January In Review: Resources Rocket, Tech Tanks

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This story features BHP GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: BHP
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

The rotation in resources away from technology stocks gathered momentum in January, boosted by positive narratives, currency tailwinds and higher commodity prices.

• The Australian share market received a major fillip in January from a surging AUD
• Value beats Growth, technology continues to flail under multiple headwinds
• RBA rate hiking cycle brings forth new challenges and market positioning ideas

By Danielle Ecuyer

All aboard the resource express for positive momentum

Like the maxi yachts charging through Sydney Harbour Heads at the start of the Sydney to Hobart yacht race, often leaning heavily to one side as crews pile onto the windward rail to maximise speed, the Australian share market has sailed into 2026 at pace, marked by a stark imbalance in sector performances.

As highlighted by Morgan Stanley, the ASX200 served up a 1.8% total return in January, compared to the S&P500’s 1.4%, underscored by resources rising 10%, with energy up 11.1% and gold up 11% as the top performers.

Removing the resource sector, Macquarie points out the balance of the ASX index fell -1% over the month, with technology, yet again, taking the wooden spoon for worst performance, down -9.1%.

The Australian market benefited from multiple global tailwinds, including a stronger Australian dollar, which rose 4.4% over the month, buoying the ASX market return relative to global indices, trailing only emerging market indices.

The ascent of the AUD supported the outperformance of the local market in US dollar terms. Historically, UBS points out, there has been a robust correlation between mining stocks and domestic currency moves. In USD terms, the ASX200 lifted 6.9%.

Notably, in local currency terms the Nikkei rose 5.9% and the Hang Seng 6.9%, by way of example. MSCI Global Emerging Markets rose 8.9% in US dollar terms.

In January, the Australian share market returned to the glory days of its resource roots.

BHP Group ((BHP)) reclaimed the top spot as the largest market cap stock on the ASX, replacing CommBank ((CBA)), which replaced CSL ((CSL)) post covid.

Sentiment benefited from narratives around a commodity super cycle, a weaker US dollar, which also favours hard assets like commodities, as well as a global infrastructure and AI spending boom across ancillary and adjacent industries.

The US Administration is pulling multiple levers to super charge the ‘America First’ economy into the November mid-term elections and is an integral part of the reflation trade and move to lower the US dollar.

Global metal prices support mining stocks

Casting an eye over metals prices, there have been some eye watering moves over the past six months.

Aluminum is up 22.6%, 5% in January, copper up 36.9%, 5.9% in January, while precious metals take the trophy, notably silver up 132% and 18.9% in January.

South32 ((S32)) shares advanced 29.8% with positive exposure to some of the winning metal prices, including aluminum and silver.

Noteworthy: February started off with a precious metal price rout over President Trump’s Federal Chair selection, Kevin Wars. Brokers including UBS have remained steadfastly upbeat on gold and gold stocks, upgrading their price forecast to US$5,200/oz as “sustainable” for 2026.

Returning to January, Morgan Stanley observes small caps continued their 12-month rolling leadership position, up 16.8%, with small cap resources rising 12.5% over the month compared to large cap resource peers inside the ASX100 ‘only’ moving up 9.5%.

While energy rose 10.6% and materials 9.5% as the market leading sectors, technology fell -9.4% and co-laggard real estate weakened by -9.7%.

In quant terms, Value outperformed Growth by 3.7% due to the bifurcation between energy and technology stocks.

As highlighted by Macquarie, the same trend was also apparent in US markets, where Value outperformed by 6.4% and Growth stocks declined by -1.9%.

Crude oil rose 14.5% as geopolitical tensions between Iran and the US escalated, and then de-escalated to start February, which brings the rise in energy stocks to 6% over the previous year, still significantly trailing the 47% gain by mining stocks since January 2025.

Uranium was also a winner, topping out at a weekly spot price of US$100/lb (TradeTech) at the end of January.

For more on the details, see our latest uranium weekly (https://fnarena.com/index.php/2026/02/03/uranium-week-back-above-us100lb/).

Technology saw some of the once favourite stalwarts crumble under the weight of money outflows into resources.

In the ASX100, Life360 ((360)) shares, despite better-than-expected quarterly results, fell over -18%, Xero ((XRO)) shares weakened nearly -18%, ProMedicus dived almost -17% and WiseTech Global shares went down -15%.

