Monthly Market Report – January 2025

Trump, customs duties, geopolitics and DeepSeek kick off a volatile 2025

The first month of 2025 hints at the greater volatility that the Trump era will bring to the markets. Throughout January, volatility spikes (both positive and negative) were recorded due to comments and decisions made by the new U.S. president. Notably, he expressed intentions to annex Canada, purchase Greenland, or take operational control of the Panama Canal.

The greatest concern for investors is the imposition of new tariffs. It wasn’t until the last day of January that Trump announced import taxes on Canada (25%), Mexico (25%), and China (10%).

The impact of these tariffs is twofold, as they increase inflation through higher prices and reduce GDP growth potential. This led to poor performance in stocks and bonds (especially the latter) during the first half of January. S&P-500 and Nasdaq fell by about 1.0%, while the U.S. yield curve rose significantly. The 10-year U.S. Treasury reached 4.80%, resulting in a price drop of -1.60%. European yield curves also moved higher.

European and U.S. inflation saw a third consecutive increase, reaching +2.4% and +2.9%, respectively. The U.S. employment report once again greatly exceeded expectations, acting as a bearish catalyst for the market by further delaying potential additional Fed rate cuts in 2025.

Central Banks met market expectations:

  • The Fed held rates at 4.50%.
  • The ECB cut rates by 25 basis points, bringing the reference level to 2.75%.

During the second half of the month, the market improved significantly. Wall Street resumed its upward trend, reaching key technical levels, while yield curves moved lower, returning to their starting point for the year.

January ended with a positive balance for European equities compared to U.S. stocks. The MSCI Europe index closed with a +6.47% monthly return, while its U.S. counterpart gained +3.02%.

Two assets had a notable performance:

  • Oil – The WTI benchmark crude rose by +12.62%, reaching $80.70. However, oil prices corrected at the end of the month after Trump commented on his intention to lower commodity prices.
  • EUR/USD – Showed high volatility, trading between 1.018 and 1.053 EUR/USD. Diverging monetary policy outlooks between Europe and the U.S. are the main reason for a strong dollar.

Finally, January also saw the emergence of DeepSeek and its application in artificial intelligence. The Chinese-based company announced its new product, following a business model completely opposite to NVIDIA or OpenAI:

  • Lower costs due to no need for intensive physical infrastructure.
  • Open-source application, making AI accessible to all companies.

This led to significant declines in the U.S. tech sector, especially in artificial intelligence-related stocks. NVIDIA ended January with a -10.59% drop, making it the biggest drag on U.S. indices.

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