Signia Invest Insights | January 2025
Market Review and Outlook
It’s been a wild and relentless start to the year for markets with whiplash being a common injury amongst investors as the three major concerns that dominated minds coming into 2025 all played out in quick succession in January. First, there was a sizeable bond sell-off early in the month sparked by hawkish economic data and higher inflation expectations pushing the US 10-year Treasury yield up to 4.8%, its highest level since October 2023. Second, there was a separate risk-off move because of DeepSeek’s new AI model, which led to big questions about the sustainability of US mega-cap tech valuations and the strength of their perceived AI moats, in particular, Nvidia and the Magnificent Seven stocks. And third, trade wars and tariffs were back on the agenda, with markets losing ground at the end of the month as the new Trump administration announced incoming tariffs on Canada, Mexico and China. Despite all of this, the equity bull market managed to shake off these concerns and continue its ascent, with the S&P 500 and STOXX 600 both recording all-time highs .
World equities rallied strongly to start 2025, rising 3.3% in January, led by European markets with the STOXX 600 and FTSE 100 rising 6.3% and 6.1%, respectively. Asian markets, however, lagged substantially, with the CSI 300 and Nikkei 225 declining -3.0% and -0.8%, respectively. None such dispersion was present in the fixed income markets, where the global bond aggregate rose 0.4% and all major sectors gained, led by EM local sovereign debt rising 1.8% during a risk-on month and weaker US dollar environment. In commodities, gold rallied strongly, rising a very impressive 6.6% during the month on a combination of factors, including rising concerns over escalating US trade wars that could become the dominate theme of uncertainty in markets this year.
The first few weeks of Donald Trump’s second presidential term have been a nonstop flow of news, executive actions, tariff threats, and TikTok resurrections, kicking off what has been a quite remarkable political comeback to the centre of power that has overcome numerous criminal indictments, a conviction, and two assassination attempts. At 78, Trump is the oldest president to be sworn into office, as well as the first Commander-in-Chief to be a convicted felon and the subject of two separate impeachments by the House of Representatives for high crimes and misdemeanours. Nevertheless, and unsurprisingly, he has returned to office more emboldened than ever, and with fewer likely political challenges given full Republican control of both chambers of US government.
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