Retail favourite JB Hi-Fi shares slumped -15.7%.

Small cap technology stocks fared even worse.

January proved a great month for uranium stocks, no doubt also supported by some short covering and boosted by a positive quarterly result from Paladin Energy ((PDN)) on top of higher U308 spot and term prices at month’s end.

Deep Yellow ((DYL)) was the top ASX300 performer, its shares rising 54%.

Technology stocks, crushed from every-which-way

Domestic technology stocks have had to battle multiple headwinds, and not only in January.

The potential for the RBA to start rising interest rates has acted as a compressor of valuations, with a higher cost of capital leading to lower price to earnings multiples for growth companies.

Overlaying that aspect of valuation compression have been AI disruption concerns across the software universe.

US stocks have also been swept up, with quality companies like ServiceNow trading at 52-week lows. Online classified platform operators like REA Group ((REA)) and CAR Group ((CAR)) have also de-rated on global fears that Google Gemini or Claude can displace their business model.

Artificial intelligence bubble fears have equally played a part in the global de-rating of technology stocks.

Macquarie highlights technology as the worst performer over the last 12 months, down -28%.

Materials lead earnings upgrades

Corresponding with the return to resources, consensus earnings estimates have reversed a multi-year downgrade cycle. As observed by Morgan Stanley, materials are consistently generating positive earnings momentum for the Australian market.

Consensus estimates now anticipate 11.3%-plus growth in FY26 and 8.6% in FY27, which translates to a prospective multiple of 18.4x, above the long term average of 14.8x for the ASX200.

Macquarie has upgraded its EPS forecasts for FY26 by 200bps after the November AGM season and is forecasting 7.7% FY26 EPS growth. Although this broker’s bottom-up analysis lags consensus, it would signify Australia’s three-year earnings recession is ending with a boom.

While higher commodity prices have boosted earnings forecasts for miners and energy companies, Macquarie flags banks are a beneficiary of potential upgrades to margin forecasts from RBA rate hikes.

US Fed vs Aussie RBA

Unlike the US Federal Reserve, expected to deliver more rate cuts later in the year, persistent inflation pressures have put the RBA on notice with the central banking lifting the cash rate by 25bps at its February 3rd meeting.

Research by Macquarie shows equity returns have historically been lower following RBA hikes, though not necessarily negative, and with more volatility.

A deeper dive into asset and sector returns post the first RBA rate hike over the most recent five tightening cycles showed stocks have a median total shareholder return of 4%-plus, half the return compared to the year prior to rate hikes commencing.

The risks to slowing growth often lead to rotation into defensive assets and stocks. Value and resource stocks tend to outperform, albeit less than before the hikes.

Morgan Stanley observes the change in market expectations around the RBA rate hiking cycle commencing has yet to filter into the official outlook from the C-suite and business management updates.

No doubt we will see more commentary in the February reporting season on this topic. Of equal importance is the emerging debate around fiscal spending in the run up to the May Federal government budget.

A previously sceptical Morgan Stanley warned before the February rate hike, renewed tightening from the central bank will meaningfully slow down the domestic economy and impact on the outlook across sectors, notably medium-term expectations for domestic industrial companies.

After the February 3 hike, Morgan Stanley issued a stern warning to investors: expect a follow-up hike in May alongside less supportive fiscal settings. 

“We believe this tightening will work – expect a sharper slowdown in 2H26.”

Rate hikes could also support a further rotation into materials and some defensive growth names.

Macquarie explains the technology sector is typically the number one underperformer under rate hikes, with the threat from AI remaining.

The broker does not so much envisage vibe coding as a threat to SaaS businesses. The risk is the potential for a start up like Elon Musk’s Macrohard to succeed as a pure AI software company with autonomous agents. Enterprise products are flagged for 2027-2028.

On the opposite end of the performance spectrum, gold has the optimal odds of outperforming, followed by utilities and infrastructure.

ASX100 Best and Worst Performers of the month (in %)

ASX200 Best and Worst Performers of the month (in %)

ASX300 Best and Worst Performers of the month (in %)

ALL-TECH Best and Worst Performers of the month (in %)

All index data are ex dividends. Commodities are in USD.

Australia & NZ

The World

Metals & Minerals

Energy

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