Market Overview
Amid bouts of spiking volatility, equity markets around the world rose in January, as investors juggled concerns about geopolitical tensions, uncertainty about the future path of global interest rates, and the results of a new earnings season.
The twists and turns in U.S. trade policy that at times roiled markets in 2025 re-emerged during January. News that the U.S. had threatened to impose additional tariffs on eight of its European allies in retaliation for their resistance to the U.S.’s attempts to assert dominion over Greenland stoked concerns of a trade war between the U.S. and the European Union and triggered a steep market sell-off. The U.S.’s announcement the next day that it had reached the framework of a deal over Greenland and thus would not impose the additional import taxes on those European countries sparked a strong relief rally across global stock markets.
The interest-rate policy path of the Federal Reserve (Fed) kept investors focused on the U.S. during the month. As expected, the Fed held interest rates steady at its policy meeting in January after three consecutive cuts late last year, citing a strong domestic economy, tentative signs of stabilization in the labour market after weakening last year, and abating risks from inflation. While the Fed did not say when it would adjust its monetary policy again or what would prompt it to do so, it did play down the possibility that its next action would be to raise rates instead of lowering them. Notably, news on the last day of the month that a critic of the Fed had been nominated to replace Jerome Powell as Chair when his term expires in May received a muted response from markets, suggesting that investors expected the Fed to keep interest rates elevated in the near term despite political pressure to lower them. The Fed’s policy meeting in June is the earliest that Fed-funds futures traders have priced in a greater than 50% chance that the U.S. central bank would lower rates, according to the CME’s FedWatch tool. The yield on the benchmark 10-year U.S. Treasury note ended January at 4.24%, 7 basis points (bps) higher than a month earlier.
Across the Atlantic, insider accounts of the European Central Bank (ECB)’s December policy meeting suggested that the eurozone central bank was in no hurry to adjust interest rates and was comfortable with market expectations that borrowing costs will remain unchanged throughout 2026. The ECB has held interest rates steady for four consecutive policy meetings heading into its next one in February as inflation in the common currency bloc has slowed sustainably toward its 2% target and the region’s economic outlook has improved. Elsewhere in Europe, the Bank of England warned that it may be limited in its ability to lower interest rates this year due to expected strong wage growth in the UK, which could accelerate domestic inflation. In January, the yield on the 10-year German Bund, Europe’s principal safe-haven asset, rose 9 bps, ending the month at 2.46%.
Meanwhile, in Japan, the Bank of Japan (BOJ) continued its cautious approach to tightening monetary policy by leaving interest rates unchanged at their current 30-year high at its January policy meeting. The BOJ also maintained its upbeat outlook for the Japanese economy and raised its forecast for core consumer inflation for fiscal year 2026, which investors interpreted as a sign that more rate hikes were on the way, though the timing was uncertain. Elsewhere in Asia, China’s central bank stated that it would lower interest rates in 2026 and adopt an appropriately accommodative monetary policy stance to boost demand and contain downside risks to the country’s economy.
The start of a new earnings season provided investors with the latest update on how company profits have held up amid shifting market dynamics. In the U.S., 79% of the companies in the S&P 500 Index that reported results topped consensus estimates, which was above the long-term average of 67%. The fourth-quarter earnings growth rate is estimated to have increased 11.7% from a year earlier. In Europe, 40% of the companies in the STOXX 600 Index that reported results posted better-than-expected earnings, below the 54% that do so in a typical quarter. The year-over-year fourth-quarter earnings growth rate is expected to have expanded 3.7%. In Japan, 64% of the companies in the TOPIX reported positive earnings surprises, surpassing the 57% beat rate over the past four quarters. The fourth-quarter earnings growth rate is estimated to have contracted 3.3% from a year earlier. In Hong Kong, 100% of the companies in the Hang Seng Index registered better-than-expected earnings, exceeding the 58% beat rate over the past four quarters. The fourth-quarter earnings growth rate decreased 12.4% from a year earlier.
