader policy discussions around permitting timelines for greenfield mining assets. The McPhillamys outcome may thus become a touchstone for similar developments in Australia’s gold sector.
Aqua Metals, American Battery Factory plan recycling partnership
US recycling and battery materials collaboration targets domestic processing and end-market recyclability by 2028.
Aqua Metals and American Battery Factory have announced a non-binding Memorandum of Understanding to explore co-locating a lithium-ion battery recycling facility in Tucson, Arizona. The plan would recycle manufacturing scrap and return battery-grade lithium carbonate to ABF, with a target of up to 10,000 tonnes of materials annually and commercial operations slated for 2028. Aqua Metals’ NVRO process claims high recovery rates and potential emissions reductions, positioning the venture as a cornerstone of a more self-sufficient US battery materials supply chain.
Permitting, site development, and funding commitments will determine the project’s pace. The collaboration aligns with broader policy aims to de-risk domestic battery supply chains and reduce reliance on overseas processing. If successful, the venture could serve as a model for integrated recycling within battery cell manufacturing ecosystems, potentially expanding to other sites and partner configurations as demand scales.
Investors will watch for milestones related to MOU binding terms, site permitting approvals, and the progression toward the 2028 start date. The initiative sits at the intersection of materials science, manufacturing, and policy support for domestic critical minerals, illustrating how recycling and circular economy principles could reshape the energy transition. The broader implication is a potential uplift in domestic processing capacity for battery inputs as part of a more resilient supply framework.
Rasied: Jam-packed field for the rest
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