January in review

Global equities hit the ground running in January, although there was a change of leadership, with Europe the standout performer instead of the US. Despite this, there were three bouts of volatility to digest, highlighting the caution that surrounds the positivity. Inflation jitters resurfaced at the start of the month, casting doubt on how many rate cuts the US Federal Reserve will deliver this year. Markets had been betting on a series of cuts, but persistent price pressures and solid economic data suggest the central bank may take a more cautious approach. Then came the most dramatic move of the month, with the release of Chinese company DeepSeek’s new AI model – which appeared to offer a similar product to US counterparts at a much lower cost – prompting a sharp (albeit temporary) sell off, led by the poster child NVIDIA.

Finally, the spectre of tariffs raised its head at the very end of the month. Emerging markets came under pressure amid these tensions, with the Trump administration announcing it would impose tariffs on imports from Canada, Mexico, and China, weighing on sentiment. Japanese equities were a notable laggard, with the Bank of Japan (BoJ) hiking rates by 25 basis points. Looking at the sector outcomes over the month, most were in the green, with communication services and health care leading the way, while tech brought up the rear.

Source: Bloomberg as at 31 January 2025.