Market commentary
Stocks begin 2025 on a positive note
January market commentary.
Stocks begin 2025 on a positive note
Global equity markets, as measured by the MSCI ACWI Index, garnered positive returns in January, as investors’ confidence was buoyed by generally favorable economic data and upbeat corporate earnings news. However, stocks fell sharply on the last day of the month after the administration of U.S. President Donald Trump announced the assessment of tariffs on imported goods from Canada, Mexico, and China. Developed markets outperformed their emerging-market counterparts for the month. Europe was the strongest-performing region within the developed markets in January, boosted by notable upturns in Sweden, Germany, and Switzerland. Conversely, the Far East posted a much smaller positive return and was the primary market laggard due to weakness in Hong Kong and New Zealand. Eastern Europe led the emerging markets, benefiting mainly from strength in Poland and the Czech Republic. The Association of Southeast Asian Nations (ASEAN) was the weakest emerging-market performer attributable to downturns in the Philippines and Malaysia.1
On January 31, President Trump initiated a multi-front trade war with the announced implementation of a 25% across-the-board tariff on Mexico, a 25% tariff on Canada (with an exception for energy, which faces a 10% duty), and a 10% tariff on imports from China. However, on February 3, a day before the tariffs were scheduled to take effect, the Trump administration reached agreements with Canada and Mexico to delay the levies for 30 days after Mexico agreed to send 10,000 troops to the border to combat the flow of fentanyl into the U.S., and Canada pledged to appoint a fentanyl czar, list cartels as terrorists, and launch a joint strike force with the U.S. to combat organised crime, fentanyl trafficking, and money laundering. Nonetheless, the ongoing tariff dispute is volatile and in flux.
Global fixed-income assets, as measured by the Bloomberg Global Aggregate Bond Index, gained 0.6% in January. High-yield bonds were the strongest performers within the U.S. fixed-income market, followed by investment-grade corporate bonds, mortgage-backed securities (MBS), and U.S. Treasurys. There was little movement in Treasury yields during the month. Yields on 2- and 5-year Treasury notes dipped by corresponding margins of 0.03% and 0.02% to 4.22% and 4.36%, while the 3- and 10-year yields were flat, ending the month at 4.27% and 4.58%, respectively.2 The spread between 10- and 2-year notes widened by 0.03% to +0.36% over the month, as the yield curve remained positively sloped (longer-term yields exceeded shorter-term yields). A positively sloped yield curve generally indicates that the economy is expected to grow in the future.
Global commodity prices, as represented by the Bloomberg Commodity Index, rose 4.0% in January. The West Texas Intermediate (WTI) and Brent crude oil prices posted corresponding increases of 1.1% and 1.4%, to $72.53 and $75.67, respectively, over the month due to concerns about the imposition of tariffs by the U.S. on oil imported from Canada and Mexico. Uncertainty regarding the tariffs led to a 7.3% surge in the gold spot price as investors sought safe-haven assets. The New York Mercantile Exchange (NYMEX) natural gas price fell 1.6% during the month due to forecasts for relatively warmer weather in the U.S. for the remainder of winter. Wheat prices were up 1.5% in January, bolstered by increased demand for exports from the U.S.
On the geopolitical front, Israel and Hamas agreed to a pause in their 15-month war, effective on January 19. The plan is being implemented in three phases, beginning with a ceasefire and the exchange of some Israeli hostages held in Gaza by Hamas for Palestinian prisoners detained by the Israeli government. The two sides then will try to reach an agreement for a permanent end to the conflict. Israel released 90 Palestinians on January 19, followed by another 200 six days later. In response, Hamas freed three female civilians from Israel and four female Israeli soldiers.
1 All equity market performance statements are based on the MSCI ACWI Index.
2 According to the U.S. Department of the Treasury. As of 31 January 2025.
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