The AI trade continued to have an influence on market performance, though there are signs that investors were becoming more selective and that the monthslong rally was continuing to broaden out. Of the top 10 contributors to the MSCI All Country World Index’s overall gain, nine were stocks of companies linked to AI, but they accounted for only 46% of the total return.
Against this backdrop, equity markets in both the developed and developing world gained in January, with the latter outperforming the former. The S&P 500 rose but lagged the broader global index, as optimism about an improving U.S. domestic economy and expectations of falling interest rates led some large-cap investors to rotate to U.S. small cap stocks. In Europe, the STOXX 600 outperformed and recorded its best monthly performance since last May, as attractive valuations and strong corporate earnings results drew in global investors. In Japan, the TOPIX outperformed, risk appetites were buoyed by the political manoeuvrings by the country’s popular minister to give her wider latitude to implement her reflationary fiscal policies to boost Japan’s economy. In China, the Hong Kong-based Hang Seng Index outperformed on expectations of potential policy support ahead of upcoming meetings of China’s policymakers.
Energy was the best-performing sector in January, as the shares of oil producers gained in sympathy with the rise in the price of crude oil stemming from concerns about disruptions to Iranian exports amid geopolitical tensions between Iran and the U.S. Consumer discretionary was the worst-performing sector, as news that U.S. consumer confidence had fallen sharply in January led investors to rotate away from companies providing non-essential goods and services.
Outlook
The prior year was marked by great uncertainty – in terms of taming of inflation, prospects for achieving an economic soft-landing, dizzying policy pivots, geopolitical conflict, and transformative technological innovation. It’s worth underscoring that not only did broad market averages enjoy exceptionally strong performance in 2025 amid the uncertainty, but traditionally defensive Infrastructure securities held their own against the growthier equity benchmarks with similarly punchy performance.
As we look out on 2026, we expect markets will continue to wrestle with great uncertainty, and investment performance will be determined by the function of starting valuation… and the trajectory of earnings revisions.
Here we expect Infrastructure to continue to exhibit critical defensive qualities and remain an invaluable diversification component for investment portfolios given the essential nature and real asset characteristics of the asset class. We believe there is a strong case to be made that much of the listed Infrastructure securities space offers superior valuation support, solid earnings growth and prospects for upward revision, and greater gearing to the trend towards lower interest rates.
From a sectoral standpoint, we see a number of multi-year critical infrastructure investment trends likely to continue largely undeterred by recent tariff and trade uncertainty. Electrification and the growing demand for power to accommodate the Artificial Intelligence (AI) / Data Centre development surge serves as an example, in our view. Utilities were a key positive contributor to performance during 2025 and we expect they will remain so in 2026. We maintain a favourable sector outlook for Utilities and foresee scope for continued upward earnings revision, particularly in the U.S. where the demand for power is materializing at a faster pace. Outside the U.S., while the trend may be lagging and destined to evolve more subtly, we also see opportunity in considerably more compelling valuations.
Outside of the utilities sector, we believe U.S. midstream energy, namely oil & gas storage and transportation, continues to offer a compelling combination of attractive valuation and improved capital allocation discipline. And while increased uncertainty regarding the pace of global economic activity now weighs more heavily on energy prices and the sector earnings outlook generally, the vast majority of the cash flows associated with the portfolio’s midstream holdings are fee-based and enjoy strong support from take-or-pay contracts and spread differentials at key access points.
Elsewhere within the portfolio, we see an abundance of opportunities stemming from large-scale investment in transportation infrastructure, information technology and energy development & security, leading to increased demand for materials, capital goods and industrial equipment.
We believe the portfolio remains well-positioned to take advantage of these opportunities in real asset infrastructure businesses as well as key enablers, including materials, services, and technologies, that will both facilitate and benefit from increased investment in infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its afflliates (“Lazard”) to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change.
Allocations and security selection are subject to change. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including additional costs, competition, regulatory implications, and certain other factors.
Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “intent,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events may differ materially from those reflected or contemplated in such forward-looking statements.
Published on February 18, 2026.