Global Markets Review

Market performance in January is generally perceived to give an indication of market direction for the rest of the year, to quote, ‘so goes January, so goes the year.’ And if January 2025 is an accurate barometer, we are looking at a potentially volatile 2025. For example, the disruption caused by the AI firm DeepSeek, and its threat to the dominance of the more established US AI firms, as well as the consternation caused by the sweeping tariffs imposed by President Trump against both allies and competitors of the US alike. Adding further grist to the mill of volatility, the impending Fed rate decisions as well as upcoming company earnings reports and continued inflation concerns remained in focus.

US markets ended the first month of 2025 on a positive note with the S&P 500 gaining 2.7%, the Nasdaq higher by 1.6%, and the Dow Jones outshining both, ending the month higher by 4.7%. Economic data for the month saw US December headline inflation (CPI) rising 2.9% YoY, with core CPI (ex-food and energy), printing up at 3.2% YoY. December’s core personal consumption expenditure (PCE), which also excludes energy and food and is the Fed’s preferred inflation gauge, printing at 2.8% YoY, thus meeting market expectations and unchanged from the previous month. In line with market expectations, the Fed kept rates unchanged at its first meeting of 2025, with Chairman Powell stating that the Fed has no intention of rushing to cut rates again.

The FTSE closed up by 6.1% for January to reach a record high, with UK inflation for December printing unexpectedly lower at 2.5% YoY from the November print of 2.6% YoY and core inflation also printing lower at 3.2% for December compared to the 3.5% November 2024 print. Prime Minister Starmer continues to suffer in the popularity stakes, however, with various blunders including the donations scandal, the slashing of winter fuel payments and the raising of national insurance contributions, which have heightened fears that these political actions could stifle growth in the UK.

Despite fears of the impact of President Trump’s tariffs threats, European markets fared better on a performance basis relative to their US counterparts, with the Dax closing the month higher by 9.2%, and the Cac up 7.7% for the month, with the most significant stock rotation into European defensive and growth equities in lieu of US equities in 10 years. Eurozone headline inflation for December rose for the third month in a row, printing at 2.4% YoY compared to November’s 2.2% YoY, with core inflation holding at 2.7% for the fourth consecutive month. Unlike its US counterpart, the ECB cut rates for the fifth time since June 2024, by twenty-five basis points, taking their benchmark rate to 2.75%.

In contrast, Asian markets ended the month mixed. The Hang Seng closed higher by 0.8%, while the Shanghai Composite ended lower by 3%. Though China achieved its 2024 growth target of 5%, this continues to be stymied by structural issues characterised by low consumer spending, continued high debt among property developers and local government, while simultaneously challenged by an aging population. Chinese inflation slowed to 0.1% in December YoY vs the November print of 0.2%, while the core inflation number printed slightly higher at 0.4% vs the November print of 0.3%. Chinese manufacturing PMI for January printed at 49 compared to the December print of 50.1, after three months of printing above 50. The non-manufacturing PMI, which tracks business sentiment in services and construction, fell to 50.2 compared to the previous reading of 52.2. Consensus is that the January manufacturing PMI numbers traditionally trend softer with migrant workers returning to their hometowns ahead of the Chinese New Year which started on the 29th of January 2025.

The Japanese market also ended the month lower by 0.8%, while the Bank of Japan (BoJ) raised its key interest rate by 25 basis points to 0.5% from 0.25%, with the rhetoric emerging from the bank that inflation was holding at a desirable target level. Recent economic data showed Japanese inflation hovering around the BoJ’s target rate of 2%. Japan is also experiencing a degree of political turmoil, causing uncertainty as coalitions are being formed, adding pressure to Prime Minister Ishiba. The situation is expected to come to a head in July 2025, with the Upper House elections which will determine not only Ishiba’s political survival, but also the future security and foreign policies of Japan.

South Africa

The local market opened 2025 on a positive note, shrugging off the hangover of the previous three negative months, as the ALSI closed higher by 2.2%. on the back of stronger resources prices compared to December. The RESI was the best performing sector, up 18% in January with top performing shares being Harmony Gold up 42.3%, AngloGold up 34.3% and Goldfields up by 30.8%. The next best performing sector was industrials, firmer by 0.9% despite Naspers and Prosus ending weaker by 5.4% and 4.1% respectively, while Financials and Property were the worst performers, weaker by 2.7% and 2.3%, respectively. Other shares to note were MTN higher by 25%, Vodacom up by 8% and Richemont up by 31%. Underperformers were Mr Price, weaker by 15%, Foschini also down by 15% and Truworths softer by 17%. On the economics front, SA headline inflation for December rose slightly to 3.0% YoY vs the 2.9% YoY print in November, with core inflation easing for the third month in a row to 3.6% YoY vs the November number of 3.7% YoY. On the back of a broad-based decline in inflation which continues to show a downward trend in all categories, the latest inflation data has seemingly settled at the lower end of the SARB’s target range, also well below the MPC’s preferred target of 4.5%. This resulted in the MPC cutting interest rates by 25 basis points at its policy meeting on the 30th of January.